Legal Alerts

Testimonials and Endorsements – Impact of the New RIA Marketing Rule

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As noted in our earlier articles, the Securities and Exchange Commission (“SEC”) adopted reforms under the Investment Advisers Act of 1940 (“Act”) to modernize rules that govern investment adviser advertisements and payments to solicitors (collectively the “Rule”).  In those articles we discussed the Rule from a 50,000-foot level, and  then we drilled down into the … Continue reading Testimonials and Endorsements – Impact of the New RIA Marketing Rule →

Overview of Advertising – Impact of the New RIA Marketing Rule

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As previously noted, the Securities and Exchange Commission (“SEC”) adopted reforms under the Investment Advisers Act of 1940 (“Act”) to modernize rules that govern investment adviser advertisements and payments to solicitors (collectively the “Marketing Rule”).   It is the intent of the SEC to provide a rule with principles-based provisions, designed to accommodate the continual evolution … Continue reading Overview of Advertising – Impact of the New RIA Marketing Rule →

SEC Adopts New RIA Marketing Rule

Legal Alerts,

On December 22, 2020, the Securities and Exchange Commission (“SEC”) finalized reforms under the Investment Advisers Act of 1940 (“Act”) to modernize rules that govern investment adviser advertisements and payments to solicitors (the “Marketing Rule”).  The SEC reflected, in its 430-page release, that the amendments are intended to create a single rule that replaces the … Continue reading SEC Adopts New RIA Marketing Rule →

SEC Proposes Exemption for Finders

Legal Alerts,

The Securities and Exchange Commission (“SEC”) has proposed a conditional exemption from broker registration requirements for certain “finders” who assist issuers with raising capital in private markets from accredited investors. If adopted, the proposed exemption would permit natural persons to engage in certain limited securities activities involving accredited investors, without registering with the SEC as … Continue reading SEC Proposes Exemption for Finders →

SEC Proposes Amending Form 13F Reporting Thresholds

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Proposed Amendments The Securities and Exchange Commission (the “SEC”) has proposed amendments to Section 13(f) of the Securities Exchange Act of 1934 (“Form 13F”).  The most significant amendment change would raise the current reporting threshold from $100 million, to $3.5 billion.  This change is the first amendment to Form 13F in 45 years, and is … Continue reading SEC Proposes Amending Form 13F Reporting Thresholds →

Accredited Investor Definition Updated by SEC

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The Securities and Exchange Commission (“SEC”) has adopted amendments to update the definition of “accredited investor” in the SEC’s rules, and the definition of “qualified institutional buyer” in Rule 144A under the Securities Act of 1933 (“Securities Act”).  The proposed amendments are intended to update and improve the definitions to identify more effectively institutional and … Continue reading Accredited Investor Definition Updated by SEC →

Credential Compromise Risk Increasing for Client Accounts

Legal Alerts,

The Securities and Exchange Commission (“SEC”) recently issued a Risk Alert addressing client account credential compromises against SEC-registered investment advisers (“advisers”) and brokers and dealers (“broker-dealers,” and together with advisers, “firms”). These compromises utilized “credential stuffing”, which is a method of cyber-attack to client accounts that uses compromised client login credentials, resulting in the possible … Continue reading Credential Compromise Risk Increasing for Client Accounts →

PPP Loans Create Divergent Disclosure Paths for Brokers and Advisers

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Payroll Protection Program (PPP) Loans Recent guidelines issued by the Securities and Exchange Commission (SEC) have again shed light on the fact that broker-dealers and investment advisers address disclosure issues differently. Specifically, the Payroll Protection Program (PPP), which was established pursuant to Section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (the CARES … Continue reading PPP Loans Create Divergent Disclosure Paths for Brokers and Advisers →

FINRA Implements Multi-Factor Authentication for Firm Gateway

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Broker-dealers and investment advisers are now subject to Multi-Factor Authentication (MFA) on the Firm Gateway as a result of the security protocols being implemented by the Financial Industry Regulatory authority (FINRA). This authentication protocol will grant Super Account Administrators and users with access to FINRA Gateway systems, only after successfully providing two pieces of identifying … Continue reading FINRA Implements Multi-Factor Authentication for Firm Gateway →

Revisions to Cash Solicitation Rule Proposed for Investment Advisers (Part 3 of 3)

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As noted previously, the Securities and Exchange Commission (“SEC”) announced that it is releasing proposed amendments to the advertising and cash solicitation rules that currently provide for the regulatory framework impacting investment advisers on these issues.  In this review, we are focusing on the proposed amendments to the cash solicitation rule under the Investment Advisers … Continue reading Revisions to Cash Solicitation Rule Proposed for Investment Advisers (Part 3 of 3) →

Updated Cash Solicitation and Advertising Rules Proposed for Investment Advisers (Part 2 of 3)

Legal Alerts,

As noted previously, the Securities and Exchange Commission (“SEC”) has announced that it is releasing proposed amendments to the cash solicitation and advertising rules that impact investment advisers.  In this discussion, we are focusing on the proposed amendments to the advertising rules under the Investment Advisers Act of 1940 (the “Act”).  The advertising rule has … Continue reading Updated Cash Solicitation and Advertising Rules Proposed for Investment Advisers (Part 2 of 3) →

FINRA Proposes Rule Restricting Registered Reps Being Named a Beneficiary, Executor or Trustee

Legal Alerts,

The Financial Industry Regulatory Authority (“FINRA”) has announced a proposed rule to limit any associated person of a member firm who is registered with FINRA (each a “registered person”) from being named a beneficiary, executor or trustee, or to have a power of attorney or similar position of trust for or on behalf of a … Continue reading FINRA Proposes Rule Restricting Registered Reps Being Named a Beneficiary, Executor or Trustee →

Updated Advertising and Cash Solicitation Rules Proposed for Investment Advisers (Part 1 of 3)

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The Securities and Exchange Commission (“SEC”) has announced that it is releasing proposed amendments to the advertising and cash solicitation rules impacting investment advisers.  The proposed amendments are to the rules that prohibit certain investment adviser advertisements and payments to solicitors, respectively, under the Investment Advisers Act of 1940 (the “Act”). Neither rule has been … Continue reading Updated Advertising and Cash Solicitation Rules Proposed for Investment Advisers (Part 1 of 3) →

Release of Regulation Best Interest to be Considered by SEC on June 5

Legal Alerts,

The Securities and Exchange Commission (SEC) announced that it has scheduled an open meeting on June 5 to consider pending rulemaking related to the relationship of broker-dealers and investment advisers with their customers stemming from proposed Regulation Best Interest, and addressing the standard of care that investors should receive from broker-dealers and investment advisers. The … Continue reading Release of Regulation Best Interest to be Considered by SEC on June 5 →

FINRA Points to Fair and Balanced Customer Communications Regarding Departing Registered Representatives

Legal Alerts,

The Financial Industry Regulatory Authority (FINRA) has consistently sought to ensure that customers can make a timely and informed choice about where to maintain their assets when their registered representative (i.e., a person registered with the member who has direct contact with customers in the conduct of the member’s securities sales) leaves a member firm. … Continue reading FINRA Points to Fair and Balanced Customer Communications Regarding Departing Registered Representatives →

Cantor Fitzgerald Fined $2 Million by FINRA for Regulation SHO Violations and Supervisory Failures

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The Financial Industry and Regulatory Authority (FINRA)  announced that it has fined Cantor Fitzgerald & Co. (Cantor) $2 million for Regulation SHO (Reg SHO) violations and supervisory failures spanning a period of at least five years. As part of the settlement, Cantor also agreed to retain an independent consultant to conduct a comprehensive review of … Continue reading Cantor Fitzgerald Fined $2 Million by FINRA for Regulation SHO Violations and Supervisory Failures →

CAB Rule Amendments Proposed by FINRA to Address Qualification Requirements

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The Financial Industry and Regulatory Authority (“FINRA”) has filed a proposed rule change with the Securities and Exchange Commission (“SEC”) and is soliciting comments to amend the Capital Acquisition Broker (“CAB”) Rules governing qualification, registration and continuing education of associated persons of CABs (CAB Rules 119-125). The proposed amendment is intended to reflect new consolidated … Continue reading CAB Rule Amendments Proposed by FINRA to Address Qualification Requirements →

FINRA Focuses on Self-Reporting Violations in 529 Plan Share Class Initiative

Legal Alerts,

The Financial Industry Regulatory Authority (“FINRA”) has implemented a 529 Plan Share Class Initiative (“529 Initiative”) to promote member firms’ compliance with the rules governing recommendations of 529 savings plans (“529 plans”).  The 529 Initiative is structured for member firms to self-report potential supervisory and suitability violations.  These violations relate directly to recommendations made to … Continue reading FINRA Focuses on Self-Reporting Violations in 529 Plan Share Class Initiative →

2019 Risk Monitoring and Examination Priorities Letter Released by FINRA

Legal Alerts

The Financial Industry Regulatory Authority (FINRA) has released its 2019 Risk Monitoring and Examination Priorities Letter, which highlights new priorities as well as identifies areas of ongoing concern that FINRA will continue to review in the coming year.  This year’s Priorities Letter to FINRA member firms takes a new approach by focusing primarily on those … Continue reading 2019 Risk Monitoring and Examination Priorities Letter Released by FINRA →

FINRA’s 2018 Examination Findings Report Targets Private Placement

Legal Alerts,

The Financial Industry Regulatory Authority’s (“FINRA”)  2018 Examination Findings Report regarding broker-dealer (“firms” or “members”) examinations made it clear that it had targeted due diligence for private placements as a part of its core examination program of members.   Ultimately, the Examination Findings Report focused on a number of observations from recent FINRA examinations, but it … Continue reading FINRA’s 2018 Examination Findings Report Targets Private Placement →

Compliance Deficiencies Targeted in FINRA’s 2018 Examination Findings Report

Legal Alerts,

The Financial Industry Regulatory Authority (“FINRA”) recently issued its 2018 Examination Findings Report that reflects a summary of its examination findings for broker-dealers (“firms” or “members”) in 2018.   For members, the report gives a view of what FINRA has focused on in 2018, and what can be expected to been seen in FINRA’s 2019 examination … Continue reading Compliance Deficiencies Targeted in FINRA’s 2018 Examination Findings Report →

SEC Releases 2019 Examination Priorities

Legal Alerts

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) has released its 2019 examination priorities. OCIE publishes its exam priorities annually to promote transparency of its examination program and provide insights into the areas it believes present potentially heightened risk to investors or the integrity of the U.S. capital markets.  This year, … Continue reading SEC Releases 2019 Examination Priorities →

Government Shutdown Impacts SEC Operations

Legal Alerts

As a result of the federal government shutdown, if you would like Division of Corporation Finance of the Securities and Exchange Commission (Corp Fin) to consider a request for acceleration of the effective date of a pending registration statement or qualification of a pending offering statement, effective December 26th you should contact Larry Spirgel at … Continue reading Government Shutdown Impacts SEC Operations →

SEC Provides Investment Advisers Guidance Relating to Electronic Messaging

Legal Alerts,

The Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and Exchange Commission (“SEC”) conducted a limited-scope examination initiative of registered investment advisers (“advisers”) that was designed to provide the SEC with a greater understanding of the various forms of electronic messaging used by advisers and their personnel, the risks of such use, and … Continue reading SEC Provides Investment Advisers Guidance Relating to Electronic Messaging →

Use of Electronic Signatures Proposed in FINRA Rule Amendment

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In a move to align the regulatory requirements with current technology, the Financial Industry Regulatory Authority (FINRA) recently filed a proposed rule change with the SEC regarding the utilization of electronic signatures.  The proposed rule will permit the use of electronic signatures consistent with the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) … Continue reading Use of Electronic Signatures Proposed in FINRA Rule Amendment →

SEC Adopts Rules Promoting Research on Investment Funds

Legal Alerts,

The Securities and Exchange Commission (SEC) recently adopted rules and amendments designed to promote research on investment funds.  These funds include mutual funds, exchange‑traded funds, registered closed-end funds, business development companies, and similar covered investment funds. These changes are intended to reduce obstacles to providing research on investment funds.  This should be realized by harmonizing the … Continue reading SEC Adopts Rules Promoting Research on Investment Funds →

OCIE Issues Guidance on Cash Solicitation Rule for RIAs

Legal Alerts,

The Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) has issued a Risk Alert to provide investment advisers with information concerning the most common deficiencies the staff has cited relating to Rule 206(4)-3 (“Cash Solicitation Rule”) under the Investment Advisers Act of 1940 (“Advisers Act”).  The Risk Alert includes observations by … Continue reading OCIE Issues Guidance on Cash Solicitation Rule for RIAs →

Stronger Internal Accounting Controls Needed to Fight Cyber Threats

Legal Alerts,

The Securities and Exchange Commission (“SEC”) recently issued an investigative report cautioning that public companies should consider cyber threats when implementing internal accounting controls, especially where the movement of assets is involved.  The report is based on the SEC Enforcement Division’s investigations of the internal accounting controls of nine public companies that fell victim to … Continue reading Stronger Internal Accounting Controls Needed to Fight Cyber Threats →

FINRA Employees to be Subject to New Post-Employment Conflict of Interest Rule

Legal Alerts,

To minimize the potential for a conflict of interest with  former FINRA employees representing persons to the Financial Industry Regulatory Authority (“FINRA”), FINRA  is filing  a proposed rule  to prohibit: Any former officer of FINRA from making certain communications to or appearances before FINRA for one year. Former FINRA  employees from making certain communications to or … Continue reading FINRA Employees to be Subject to New Post-Employment Conflict of Interest Rule →

SEC Staff Issues Guidance on Third-Party Recordkeeping Services

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The Securities and Exchange Commission  (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) have restated the importance of broker/dealers doing due diligence on third-party service providers, especially where the firm relies on a third-party for maintenance of the books and records of the firm.  In FINRA Regulatory Notice 18-31, FINRA advised its members that the … Continue reading SEC Staff Issues Guidance on Third-Party Recordkeeping Services →

SEC Chairman Clayton Addresses SEC Staff Views

Legal Alerts

To address recent comments regarding the concept that the Securities and Exchange Commission (“SEC”) is de facto rulemaking based on the views of staff, SEC Chairman Jay Clayton issued a public statement regarding SEC staff views.  It was noted that the staff of the SEC frequently makes their views known through a variety of communications, … Continue reading SEC Chairman Clayton Addresses SEC Staff Views →

FINRA Restructures Qualification Examination Program

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The Financial Industry Regulatory Authority’s (‘FINRA”) restructured qualification examination program will become effective on October 1, 2018, and it will then require that all new representative-level applicants be required to take a general knowledge examination (the “SIE examination”) and a tailored, specialized knowledge examination (a revised representative-level qualification examination) for their particular registered role.   As part of … Continue reading FINRA Restructures Qualification Examination Program →

FINRA Proposes Amendment to Rule 1220 for Firms Exempt from FINOP Requirement

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Financial Industry Regulatory Authority, Inc. (“FINRA”) filed  a proposed rule change with the Securities and Exchange Commission to amend FINRA Rule  Rule 1220(a)(4) (Financial and Operations Principal and Introducing Broker-Dealer Financial and Operations Principal) to: (1) Reflect that certain firms remain exempt from the requirement to designate an individual as a Financial and Operations Principal … Continue reading FINRA Proposes Amendment to Rule 1220 for Firms Exempt from FINOP Requirement →

MSRB Seeks Comments on the Use of Social Media

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The Municipal Securities Rulemaking Board (“MSRB”) is seeking comments from regulated entities and other stakeholders about draft answers to frequently asked questions (“FAQs”) addressing the use of social media in advertising by municipal advisors and municipal securities dealers and their associated persons.  As the effective date of new MSRB Rule G-40 on advertising by municipal … Continue reading MSRB Seeks Comments on the Use of Social Media →

ALJ Decision Results in SEC Retrying Enforcement Actions

Legal Alerts,

The Supreme Court decision in Lucia v. SEC  that the in-house SEC administrative law judges (“ALJ”) were not properly appointed and put in office has resulted in the Securities and Exchange Commission (“SEC”) issuing an order to retry over 120 enforcement actions.   In the order, the SEC reiterated their approval of the appointments of Chief … Continue reading ALJ Decision Results in SEC Retrying Enforcement Actions →

Sanction Guidelines Revised by FINRA

Legal Alerts,

The Sanction Guidelines were revised by FINRA to instruct adjudicators in the disciplinary process to consider customer-initiated arbitrations that result in adverse arbitration awards or settlements when assessing sanctions.  Thus, when a respondent’s disciplinary history, and history of arbitration awards and arbitration settlements together with the violation found in a disciplinary case, form a pattern, … Continue reading Sanction Guidelines Revised by FINRA →

SEC Proposes Amendments to Whistleblower Rule

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The Securities and Exchange Commission (SEC) has proposed for public comment several amendments to the SEC’s rules implementing its whistleblower program.  The whistleblower provisions of the Securities Exchange Act of 1934 (Exchange Act) provides, among other things, that the SEC shall pay an award to eligible whistleblowers who voluntarily provide the SEC with original information … Continue reading SEC Proposes Amendments to Whistleblower Rule →

FINRA Requires Principal Financial Officer and Principal Operations Officer

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Financial Industry Regulatory Authority (FINRA) Regulatory Notice 17-30 noted that the Securities and Exchange Commission (SEC) had approved new registration and qualification rules for FINRA, including that members are required to designate a Principal Financial Officer and a Principal Operations Principal, effective October 1, 2018.  The position of Principal Financial Officer will have primary responsibility … Continue reading FINRA Requires Principal Financial Officer and Principal Operations Officer →

NYSE Proposes to Drop FINRA Membership Requirement

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The Securities and NYSE Commission (SEC) has published notice to solicit comments on a proposed rule change from the New York Stock NYSE LLC (NYSE) to amend Rule 2 to remove a requirement that a registered broker-dealer be a member of the Financial Industry Regulatory Authority, Inc. (FINRA) or another national securities exchange. The NYSE … Continue reading NYSE Proposes to Drop FINRA Membership Requirement →

New Enforcement Structure Announced by FINRA

Legal Alerts

FINRA recently announced the Department of Enforcement’s new structure, which marks the completion of the final phase of the integration of FINRA’s enforcement functions, a process that began in July 2017. FINRA observed that consolidation is a key outcome of FINRA360, FINRA’s ongoing comprehensive self-evaluation and improvement initiative.  Prior to the consolidation, the department was … Continue reading New Enforcement Structure Announced by FINRA →

Simplified Arbitration Approved by SEC

Compliance Notice, Legal Alerts,

The Code of Arbitration Procedure for Customer Disputes (Customer Code) and the Code of Arbitration Procedure for Industry Disputes (Industry Code, and together with the Customer Code, the Codes) have provided two options for administering cases with claims involving $50,000 or less, excluding interest and expenses. The default option for arbitration was a decision by … Continue reading Simplified Arbitration Approved by SEC →

FINRA Encourages Disclosure of Activities in Digital Assets

Legal Alerts,

The Financial Regulatory Authority (“FINRA”) recently issued Regulatory Notice 18-20, which encouraged member firms to provide notification if either the broker-dealer or their associated persons or affiliates were engaging in, or planned to engage in, any activities related to digital assets such as cryptocurrencies and other virtual coins. FINRA observed that the market for digital … Continue reading FINRA Encourages Disclosure of Activities in Digital Assets →

SEC Issues Best Execution Risk Alert

Legal Alerts,

The Office of Compliance Inspections and Examinations (“OCIE”) recently issued a Risk Alert regarding Best Execution The alert was targeted to investment advisers (“advisers”), investors and other market participants with information concerning many of the most common deficiencies that the staff of the Securities and Exchange Commission (“SEC”) has cited in recent examinations of advisers’ … Continue reading SEC Issues Best Execution Risk Alert →

FINRA Provides Background Investigation of Public Financial Records

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FINRA is making enhancements to its  disclosure review process that will permit firms to rely on FINRA’s background investigation and verification process for purposes of compliance with the requirement to conduct a search of public records relating to bankruptcies, judgments and liens. Specifically,  FINRA will conduct a public records search within fifteen calendar days from … Continue reading FINRA Provides Background Investigation of Public Financial Records →

FINRA 2018 Regulatory and Examination Priorities Letter

Legal Alerts,

The 2018 Regulatory and Examination Priorities Letter is an affirmation  that the coming year will bring both continuity and change in FINRA’s regulatory programs. The continuity comes, first in the commitment of FINRA to their stated mission: protecting investors and promoting market integrity in a manner that facilitates vibrant capital markets. The Priorities Letter speaks to … Continue reading FINRA 2018 Regulatory and Examination Priorities Letter →

FINRA Proposes New Rule on Outside Business Activities and Private Securities Transactions

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FINRA seeks comments on a proposed new rule to consolidate FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of an Associated Person).  The proposed rule would require registered persons to provide their firm(s) with prior written notice for all investment-related or other business activities outside the scope … Continue reading FINRA Proposes New Rule on Outside Business Activities and Private Securities Transactions →

FINRA Requests Comments on Proposed Amendments to FINRA Rule 4521

Compliance Notice, Legal Alerts,

FINRA is seeking comment on proposed amendments to FINRA Rule 4521 (Notifications, Questionnaires and Reports) that would require specified member firms to notify FINRA no more than 48 hours after specified events that may signal an adverse change in liquidity risk. FINRA also seeks comment on a proposed new Supplemental Liquidity Schedule (SLS) that member … Continue reading FINRA Requests Comments on Proposed Amendments to FINRA Rule 4521 →

Is There a Place for Non-Attorney Representation Firms in Arbitration?

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The FINRA Codes of Arbitration and Mediation Procedure (“Codes”) permits non-attorney representation of  clients in securities arbitration and mediation subject to certain exceptions.  FINRA is currently conducting a review of the efficacy of continuing to allow such representation.  Typically, while some parties may be represented by relatives or friends who assist with case preparation or … Continue reading Is There a Place for Non-Attorney Representation Firms in Arbitration? →

Firm Fined $1.25 Million for Failure to Run Adequate Background Checks

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The Financial Industry Regulatory Authority (FINRA) announced it has fined J.P. Morgan Securities, LLC $1.25 million for failing to conduct timely or adequate background checks on approximately 8,600, or 95 percent, of its non-registered associated persons (NRAs) from January 2009 through May 2017.   Additionally, FINRA found that for more than eight years, J.P. Morgan did … Continue reading Firm Fined $1.25 Million for Failure to Run Adequate Background Checks →

Broker Protocol Under Attack by Wall Street

Legal Alerts,

Merrill Lynch recently claimed that its participation in the Protocol for Broker Recruiting (“broker protocol”) only applies to brokers who do not carry the “vice-president” or above title – which is functionally anyone worth recruiting.   Now Morgan Stanley and the U.S. wealth-management arm of Swiss bank UBS Group AG have also withdrawn from the broker protocol, a … Continue reading Broker Protocol Under Attack by Wall Street →

Fiduciary Rule Implementation Delayed 18 Months

Legal Alerts,

The Department of Labor (DOL)  issued  a release on Monday and announced  that the full implementation of key provisions of the DOL fiduciary rule would be extended 18-months.   To that end, the DOL’s announcement noted that the compliance date for the fiduciary rule’s special Transition Period for the Best Interest Contract Exemption and the Principal Transactions … Continue reading Fiduciary Rule Implementation Delayed 18 Months →

FINRA Requests Comments on Proposal for Remote Inspections of Branch Offices

Comment Letters, Legal Alerts,

FINRA’s responded to industry feedback on the inspection process for branch offices.  Based on Rule 3110 (the Supervision Rule),  each firm to currently required to establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA … Continue reading FINRA Requests Comments on Proposal for Remote Inspections of Branch Offices →

MSRB Fees to Increase for Municipal Advisors

Legal Alerts,

In support of the Municipal Securities Rulemaking Board’s (“MSRB”) ongoing efforts to more fairly and equitably assess fees among regulated entities, the MSRB has filed a rule amendment to MSRB Rule A-11, on assessments for municipal advisor professionals, to increase the annual municipal advisor professional fee to $500 from $300, with the Securities and Exchange Commission (“SEC”). … Continue reading MSRB Fees to Increase for Municipal Advisors →

FINRA Board Approves Rule Proposals on Low Risk Branch Exams and Expanded BrokerCheck Discosures

Legal Alerts,

At the September FINRA Board of Governors meeting, the Board authorized publishing for comment two proposed rulemaking items. One would permit firms to use technology to conduct remote inspections of offices engaged in certain low-risk activities, which in turn would enable firms to reallocate compliance resources to activities that pose greater risks to investors.  The … Continue reading FINRA Board Approves Rule Proposals on Low Risk Branch Exams and Expanded BrokerCheck Discosures →

Communications Submitted for Review by FINRA Face Increased Review Fees

Legal Alerts,

The Financial Industry Regulatory Authority, Inc. (“FINRA”) has announced that it is filing with the Securities and Exchange Commission (“SEC” or “Commission”), a  proposed rule change to amend Section 13 of Schedule A to the FINRA By-Laws (“Section 13”)  which govern the review charges for communications filed with or submitted to FINRA’s Advertising Regulation Department (the … Continue reading Communications Submitted for Review by FINRA Face Increased Review Fees →

SIPC / FINRA Streamline Broker/Dealer Reporting Process

Legal Alerts,

The Securities Investor Protection Corporation (SIPC) and the Financial Industry Regulatory Authority (FINRA) recently announced a joint services agreement that was designed by the agencies to ease the reporting burdens and compliance costs for FINRA member firms by allowing the firms to file just once with FINRA.  It is hoped that the new, simplified filing process, … Continue reading SIPC / FINRA Streamline Broker/Dealer Reporting Process →

FINRA’s Adopts Electronic Form 211 for FINRA Rule 6432 Compliance

Legal Alerts,

The Financial Industry Regulatory Authority (FINRA) has adopted a new electronic Form 211 for purposes of compliance with FINRA Rule 6432 (Compliance with the Information Requirements of SEA Rule 15c2-11).  FINRA member firms must begin using the electronic Form 211, in place of the current paper form, beginning on October 23, 2017, but they may … Continue reading FINRA’s Adopts Electronic Form 211 for FINRA Rule 6432 Compliance →

FINRA Offers Compliance Vendor Directory

Legal Alerts,

The Financial Industry Regulatory Authority (FINRA) has issued a Compliance Vendor Directory for its members as a new resource for firms searching for vendors that offer compliance-related products and services.  The directory includes nine vendor categories: Compliance Consulting, Cybersecurity, Data Management, Email & Social Media Archive, Exam Prep & Firm CE, Insurance Brokers, Monitoring, PCAOB-Registered … Continue reading FINRA Offers Compliance Vendor Directory →

SEC Released Agenda for Meeting of Advisory Committee on Small and Emerging Companies

Legal Alerts

The Securities and Exchange Commission (“SEC”) announced the agenda for the next meeting of its Advisory Committee on Small and Emerging Companies.  The committee will discuss the Sarbanes-Oxley Act auditor attestation requirement and explore whether updates are needed to Securities Act Rule 701, which many companies use to provide stock and option awards.  The committee … Continue reading SEC Released Agenda for Meeting of Advisory Committee on Small and Emerging Companies →

Pay to Play Guidance Issued Related to CAB Broker/Dealers

Legal Alerts,

The US Securities and Exchange Commission (“SEC”) issued an update to the guidance previously issued in the Staff Response to Questions about the “pay to play” rule (Investment Advisers Act Rule 206(4)-5).  The updated information was meant to address pay to play issues raised as a result of the rules implemented by the Financial Industry … Continue reading Pay to Play Guidance Issued Related to CAB Broker/Dealers →

SEC Releases Updated Instructions for Form ADV Filings with Incomplete Information

Legal Alerts,

In Form ADV and Investment Advisers Act Rules, Advisers Act Release No. 4509, the Securities and Exchange Commission (“SEC”) adopted amendments to Form ADV that have a compliance date of October 1, 2017. As of that date, any adviser filing an initial Form ADV or an amendment to an existing Form ADV will be required to provide responses … Continue reading SEC Releases Updated Instructions for Form ADV Filings with Incomplete Information →

PCAOB Adopts New Rules for Audit Reports

Legal Alerts,

The Public Company Accounting Oversight Board (PCAOB) has adopted new rules and amendments to auditing standards (collectively, the “proposed rules”) to make the auditor’s report more informative and relevant to investors and other financial statement users. The text of the proposed rules appears in Exhibit A to the SEC Filing Form 19b-4 and is available … Continue reading PCAOB Adopts New Rules for Audit Reports →

SEC’s Observations on the Elements of Robust Cybersecurity Policies and Procedures

Legal Alerts,

The Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections (“OCIE”) issued a Risk Alert that provides its observations on the elements of robust cybersecurity policies and procedures.  Those observations resulted from OCIE’s examinations conducted pursuant to the Cybersecurity Examination and the elements noted by OCIE staff (“staff”) during the review of the respective policies … Continue reading SEC’s Observations on the Elements of Robust Cybersecurity Policies and Procedures →

SEC Proposes Amendment to Investment Advisers Act to Address FAST Act

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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

Legal Alerts,

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

Legal Alerts

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

Compliance Notice, Legal Alerts,

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

Legal Alerts,

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

Legal Alerts

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

Legal Alerts,

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

Legal Alerts,

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

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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

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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

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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

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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

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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

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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

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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 →

FinCEN Penalizes California Bank for AML Violations

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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 →

SEC Exam Priorities for 2017 Released

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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 →