News/Commentary

SEC Proposes Amendment to Investment Advisers Act to Address FAST Act

The Securities and Exchange Commission ( “SEC”) is proposing to amend the definition of a venture capital fund (rule 203(l)-1) and the private fund adviser exemption (rule 203(m)-1) under the Investment Advisers Act of 1940 (the “Advisers Act”) in order to reflect changes made by title LXXIV, sections 74001 and 74002 of the Fixing America’s Surface Transportation … Continue reading SEC Proposes Amendment to Investment Advisers Act to Address FAST Act

SECs Cybersecurity Examination Initiative Notes Firms Should Improve Cybersecurity

The Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections (“OCIE”) has issued a Risk Alert that provides observations on cybersecurity arising from OCIE’s examinations conducted pursuant to the Cybersecurity Examination Initiative of 75 registered broker-dealers, investment advisers and investment companies.  The initiative was initially focused on making a preliminary assessment of industry practices and … Continue reading SECs Cybersecurity Examination Initiative Notes Firms Should Improve Cybersecurity

FINRA Posts Guidance on Disclosure to Retail Customers

The Financial Industry Regulatory Authority has released guidance to help securities firms implement a new rule requiring enhanced price disclosure to retail customers for trades in corporate and agency bonds. The new requirements go into effect May 14, 2018. The guidance, in the form of answers to frequently asked questions (FAQ), covers such topics as … Continue reading FINRA Posts Guidance on Disclosure to Retail Customers

SEC Approves New FINRA Pay-To-Play Rules

The Securities and Exchange Commission (SEC) approved FINRA Rule 2030 (Engaging in Distribution and Solicitation Activities with Government Entities) and 4580 (Books and Records Requirements for Government Distribution and Solicitation Activities) to establish pay-to-play and related rules regulating the activities of member firms of the Financial Industry Regulatory Authority (FINRA) that engage in distribution or solicitation … Continue reading SEC Approves New FINRA Pay-To-Play Rules

California Modifies Exemption for Payment of Finder Fees

The California Department of Business Oversight (“Department”) has modified Section 25206.1 of the California Corporation’s Code (“Code”) which provides a broker-dealer registration exemption for the payment of finder fees to individuals who introduce California investors to California securities issuers.  California Exemption Requires Certain Conditions Be Met- To qualify for the exemption, an individual has to … Continue reading California Modifies Exemption for Payment of Finder Fees

SEC Charges Clearing Firm with Failing to Comply With Anti-Money Laundering Laws

The Securities and Exchange Commission (SEC) charged Alpine Securities Corporation, a Salt Lake City-based clearing firm, with securities law violations related to its anti-money laundering program through its alleged practice of clearing transactions for microcap stocks that were used in manipulative schemes to harm investors.  Based on the allegations contained in the SEC Complaint, Alpine … Continue reading SEC Charges Clearing Firm with Failing to Comply With Anti-Money Laundering Laws

FINRA Revises Rule 4530 to Address New DOL Fiduciary Rule

The Financial Industry Regulatory Authority (FINRA) is amending FINRA Rule 4530  by adding a new Rule 4530 Problem Code to address changes the United States Department of Labor (DOL) has made to its fiduciary rule. The DOL has stated that certain provisions of the fiduciary rule and the related exemptions will become applicable on June … Continue reading FINRA Revises Rule 4530 to Address New DOL Fiduciary Rule

DOL’s June 9th Compliance Date for the Fiduciary Rule Won’t Be Delayed

In an op-ed published last week in The Wall Street Journal, Labor Secretary Alexander Acosta stated that the Department of Labor (“DOL” or “Department”) will not delay the June 9th compliance date for the DOL fiduciary rule while the Department seeks public input on the rule as laid out in President Donald Trump’s February 3 … Continue reading DOL’s June 9th Compliance Date for the Fiduciary Rule Won’t Be Delayed

Rules on Outside Business Activities and Personal Securities Transactions Under Review

The Financial Industry Regulatory Authority (“FINRA”) has announced, both in Regulatory Notice 17-20, and in a session regarding the topic at the recent 2017 FINRA Annual Conference in Washington DC, that it  has identified Rules 3270 and 3280, which govern outside business activities and personal securities transactions for review. The rules govern firm employees’ business … Continue reading Rules on Outside Business Activities and Personal Securities Transactions Under Review

FINRA Issues New Guidance on Social Media and Digital Communications

In light of trends in emerging technologies and communications innovations, FINRA has issued new guidance regarding the application of FINRA rules governing communications with the public to social media and digital communications.  It should be noted that in the Retrospective Rule Review Report: Communication with the Public, a report published by FINRA in December 2014, … Continue reading FINRA Issues New Guidance on Social Media and Digital Communications

SEC Adopts T+2 Settlement Cycle for Securities Transactions

The Securities and Exchange Commission (“SEC”) has adopted an amendment to shorten the standard settlement cycle for most broker-dealer securities transactions by one business day (“T+2”).  Currently, the standard settlement cycle for these transactions is three business days, known as T+3.  The amendment to Rule 15c6-1(a) shortens the settlement cycle to two business days. The … Continue reading SEC Adopts T+2 Settlement Cycle for Securities Transactions

FINRA Rule 3210 – Accounts at Other Broker-­Dealers

FlNRA Rule 3210 – Accounts at other Broker-Dealers and Financial Institutions (the “Rule”) was approved by the SEC in 2016 and became effective April 3, 2017.  As approved, the new rule change helps facilitate effective oversight of accounts opened or established by associated persons at firms other than the firm at which they are employed; … Continue reading FINRA Rule 3210 – Accounts at Other Broker-­Dealers

FINRA Updates Private Placement Filer Form

In an attempt to collect more information on private placement activity, the Financial Industry Regulatory Authority (“FINRA”) has updated the private placement filer form that member firms must use to file offering documents and information pursuant to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) (the “Filer … Continue reading FINRA Updates Private Placement Filer Form

Phishing Scam Targeting EDGAR Filers

The Securities and Exchange Commission (“SEC”) has recently noted that there have been reports of malicious emails sent to some EDGAR filers that appear to be part of a phishing campaign that appears to be meant to compromise company network systems and obtain access to non-public information.  The malicious emails purport to be communications from the … Continue reading Phishing Scam Targeting EDGAR Filers

Supreme Court Decision limits SEC Disgorgement Powers

The Supreme Court ruled that the Securities and Exchange Commission’s power to require the disgorgement of illegally obtained profits can only be applied to funds obtained up to five years before the SEC files its claim. SIFMA supported the plaintiff in an amicus brief, calling on the court to limit the SEC’s powers to make … Continue reading Supreme Court Decision limits SEC Disgorgement Powers

Standardizing Cybersecurity Regulations

Standardizing cybersecurity regulations is becoming more important as the focus on cybersecurity continues to spur new laws, regulations and guidelines.  Just recently Treasury Secretary Steven Mnuchin noted that since the safety of the financial system is critical, he has made cybersecurity his top technology priority and that he will use his authority as chairman of the … Continue reading Standardizing Cybersecurity Regulations

FinCEN Penalizes California Bank for AML Violations

On February 27, 2017, the Financial Crimes Enforcement Network (FinCEN) announced the assessment of a $7 million civil money penalty (CMP) against Merchants Bank of California (“Merchants”) in Carson, CA, for willful AML violations related to violations of several provisions of the Bank Secrecy Act (BSA).  The Office of the Comptroller of the Currency (OCC), … Continue reading FinCEN Penalizes California Bank for AML Violations

Chapters in Thomson Reuters Broker-Dealer Guide Co-Authored by LeGaye Law Firm

Thomson Reuters recently released an article based on its the newly updated “Practitioner’s Guide for Broker-Dealers,” a multi-chapter resource from Thomson Reuters Regulatory Intelligence. The guide provides up-to-date commentary on topics pertaining to broker-dealer regulatory issues and offers practitioner tips on dealing with these important issues on a day-to-day basis. Each chapter of the Broker-Dealer … Continue reading Chapters in Thomson Reuters Broker-Dealer Guide Co-Authored by LeGaye Law Firm

SEC Exam Priorities for 2017 Released

The Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and Exchange Commission (“SEC”) has released the SEC Exam Priorities for 2017 (the “SEC Exam Priorities”).  In general, the SEC Exam Priorities reflect certain practices, products, and services that OCIE perceives to present potentially heightened risk to investors and/or the integrity of the U.S. … Continue reading SEC Exam Priorities for 2017 Released

SEC Issues Alert on Excessive Trading

sec eThe Office of Investor Education and Advocacy (OIEA) and the Broker-Dealer Task Force of the Securities and Exchange Commission (SEC) jointly issued an Investor Alert to help investors identify excessive trading in their brokerage accounts and to educate investors about steps they should take if their brokerage firm notifies them of a high volume … Continue reading SEC Issues Alert on Excessive Trading

Attack on DOL Fiduciary Rule Escalates

The Department of Labor’s (DOL) Fiduciary Rule, which is set to become generally effective on April 10, 2017, has received substantial push-back from the financial industry, including numerous lawsuits and proposed legislation which are questioning the validity of the rule.  However, the attack has been escalated by Rep. Joe Wilson, (R-S.C.), who introduced legislation on … Continue reading Attack on DOL Fiduciary Rule Escalates

FINRA Releases its 2017 Exam Priorities Letter

On January 4, 2017, the Financial Regulatory Authority (FINRA) started the new year with a bang as it published the Regulatory and Examination Priorities Letter (Exam Priorities Letter) for 2017.  FINRA publishes the priorities letter annually to provide information to member firms about areas of concern that  FINRA plans to review in its 2017 exam … Continue reading FINRA Releases its 2017 Exam Priorities Letter

Forum Selection Involving Customers & Associated Persons

Based upon recent federal appellate court and Second Circuit decisions, the Financial Industry Regulatory Authority (“FINRA”) released guidance regarding forum selection provisions between member firms and their customers and employees (Regulatory Notice 16-25).  The guidance was the result of an apparent conflict between the court decisions and FINRA rules regarding arbitration. In the federal appellate … Continue reading Forum Selection Involving Customers & Associated Persons

FINRA Gives Additional Guidance on Contingency Offerings

The Financial Industry Regulatory Authority’s  (FINRA) review of securities offering documents has revealed a large number of instances in which broker-dealers have not complied with requirements of Rules 10b-9 and 15c2-4 under the Securities Exchange Act of 1934 (SEA) as they relate to contingency offerings.  FINRA published Regulatory Notice 16-08 to provide guidance regarding the … Continue reading FINRA Gives Additional Guidance on Contingency Offerings

Conflicts of Interest and Dual Registrants

The Securities and Exchange Commission (the “SEC”) continues to pay close attention to the conflicts of interest that can exist in broker/dealers and investment advisory firms that share financial professionals and dually registered firms.  In the Staff Report issued by the SEC on January 21, 2011, the SEC principally based its advocacy for a uniform regulatory … Continue reading Conflicts of Interest and Dual Registrants

Pushback Regarding DOL Fiduciary Rule Continues

On April 6, the U.S. Department of Labor (“DOL”) released the fiduciary rule in its final form. The rule was released after months of public comment, with many of the nation’s insurers, agents, brokers/dealers and trade associations being adamantly against the proposed language.  Under the new rule, the “fiduciary” is defined as a who provides … Continue reading Pushback Regarding DOL Fiduciary Rule Continues

FINRA Proposes New Rules to Protect Seniors

The Financial Industry Regulatory Authority (FINRA) has proposed new rules to address the financial exploitation of seniors and other vulnerable adults to the Securities and Exchange Commission (SEC).  As set forth in in FINRA rule release (SR-FINRA 2016-039), FINRA is proposing rule amendments that would require firms to make reasonable efforts to obtain the name … Continue reading FINRA Proposes New Rules to Protect Seniors

SEC Proposes Rule Amendment to Shorten Settlement Cycle to T+2

The Securities and Exchange Commission (“SEC”) has approved a proposed amendment to Rule 15c6-1(a) of the Exchange Act of 1934 to shorten the standard settlement cycle for most broker-dealer securities transactions from three business days after the trade date (T+3) to two business days after the trade date (T+2). The proposed amendment is designed to … Continue reading SEC Proposes Rule Amendment to Shorten Settlement Cycle to T+2

SEC Whistleblower Program Impacts Exam Program

The Securities and Exchange Commission (SEC) is including enforcement of the Whistleblower provisions enabled by Frank Dodd in its exam program, and as such is directly impacting broker/dealers and investment advisers.  To that end, whistleblower issues have recently arisen in SEC exams of investment advisers.   In those exams, confidentiality agreements, registered representative and Investment adviser … Continue reading SEC Whistleblower Program Impacts Exam Program

SEC Enforcement Actions Against Investment Advisers Increasing

In the enforcement results summary recently issued by the Securities and Exchange Commission (“SEC”), it was noted that in fiscal year 2016, the SEC filed 868 enforcement actions against financial reporting firms related to misconduct by companies and their executives and misconduct by investment advisers and gatekeepers, as the agency continued to enhance its use … Continue reading SEC Enforcement Actions Against Investment Advisers Increasing

FINRA Reduces Clock Synchronization Tolerance

The Securities and Exchange Commission (SEC) approved a new clock synchronization standard of 50 milliseconds that is applicable to computer clocks that are used to record certain events in NMS securities or OTC equity securities.  The effective date is August 15, 2016; however, Financial Industry Regulatory Authority (“FINRA”) member firms have six months from the … Continue reading FINRA Reduces Clock Synchronization Tolerance

Investment Advisers Face Enhanced Information Reporting

The Securities and Exchange Commission (SEC) has recently adopted amendments to several Investment Advisers Act rules, including the investment adviser registration data collection and reporting forms to enhance the reporting and disclosure of information by Investment Advisers.  These amendments are intended to improve the quality of information that investment advisers provide to investors and the … Continue reading Investment Advisers Face Enhanced Information Reporting

New FINRA Rule 3210 – Accounts At Other Broker-Dealers

The SEC has approved new FINRA Rule 3210 (Accounts at Other Broker-Dealers and Financial Institutions) which is a consolidated rule governing accounts opened or established by associated persons at firms other than the firm at which they are employed. The goal of the new rule is to help facilitate effective oversight of such accounts by member firms.  New … Continue reading New FINRA Rule 3210 – Accounts At Other Broker-Dealers

Cyber-Security Procedures and Data Classification

In the on-going evolution of the fight against cyber-security threats, broker-dealers and investment advisers need to have robust cyber-security policies and procedures.  One of the initial steps is to think about creating a data classification policy to better understand the real types of sensitive information shared within the firm.  Once you have classified the data … Continue reading Cyber-Security Procedures and Data Classification

Oppenheimer Fined 2.25 million for ETF Suitability & Due Diligence Failures

The Financial Industry Regulatory Authority (FINRA) announced that it has fined Oppenheimer & Co. Inc. $2.25 million and ordered the firm to pay restitution of more than $716,000 to affected customers for selling leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs) to retail customers without reasonable supervision and due diligence, and for recommending non-traditional ETFs … Continue reading Oppenheimer Fined 2.25 million for ETF Suitability & Due Diligence Failures

FINRA Issues Small Firm Cybersecurity Checklist

The Financial Industry Regulatory Authority (FINRA) announced at its recent  2016 Annual FINRA Conference in Washington DC that it has created a Cybersecurity Checklist to assist small member firms in establishing a cybersecurity program to assist small firms in establishing a cybersecurity program to identify and assess cybersecurity threats, protect assets from cyber intrusions, detect when their … Continue reading FINRA Issues Small Firm Cybersecurity Checklist

Three Whistleblower Awards Issued By SEC

The U.S. Securities and Exchange Commission (“SEC”) has recently announced whistleblower awards to four individuals who provided the SEC with information in three ongoing investigations. The SEC announced on May 13, 2016 that it had awarded $3.5 million dollars to a  company employee whose tip bolstered an ongoing investigation with additional evidence of wrongdoing that strengthened the … Continue reading Three Whistleblower Awards Issued By SEC

FINRA Requiring Educational Communication for Transfer Customers

The Financial Industry Regulatory Authority (“FINRA”) announced in Regulatory Notice 16-18 that the Securities and Exchange Commission approved the adoption of FINRA Rule 2273  (Educational Communication Related to Recruitment Practices and Account Transfers).  The rule establishes an obligation to deliver an educational communication in connection with firm recruitment practices and account transfers.  The rule becomes effective … Continue reading FINRA Requiring Educational Communication for Transfer Customers

Crowdfunding Guidance Released by SEC

The Securities and Exchange Commission (“SEC”) has issued Compliance and Disclosure Interpretations (C&DIs) providing interpretive guidance on Regulation Crowdfunding, which became effective May 16. The C&DIs answer a number of questions relating to the crowdfunding exemption and its requirements, including disclosure requirements, advertising and promoter compensation in a crowdfunded offering. The SEC guidance clarifies that, … Continue reading Crowdfunding Guidance Released by SEC

Creating & Articulating Firm Culture For FINRA

FINRA executives have been speaking regularly about conflicts of interest, firm culture and professional ethics. Firm cultural values have a profound influence on how a broker-dealer conducts its business, including how it manages conflicts of interest.  A culture that consistently places ethical considerations and client interests at the center of business decisions helps protect investors … Continue reading Creating & Articulating Firm Culture For FINRA

Changes in Accredited Investor Definition on Horizon

The Securities and Exchange Commission’s (“SEC”) Advisory Committee on Small and Emerging Companies met on May 18 and focused primarily on the proposed changes in the definition of an accredited investor. During the meeting, the committee discussed the recent SEC staff report (“Report”) on the accredited investor definition and the various recommendations that were set out in the Report, … Continue reading Changes in Accredited Investor Definition on Horizon

SIFMA releases 2015 Securitization Year in Review

The Securities Industry and Financial Markets Association (SIFMA) recently released its annual U.S Securitization Year in Review report.  The report offers a consolidated review of the U.S securitization markets in 2015 and is comprised of two sections. The first section captures various securitization market trends, statistics and market activity for 2015. The second section contains summaries … Continue reading SIFMA releases 2015 Securitization Year in Review

Implementation Date of FINRA Rule 2242 Extended to July 16, 2016

The Securities and Exchange Commission approved the adoption of FINRA Rule 2242 (Debt Research Analysts and Debt Research Reports) to address conflicts of interest relating to the publication and distribution of debt research reports.  While FINRA Rule 2242 became effective on February 22, 2016, the implementation date has been pushed back to July 16, 2016. … Continue reading Implementation Date of FINRA Rule 2242 Extended to July 16, 2016

Comment Period Ends May 6, 2016 on the Proposed Capital Acquisition Broker Rules

The Financial Industry Regulatory Authority (“FINRA”) has proposed the creation of a separate rule set that would apply to firms that meet the definition of a ‘‘capital acquisition broker’’ (“CAB”) and elect to be governed under that rule set.  To address the rule making process with respect to the proposal, the Securities and Exchange Commission (“SEC”) … Continue reading Comment Period Ends May 6, 2016 on the Proposed Capital Acquisition Broker Rules

SEC Approves FINRA Rule 2272 on the Sales of Securities on Military Installations

The SEC approved  Regulatory Notice 15-34,  the adoption of FINRA Rule 2272 (Sales and Offers of Sales of Securities on Military Installations), to govern sales and offers of sales of securities by firms on the premises of any military installation to members of the U.S. Armed Forces or their dependents. The rule becomes effective March 30, … Continue reading SEC Approves FINRA Rule 2272 on the Sales of Securities on Military Installations

The Pressure to Shorten the Settlement Cycle From T+3 to T+2 Has Increased

Since early last year, the Securities Industry and Financial Markets Association(“SIFMA”) and the Investment Company Institute (“ICI”) have publicly supported the shortening of the settlement cycle from trade date plus three business days (“T+3”) to trade date plus two business days (“T+2”) for U.S. secondary market transactions in equities, corporate and municipal bonds, unit investment trusts, … Continue reading The Pressure to Shorten the Settlement Cycle From T+3 to T+2 Has Increased

FINRA Designates Chief Information Security Officer as New Role

FINRA maintains contact information records of all Executive Representatives, Chief Compliance Officers and other individuals at firms, including contacts that are required under FINRA rules and By-Laws, and others that are voluntary on the FINRA Contact System (FCS). Historically, FINRA has used this information for regulatory communications, compliance purposes and ballots for Board and other … Continue reading FINRA Designates Chief Information Security Officer as New Role

FINRA Releases New Written Supervisory Procedures Checklist

FINRA has released an updated Written Supervisory Procedures Checklist to reflect new FINRA rules. The Written Supervisory Procedures Checklist (“WSP Checklist”) is an outline of selected key topics representative of the range of business activities typically proposed by applicants seeking approval to become FINRA members or to expand their existing securities business under NASD Membership … Continue reading FINRA Releases New Written Supervisory Procedures Checklist

Upshot of SEC’s 2016 Goals – Active Year for Regulatory Rulemaking

In her opening remarks at the annual “SEC Speaks” conference held in Washington, D.C., the U.S. Securities and Exchange Commission (“SEC”), SEC Chairman Mary Jo White cautioned that the SEC should not be considered a mere “disclosure agency,” in that she noted that the SEC would use all of the tools at the SEC’s disposal … Continue reading Upshot of SEC’s 2016 Goals – Active Year for Regulatory Rulemaking

SEC Announces its Fee Rate Advisory for Fiscal Year 2016

The Securities and Exchange Commission announced that starting on Feb. 16, 2016, the fee rates applicable to most securities transactions will be set at $21.80 per million dollars. Consequently, each SRO will continue to pay the Commission a rate of $18.40 per million for covered sales occurring on charge dates through Feb. 15, 2016, and … Continue reading SEC Announces its Fee Rate Advisory for Fiscal Year 2016

FINRA Proposes New Registration Category for Corporate Financing Brokers

The Financial Industry Regulatory Authority (“FINRA”) has announced a proposed new set of rules that address the needs of FINRA member firms that are solely corporate financing firms that advise companies on mergers and acquisitions, advise issuers on raising debt and equity capital in private placements with institutional investors, or provide advisory services on a … Continue reading FINRA Proposes New Registration Category for Corporate Financing Brokers

FINRA Proposes “Pay-To-Play” Rules

The Financial Industry Regulatory Authority, Inc. (“FINRA”) has filed a proposed rule change to adopt FINRA Rules 2030 (Engaging in Distribution and Solicitation Activities with Government Entities) and 4580 (Books and Records Requirements for Government Distribution and Solicitation Activities) with the Securities and Exchange Commission (“SEC”) to establish “pay-to-play” and related rules that would regulate … Continue reading FINRA Proposes “Pay-To-Play” Rules

SEC Releases the 2016 Examination Priorities

The Securities and Exchange Commission released its Office of Compliance Inspections and Examinations’ (OCIE) 2016 exam priorities. New areas of focus include liquidity controls, public pension advisers, product promotion, and two popular investment products, exchange-traded funds and variable annuities.  The priorities also reflect a continuing focus on protecting investors in ongoing risk areas such as cybersecurity, microcap fraud, fee … Continue reading SEC Releases the 2016 Examination Priorities

FINRA Rule 2210 Amended to Require BrokerCheck Website Hyperlink

The Financial Industry Regulatory Authority (FINRA) announced in Regulatory Notice 15-50 that the Securities and Exchange commission approved amendments to FINRA Rule 2210 (Communications with the Public) that become effective June 6, 2016.  The amendments require that each FINRA member firm’s website to include a readily apparent reference and hyperlink to BrokerCheck on: the initial … Continue reading FINRA Rule 2210 Amended to Require BrokerCheck Website Hyperlink

Firm Fined $2.6 Million for Failures in Electronic Records and Email Retention

The Financial Industry Regulatory Authority (FINRA) has fined Scottrade, Inc. $2.6 million for failing to retain a large number of securities-related electronic records in the required format, and for failing to retain certain categories of outgoing emails.  Additionally, FINRA set forth in its findings that Scottrade also did not have a reasonable supervisory system in … Continue reading Firm Fined $2.6 Million for Failures in Electronic Records and Email Retention

Moody’s to consider CyberDefense in its Credit Ratings

Moody’s Investors Services recently noted that In today’s interconnected and digital world, business leaders must be aware of the diverse cyber threats their business faces and be proactive in protecting their clients, data, networks and operations from theft, disruption and destruction. These threats range from criminals seeking financial gain to nation states committing corporate espionage … Continue reading Moody’s to consider CyberDefense in its Credit Ratings

SEC Reduces Form U5 Wait Period to 3 Days on BrokerCheck

The Securities and Exchange Commission has approved a change to FINRA Rule 8312 (FINRA BrokerCheck Disclosure) which will reduce the waiting period from 15 days to three business days for the release of certain information reported on the Form U5 (Uniform Termination Notice for Securities Industry Registration) through BrokerCheck. Beginning on December 12, 2015, the … Continue reading SEC Reduces Form U5 Wait Period to 3 Days on BrokerCheck

Lawyers Tagged by SEC for Offering EB-5 Investments as Unregistered Brokers

The Securities and Exchange Commission (SEC) announced a series of enforcement actions against lawyers across the country charged with offering EB-5 investments while not registered to act as brokers. In one case, the lawyer and his firm are charged with defrauding foreign investors in the government’s EB-5 Immigrant Investor Program, through which they seek a path … Continue reading Lawyers Tagged by SEC for Offering EB-5 Investments as Unregistered Brokers

FINRA Proposes Amendments to the Funding Portal Rules

The Financial Industry Regulatory Authority, Inc. (“FINRA”) has  filed with the Securities and Exchange Commission (“SEC”) a proposed rule change to adopt Funding Portal Rules 100, 110, 200, 300, 800, 900 and 1200 (collectively, the “Funding Portal Rules”) and related forms. In addition, as part of the proposed rule change, FINRA proposes to adopt new … Continue reading FINRA Proposes Amendments to the Funding Portal Rules

Comment Period is Open on FINRA’s Proposed Rule Amendments to Address the Financial Exploitation of Seniors

FINRA’s experience with its Securities Helpline for Seniors  has highlighted issues relating to financial exploitation of this group of investors.  Among these issues is a firm’s ability to quickly and effectively address suspected financial exploitation of seniors and other vulnerable adults consistent with FINRA rules. Currently, FINRA rules do not explicitly permit firms to contact … Continue reading Comment Period is Open on FINRA’s Proposed Rule Amendments to Address the Financial Exploitation of Seniors

FINRA’s Top 3 Regulatory Concerns for 2016 Examination Focus

Richard Ketchum, Chairman and CEO  of the Financial Industry Regulatory Authority (FINRA), shared his thoughts on the top 3 regulatory concerns for 2016 recently at the SIFMA  Annual Conference.  His observations were in response to Ben A. Indek, an  attorney at Morgan Lewis, who asked Ketchum about what we can expect on next year’s annual examination … Continue reading FINRA’s Top 3 Regulatory Concerns for 2016 Examination Focus

FINRA Rule to Increase Transparency in OTC Equities Market

The Financial Industry Regulatory Authority (FINRA) has announced the U.S. Securities and Exchange Commission’s (SEC) recent approval of FINRA’s proposal to expand its transparency initiative for over-the-counter (OTC) equity securities. Under the newly approved rule, FINRA will supplement the alternative trading system (ATS) volume it currently publishes with all other equity volume executed over-the-counter by … Continue reading FINRA Rule to Increase Transparency in OTC Equities Market

SEC Charges Investment Adviser With Improperly Using Mutual Fund Assets to Pay Distribution Fees

The Securities and Exchange Commission (SEC) charged a New York-based investment adviser and its affiliated distributor with improperly using mutual fund assets to pay for the marketing and distribution of fund shares.  This is the first enforcement action brought as a result of the Distribution-in-Guise Initiative of the SEC, which was a joint undertaking by … Continue reading SEC Charges Investment Adviser With Improperly Using Mutual Fund Assets to Pay Distribution Fees

FDIC Approval of Margin Rules Triggers SEC Parallel Rule

Two agencies approved a final rule that will govern how much money financial firms must set aside in derivatives deals.  A key change from recent draft versions of the rule — and the focus of months of debate among regulators — cut in half what the companies must post in transactions between their own divisions. … Continue reading FDIC Approval of Margin Rules Triggers SEC Parallel Rule

Final Crowdfunding Rules Adopted by the SEC

The Securities and Exchange Commission (SEC) has adopted final rules to permit companies to offer and sell securities through crowdfunding.  Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects.  Title III of the JOBS Act created a federal exemption under the … Continue reading Final Crowdfunding Rules Adopted by the SEC

SEC Enforcement Activities in Fiscal 2015 Appear Aggressive

The Securities and Exchange Commission announced that in fiscal year 2015, it continued to build a strong record of first-of-their-kind cases that spanned the spectrum of the securities industry. The SEC’s increase in enforcement actions is significant.  The SEC’s independent enforcement actions have increased substantially since 2013, up to 507 actions from 341. This has resulted … Continue reading SEC Enforcement Activities in Fiscal 2015 Appear Aggressive

LeGaye Law Firm to Attend the 2015 NSCP National Conference

The LeGaye Law Firm, a law firm focused on compliance and regulatory issues for the financial industry, is pleased to announce its upcoming attendance at the 2015 National Society of Compliance Professionals (NSCP) National Conference in National Harbor, Maryland, November 1-4, 2015. In attendance will be Daniel E. LeGaye and Mr. Michael Schaps, who bring with them a seasoned … Continue reading LeGaye Law Firm to Attend the 2015 NSCP National Conference

SEC Publishes Private Funds Statistics Report

The Securities and Exchange Commission (“SEC”)   recently published the Private Funds Statistics Report for Fourth Quarter 2014.  The  report provides private fund industry statistics and trends, reflecting aggregated data reported by private fund advisers on Form ADV and Form PF.  The report also includes statistics about the distribution of borrowings, an analysis of hedge fund … Continue reading SEC Publishes Private Funds Statistics Report

FinCen Releases Annual Review of SAR’s Data

FinCEN has issued the second edition of SAR Stats, FinCEN’s annual review of aggregated Suspicious Activity Report (SAR) filing activity and announced the introduction of Interactive SAR Stats.  FinCEN developed Interactive SAR Stats to address the large number of requests for more current aggregated SAR data than an annual publication could provide.  Interactive SAR Stats … Continue reading FinCen Releases Annual Review of SAR’s Data

FINRA Provides Guidance on Regulation A+ Offerings

FINRA recently published Regulatory Notice 15-32 to provide guidance regarding the FINRA filing requirements and review procedures that apply to firms that participate in Regulation A+ offerings.   Specifically, FINRA’s Corporate Financing Rules require firms that participate in Regulation A+ offerings to file with FINRA information specified in the rules.   FINRA’s Communications with the Public Rule and its … Continue reading FINRA Provides Guidance on Regulation A+ Offerings

FINRA Targets Firms for Failing to Apply Sales Charge Discounts

The Financial Industry Regulatory Authority (FINRA)  ordered 12 firms to pay restitution totaling more than $4 million and fines totaling more than $2.6 million for failing to apply available sales charge discounts to customers’ purchases of Unit Investment Trusts (UITs), and related supervisory failures. A UIT is a type of investment company that offers redeemable … Continue reading FINRA Targets Firms for Failing to Apply Sales Charge Discounts

SEC Approves FINRA Rule 2272 – Governing Sales of Securities on Military Installations

The SEC approved the adoption of FINRA Rule 2272 (Sales and Offers of Sales of Securities on Military Installations) to govern sales and offers of sales of securities by firms on the premises of any military installation to members of the U.S. Armed Forces or their dependents. The rule becomes effective March 30, 2016. The … Continue reading SEC Approves FINRA Rule 2272 – Governing Sales of Securities on Military Installations

Cybersecurity Best Practices for Broker-Dealers and Advisers for 2015

In light of both the targeted sweep exams the expanded exam modules of the SEC, FINRA and state securities regulators on cybersecurity, and recent enforcement actions related to cyber breaches,  it is important for financial firms to to step back and reassess their policies and procedures related to cybersecurity and the protection of customer identification.  To … Continue reading Cybersecurity Best Practices for Broker-Dealers and Advisers for 2015

SEC Sanctions Underwriting Firms for Fraudulent Municipal Bond Offerings

The Securities and Exchange Commission announced enforcement actions against 22 municipal underwriting firms for violations in municipal bond offerings.  The actions are the second round of filings against underwriters under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative , a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents. In the actions, the … Continue reading SEC Sanctions Underwriting Firms for Fraudulent Municipal Bond Offerings

CRD Public Records Validation Initiative Evolving to Ongoing Validation

In April 2014, the Financial Industry Regulatory Authority (“FINRA“) rolled out the CRD Public Records Validation Initiative to conduct a review of public records available for the entire population of  approximately 630,000 active registered representatives (“RRs”) for financial disclosures that may not have been reported and for criminal disclosures that may not have been reported … Continue reading CRD Public Records Validation Initiative Evolving to Ongoing Validation

FINRA Rules Amended to Expedite Cease and Desist Orders

The Securities and Exchange Commission (SEC) recently approved amendments to the Financial Industry Regulatory authority (FINRA) rules that lower the evidentiary standard to impose a temporary cease and desist order (TCDO); create a new expedited proceeding for repeated failures to comply with a TCDO or a permanent cease and desist order (PCDO); harmonize the provisions … Continue reading FINRA Rules Amended to Expedite Cease and Desist Orders

NASAA Adopts Model M&A State Rule

The North American Securities Administrators Association (“NASAA”) formally adopted a Model State Rule which, if adopted by each state, will exempt M&A Brokers from having to register as securities brokers at the state level. The intent of NASAA’s model rule is to harmonize state securities rules and regulations with recent changes in federal securities regulation … Continue reading NASAA Adopts Model M&A State Rule

2015 SILA National Education Conference

On October 6, 2015, Daniel LeGaye of The LeGaye Law Firm was a co-speaker at the 2015 SILA National Education Conference, which was held at the Gaylord Opryland Resort & Convention Center in Nashville, TN.  The panels’ topic was “Walk the Line or Face Enforcement” and the presentation was meant to provide insight into the current regulatory … Continue reading 2015 SILA National Education Conference

FINRA Issues Liquidity Risk Management Guidance

FINRA believes that effective liquidity management is a critical control function at broker-dealers and across firms in the financial sector. Failure to manage liquidity has contributed to both individual firm failures and, when widespread, systemic crises.  To address this, FINRA has recently provided guidance on effective practices that senior management and risk managers at firms … Continue reading FINRA Issues Liquidity Risk Management Guidance

State Exam Programs Reflect Improved Compliance by State Regulated Advisers

Every two years, state securities examiners voluntarily report sample data from their investment adviser examinations to the North American Securities Administrators Association’s (NASAA) Investment Adviser Operations Project Group.  The 2015 sample examination data was provided by 42 jurisdictions between January and June 2015 and as a result, NASAA has released the 2015 IA Coordinated Examinations … Continue reading State Exam Programs Reflect Improved Compliance by State Regulated Advisers

Daniel LeGaye Guest Speaker on Current Regulatory Enforcement Environment

On October 6, 2015, Daniel LeGaye of The LeGaye Law Firm will be a co-speaker at the 2015 SILA National Education Conference.  The panels’ topic is “Walk the Line or Face Enforcement” and the presentation is meant to provide insight into the current regulatory and enforcement environment impacting broker-dealers and investment advisers – and the … Continue reading Daniel LeGaye Guest Speaker on Current Regulatory Enforcement Environment

FINRA Board Approves Rulemaking Item to Protect Seniors

The Financial Industry Regulatory Authority (FINRA) announced that its Board of Governors approved a rulemaking item to help firms better protect seniors and other vulnerable adults from financial exploitation. The proposal would allow a firm to place a temporary hold on a disbursement of funds or securities and notify a customer’s trusted contact when the … Continue reading FINRA Board Approves Rulemaking Item to Protect Seniors

SEC Sanctions Investment Adviser $75,000 for Cyberattack

The Securities and Exchange Commission (SEC) announced that R.T. Jones Capital Equities Management, a St. Louis-based investment adviser, has agreed to settle charges that it failed to establish cybersecurity policies and procedures in advance of a breach that compromised the personally identifiable information (PII) of approximately 100,000 individuals, including thousands of the firm’s clients.  Without … Continue reading SEC Sanctions Investment Adviser $75,000 for Cyberattack

FINRA Cracksdown on Broker Migration

The Financial Industry Regulatory Authority (FINRA) announced that as a result of a 2014 onsite exam, it found securities violations including various misleading sales pitches, customer account churning and other business misconduct at Global Arena Capital Corp.  As a result, it has barred seven former registered representatives from the securities industry, suspended an eighth person … Continue reading FINRA Cracksdown on Broker Migration

FINRA Ombudsman Office Releases 2014 Report

The Office of the Ombudsman for the Financial Industry Regulatory Authority (FINRA) recently issued its 2014 Report regarding its activities.  The primary mission of the Ombudsman’s Office is to provide assistance to investors, brokerage firms, individual brokers, and any other business or individual who interacts with FINRA and has concerns regarding unfair treatment or inconsistent regulatory practices. As an independent, … Continue reading FINRA Ombudsman Office Releases 2014 Report

Net Capital Deficiency Costs Charles Schwab Millions

The Financial Industry Regulatory Authority (FINRA) a has censured and fined Charles Schwab & Co., Inc. $2 million for net capital deficiencies and for related supervisory failures. The net capital deficiencies occurred on three separate dates in 2014, and ranged from $287 million to $775 million. FINRA found that on three occasions between May 15, … Continue reading Net Capital Deficiency Costs Charles Schwab Millions

SEC Exam Program Doubles Up Focus on Cybersecurity

The Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE) has issued an additional Risk Alert regarding the Targeted Industry Reviews and Examinations Initiative for the second round of cybersecurity examinations. This current initiative follows the (i) SEC sponsored Cybersecurity Roundtable where SEC Commissioners and staff, along with industry representatives, underscored the importance of cybersecurity in March … Continue reading SEC Exam Program Doubles Up Focus on Cybersecurity

MSRB Seeks Approval to Amend Gifts Rule

The Municipal Securities Rulemaking Board (MSRB) has filed a Notice of Rule Change with the Securities and Exchange Commission (SEC) to apply the limitations on business-related gift-giving that currently applies to Municipal Securities Dealers to Municipal Advisors.  The proposed amendments to MSRB Rule G-20 aim to address conflicts of interest that may arise from the giving of gifts … Continue reading MSRB Seeks Approval to Amend Gifts Rule

SEC to Broker-Dealers: Better Supervise Sales of Risky Products

The Securities and Exchange Commission is warning brokerages to better monitor the sales of risky complex investments to their retail clients.  In a recently issued National Exam Program Risk Alert, the SEC  said that in an analysis of 26,600 transactions totaling $1.25 billion of structured securities products, the SEC observed in a significant number of … Continue reading SEC to Broker-Dealers: Better Supervise Sales of Risky Products

MSRB to Raise Annual and Initial Fees

The Municipal Securities Rulemaking Board (MSRB) announced in Regulatory Notice 2015-13 that it will be raising the fees assessed to its registrants (brokers, dealers, and municipal securities dealers (collectively “dealers”) and municipal advisors (collectively “regulated entities”), effective October 1, 2015.  These fees are as follows:  Rule A-11 (municipal advisor professional fee); Rule A-12 (initial and … Continue reading MSRB to Raise Annual and Initial Fees

FINRA Announces New Electronic Subordinated Loans System

FINRA has announced that later this year, it will transition the subordinated loan submission process to an electronic platform, via the Firm Gateway.  The online system will simplify the submission and review of subordinated loan requests and eliminate the manual steps now utilized. After the launch of the new system, all firms must submit their … Continue reading FINRA Announces New Electronic Subordinated Loans System

FINRA Proposes to Adopt FINRA Rule 3280 – Private Securities Transactions

Financial Industry Regulatory Authority, Inc. (“FINRA”) has filed  a proposed rule change with the Securities and Exchange Commission (“SEC”) to adopt NASD Rule 3040 (Private Securities Transactions of an Associated Person) as FINRA Rule 3280 (Private Securities Transactions of an Associated Person) in the consolidated FINRA Rulebook. FINRA also proposes to update cross-references within other … Continue reading FINRA Proposes to Adopt FINRA Rule 3280 – Private Securities Transactions

SEC Approves Rule Addressing Conflicts of Interest in Research Reports

The Securities and Exchange Commission (SEC) approved the adoption of FINRA Rule 2241 ( Research Analysts and Research Reports), a consolidated rule to address conflicts of interest relating to the publication and distribution of equity research reports, which may come into effect either September 25, 2015 or December 24, 2015.  In general, the rule retains  … Continue reading SEC Approves Rule Addressing Conflicts of Interest in Research Reports

FINRA Issues Targeted Exam Letter: Compensation Conflicts of Interest Review

FINRA recently issued a Targeted Exam Letter that is focused on conflicts of interest with respect to compensation practices for retail brokerage firms.   As noted in FINRA’s Annual Priorities Letter, conflicts of interest continue to represent a recurring challenge that contribute to compliance and supervisory breakdowns which can lead to firms and registered representatives, at times, compromising … Continue reading FINRA Issues Targeted Exam Letter: Compensation Conflicts of Interest Review

Basel Institute Publishes the 2015 Basel AML Index

The Basel Institute on Governance recently published the  Basel Anti-Money Laundering (AML) AML Index for 2015.  The report provides an annual risk rating of money laundering and terrorist financing  by ranking countries according to their risk of money laundering and terrorist financing. This year the report covers 152 countries. The risk assessment includes the a review of … Continue reading Basel Institute Publishes the 2015 Basel AML Index

AML Programs to be Required for Federal Investment Advisers

The Financial Crimes Enforcement Network (FinCEN) has finally reproposed a rule requiring investment advisers that are required to be registered with the U.S. Securities and Exchange Commission (SEC) to establish an anti-money laundering (AML) program and report suspicious activity to FinCEN pursuant to the Bank Secrecy Act (BSA).  As a part of the proposed rule, … Continue reading AML Programs to be Required for Federal Investment Advisers

State Regulators Jump on Bandwagon of Sanctioning Wall Street Brokerages

The State of Texas sanctioned Citigroup Global Markets Inc. for failure to monitor the registration status of sales assistants, some of whom accepted client orders without being appropriately licensed.  Texas was part of a multi-state investigation into the practices of Citigroup Global and other firms in supervising sales assistants, who provide administrative and operational duties for the company’s … Continue reading State Regulators Jump on Bandwagon of Sanctioning Wall Street Brokerages

Guggenheim Partners Sanctioned for Failure to Disclose Conflict to Clients

Guggenheim Partners Investment Management LLC agreed to pay a $20 million penalty to settle charges brought by the  Securities and Exchange Commission (SEC)  that it breached its fiduciary duty by failing to disclose a $50 million loan that one of its senior executives received from an advisory client. According to the SEC’s order instituting a … Continue reading Guggenheim Partners Sanctioned for Failure to Disclose Conflict to Clients

SEC Adopts Rule for Pay Ratio Disclosure

The Securities and Exchange Commission has finally adopted the final rule t requiring public companies to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees. The new rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, provides companies with flexibility in calculating this … Continue reading SEC Adopts Rule for Pay Ratio Disclosure