Legal Alerts

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

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

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

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

Substantive Pre-Existing Relationships Possible in On-Line Private Placements

On August 6, 2015, the Securities and Exchange Commission (SEC) issued a No Action Letter to Citizen VC, Inc. (CVC) that appears to have further loosened the prior No Action Letter guidance provided by the SEC related to the ban on general solicitation and the creation of substantive pre-existing relationships in private placements. Counsel for … Continue reading Substantive Pre-Existing Relationships Possible in On-Line Private Placements

FINRA Issues Guidance Relating to Firm Short Positions & Fails-to-Receive in Municipal Securities

FINRA issued Regulatory Notice 15-27 to remind firms engaging in municipal securities transactions that their written supervisory procedures should identify the process for detecting, resolving and preventing the consequences of firm short positions and fails-to-receive in municipal securities, as well as the controls for ensuring that communications with customers regarding municipal securities transactions, including the tax status of interest payments, … Continue reading FINRA Issues Guidance Relating to Firm Short Positions & Fails-to-Receive in Municipal Securities

Online Delivery of the FINRA Regulatory Element of Continuing Education Approved

 The SEC  has approved amendments to FINRA Rule 1250 (Continuing Education Requirements) to provide for a Web-based delivery method for completing the Regulatory Element of the Continuing Education (CE) requirements. The CE requirements under FINRA Rule 1250 include a Regulatory Element and a Firm Element.  The Regulatory Element applies to registered persons and consists of periodic computer-based training on … Continue reading Online Delivery of the FINRA Regulatory Element of Continuing Education Approved

Pay to Play Ban on Third-Party Solicitation Now Effective

The Securities and Exchange Commission (“SEC”) adopted Rule 206(4)-5 (“Pay to Play Rule”) under the Investment Advisers Act of 1940 in 2010.  The Pay to Play Rule prohibited investment advisers from providing advisory services for compensation to a government client for two years after the adviser or certain of its executives or employees had made … Continue reading Pay to Play Ban on Third-Party Solicitation Now Effective

SEC Approves New FINRA Debt Research Analysts & Report Rules

The Securities and Exchange Commission (“SEC”), has approved the  adoption of new 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. FINRA Rule 2242 (“Debt Research Rules”) represents a tiered approach that, in general, would provide retail debt research recipients with … Continue reading SEC Approves New FINRA Debt Research Analysts & Report Rules

FINRA Proposes Change to Rule 2210 (Communications with the Public)

The Financial Industry Regulatory Authority, Inc. (“FINRA”) has filed a proposed rule change to amend FINRA Rule 2210 (Communications with the Public) with the Securities and Exchange Commission (“SEC”).  The proposed rule amendment would require each FINRA member’s websites to include a readily apparent reference and hyperlink to BrokerCheck on: (i) the initial webpage that the … Continue reading FINRA Proposes Change to Rule 2210 (Communications with the Public)

FINRA Extends Deadline for 2015 Risk Control Assessment

FINRA has extended the deadline to complete the 2015 Risk Control Assessment Survey(RCA) to July 31, 2015. The RCA is a survey that FINRA uses to better understand the business activities in which individual member firms engage, the products and services they sell, the kinds of clients and counterparties with which they deal, and to further understand … Continue reading FINRA Extends Deadline for 2015 Risk Control Assessment

SEC Awards Whistleblower Over $3 Million Award

The Securities and Exchange Commission (“SEC”)  announced a whistleblower award of more than $3 million to a company insider whose information helped the SEC crack a complex fraud.  The multi-million dollar payout is the third highest award to date under the SEC’s whistleblower program. The SEC noted that the whistleblower’s specific and detailed information comprehensively … Continue reading SEC Awards Whistleblower Over $3 Million Award

SEC Chair Mary Jo White Sets the Tone at the Top

 In her opening remarks at the 2015 National Compliance Outreach Program for Broker-Dealers SEC Chair Mary Jo White set the tone for the program, and addressed a number of issues.  Most significant was her attempt to calm the growing concern of compliance officers that the targets on their back are going to result  in enforcement actions against them for failures … Continue reading SEC Chair Mary Jo White Sets the Tone at the Top

The Impact of “Ban the Box” Legislation on FINRA Broker-Dealers

Oregon has joined California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New Mexico, Rhode Island, Vermont, Virginia and Washington, D.C. in the “Ban the Box” initiative, a National Employment Law Project. The Ban the Box initiative is named for the checkbox on applications asking about a job applicant’s criminal background, … Continue reading The Impact of “Ban the Box” Legislation on FINRA Broker-Dealers

Bill Introduced to Significantly Increase SEC Penalties

Senators Jack Reed (D-RI) and Chuck Grassley (R-IA) introduced bipartisan legislation in the Senate to give the Securities and Exchange Commission (SEC) another tool to crack down on violations of securities laws by increasing penalties fines by almost 10 times.  In the Press Release,  Senator Reed, a senior member of the Senate Banking Committee was quoted stating “This bipartisan bill gives … Continue reading Bill Introduced to Significantly Increase SEC Penalties

SEC Launches Retirement Targeted Exam Initiative

The SEC Office of Compliance Inspections and Examinations (OCIE) recently issued a Risk Alert regarding the Targeted Industry Reviews and Examinations Initiative related to retirement accounts. The Risk Alert noted that the 2015 Examination Priorities issued earlier this year by OCIE noted that the examination of broker-dealers and investment advisers would include a focus on “examining matters … Continue reading SEC Launches Retirement Targeted Exam Initiative

CRD Public Records Validation Initiative

In April 2014, FINRA announced it would 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 by RRs who have not been fingerprinted within the last five … Continue reading CRD Public Records Validation Initiative

FINRA Requests Comments on Revised Proposal Regarding Discretionary Accounts

FINRA is requesting comments in Regulatory Notice 15-22 on a revised proposal to adopt the NASD and Incorporated NYSE rules regarding discretionary accounts and transactions as FINRA Rule 3260 (Discretionary Accounts and Transactions by Persons Other Than the Customer) in the consolidated FINRA rulebook. In addition, the revised proposal addresses the treatment of customers’ free … Continue reading FINRA Requests Comments on Revised Proposal Regarding Discretionary Accounts

FINRA Updates the Interpretations of Financial & Operational Rules

In Regulatory Notice 15-25, FINRA released updates to interpretations in the Interpretations of Financial and Operational Rules that have been communicated to FINRA by the staff of the SEC’s Division of Trading and Markets (SEC staff). The updated interpretations relate to the effectiveness of amendments that the SEC adopted to Securities Exchange Act (SEA) Rules 15c3-1 … Continue reading FINRA Updates the Interpretations of Financial & Operational Rules

SEC Approves Amendments to the Codes of Arbitration Procedure to Increase the Fees Assessed for Late Cancellation or Postponement of a Hearing

The Code of Arbitration Procedure for Customer Disputes (Customer Code) and the Code of Arbitration Procedure for Industry Disputes (Industry Code) (together, codes) govern the payments that FINRA makes to its arbitrators for the services they provide to FINRA’s dispute resolution forum, as well as the fees assessed to the parties for arbitration proceedings. FINRA … Continue reading SEC Approves Amendments to the Codes of Arbitration Procedure to Increase the Fees Assessed for Late Cancellation or Postponement of a Hearing

Deloitte & Touche Charged With Violating Auditor Independence Rules

The SEC announced on July 1, 2015 that Deloitte & Touche LLP (Deloitte) was charged by the SEC with violating auditor independence rules when its consulting affiliate, Deloitte Consulting LLP, maintained a business relationship with a trustee (Boynton) serving on the boards and audit committees of three funds it audited. According to the SEC’s order instituting a … Continue reading Deloitte & Touche Charged With Violating Auditor Independence Rules

T+2 Trade Settlement on Regulatory Horizon

Based upon a public statement issued by SEC Commissioner Michael S. Piwowar and Commissioner Kara M. Stein earlier this week,  it appears that that the plan to move from a three-day (T+3) trade settlement cycle to a two-day (T+2) trade settlement cycle is closer to being implemented. In the release, the Commissioners applauded industry’s leadership in seeking … Continue reading T+2 Trade Settlement on Regulatory Horizon

Background Investigations Now Required by FINRA

FINRA Rule 3110(e) (Responsibility of Member to Investigate Applicants for Registration) is effective as of July 1, 2015. The new rule requires, prior to registration, that broker-dealers conduct an investigation of the background of all potential applicants for verification of the information on the Form U4, with the goal to ascertain, by investigation, the good … Continue reading Background Investigations Now Required by FINRA

FinCEN Re-Proposes AML Rule for Investment Advisers

The U.S. Department of the Treasury (“Treasury Department”) submitted its Semiannual Regulatory Agenda for review by The Office of Management and Budget (“OMB”) in April 2015. The semiannual regulatory agenda of the Treasury Department includes regulations that the Financial Crimes Enforcement Network (“FinCEN”) has issued or expects to issue and rules currently in effect that … Continue reading FinCEN Re-Proposes AML Rule for Investment Advisers

Financial Industry Cybersecurity Standards Not Modeled After Government Agencies, Thankfully …

The last 18 months has found the financial industry in the spotlight for cybersecurity breaches, and as a result, the SEC and FINRA are ramping up their expectations regarding cybersecurity  for the financial industry.  This is based in large part on both the importance of the financial markets to the United States economy and the negative impact … Continue reading Financial Industry Cybersecurity Standards Not Modeled After Government Agencies, Thankfully …

MSRB Requests Comments on Alternative Standard of Independence for Investor Representative on its Board

The Municipal Securities Rulemaking Board (MSRB) is requesting comment on a proposal to modify the application of the standard of independence for the one public member of its Board of Directors designated to be representative of institutional or retail investors in municipal securities. Comments should be submitted to the MSRB no later than July 13, 2015. … Continue reading MSRB Requests Comments on Alternative Standard of Independence for Investor Representative on its Board

FINRA Launches National Ad Campaign

FINRA’s announced a new ad campaign that is meant to underscore the ease and importance of checking BrokerCheck before investing. In tangent with the print ad released, FINRA plans to air 15-second commercials for five weeks on cable channels, including CNBC, Bloomberg, CNN, MSNBC, Fox Business, Fox News, ESPN, Discovery, The History Channel and HGTV. … Continue reading FINRA Launches National Ad Campaign

SEC Requests Comments on Exchange-Traded Products

The SEC is asking for comments on how new and novel exchange-traded products should be listed, marketed and traded, as part of an effort to potentially write new rules for the sector. The Securities and Exchange Commission cited an ever-increasing number of requests by funds to launch new kinds of complex products and investment strategies. “Exchange-traded … Continue reading SEC Requests Comments on Exchange-Traded Products

FINRA Requests Comments Proposal to Restructure the Representative-Level Qualification Examination Program

FINRA has requested comments in Regulatory Notice 15-20 on a concept proposal to restructure the current representative-level qualification examination program into a format whereby all potential representative-level registrants would take a general knowledge examination and an appropriate specialized knowledge examination to reflect their particular registered role. For purposes of this proposal, the general knowledge examination will … Continue reading FINRA Requests Comments Proposal to Restructure the Representative-Level Qualification Examination Program

No-Action Guidance on Prompt Forwarding of Customer Funds with Subscription-Way Securities

In a major shift in policy with respect to the processing of customer checks by broker-dealers in subscription-way securities, the United States Securities and Exchange Commission (“SEC”) issued a No Action Letter on March 12, 2015 to NYLIFE Securities, Inc. stating that the Staff in the SEC’s Division of Trading and Markets would not recommend … Continue reading No-Action Guidance on Prompt Forwarding of Customer Funds with Subscription-Way Securities

FINRA Enforcement Sanctions Increased

FINRA, through the The National Adjudicatory Council (NAC), first published the Sanction Guidelines  in 1993. The goal of the Sanction Guidelines was twofold. First, it was intended to familiarize FINRA firms with some of the typical securities industry rule violations that occur, and the range of disciplinary sanctions that may result from those rule violations. … Continue reading FINRA Enforcement Sanctions Increased

Colorado – New Email Rules Effective June 1, 2015

The LeGaye Law Firm wants to advise you that the Colorado Department of Regulatory Agencies has recently passed a new rules Rules 51-4.3(K) and 51-4.4(IA)(I), which requires all broker-dealer and investment adviser agents who are currently registered to do business in the State of Colorado to register their current business e-mail address with the Commissioner … Continue reading Colorado – New Email Rules Effective June 1, 2015

DOL Fiduciary Rule To Be Released As Early As April 14, 2015

It appears that the proposed fiduciary rule submitted by the Department of Labor to the Office of Management and Budget is being fast-tracked and may be released today.  Megan Leonhardt noted in an article on WealthManagement.com that “the proposal was expedited by the OMB after President Barack Obama publically supported the DOL’s efforts in a … Continue reading DOL Fiduciary Rule To Be Released As Early As April 14, 2015

FINRA Rule 0190 Effective August 24, 2105

FINRA Notice to Members 15-07 noted that  the effective date of Rule 0190 is August 24, 2015.  Rule 0190 is based largely on NASD IM-2420-1(a) (Transactions Between Members and Non-Members; Non-members of the Association).  The rule confirms that a member firm will be considered as a non-member of FINRA from the effective date of any … Continue reading FINRA Rule 0190 Effective August 24, 2105

Amendment to FINRA Rule 8311 Approved

FINRA Notice to Member 15-07 noted that the amendments to FINRA Rule 8311 will be effective August 24, 2015.  In general, while the amendments to FINRA Rule 8311 eliminate duplicative provisions in NASD IM-2420-2, the most significant impact is that it clarified  the scope of the rule on payments by member firms to persons subject … Continue reading Amendment to FINRA Rule 8311 Approved

New Proposed AML Customer Due Diligence Requirements

The Financial Crimes Enforcement Network (FinCEN) is proposing new rules under the Bank Secrecy Act (BSA) to clarify and strengthen customer due diligence (CDD) requirements for banks, broker-dealers, mutual funds, and futures commission merchants and introducing brokers in commodities. The proposed rules would address CDD elements related to identifying and verifying the identity of beneficial … Continue reading New Proposed AML Customer Due Diligence Requirements

Treasury Regulations Implemented to Address FATCA Impact Broker-Dealers and Investment Advisers

Overview The Foreign Account Tax Compliance Act (“FATCA”) has resulted in significant changes in the reporting and withholding requirements of financial institutions, including broker-dealers and investment advisers that represent foreign investors. One impact on all broker-dealers and investment advisers with foreign clients is the finalization of new U.S. Treasury Regulations (“Treasury Regulations”) related to reporting, … Continue reading Treasury Regulations Implemented to Address FATCA Impact Broker-Dealers and Investment Advisers

FINRA Backing Away From Reliance on Rule 8210 for Routine Information Requests

It appears that the Financial Industry Regulatory Authority (“FINRA“) intends to back away from their reliance on FINRA Rule 8210 (the “Rule”) information requests for routine matters. At the Ask FINRA Senior Staff session of the FINRA 2014 Conference in Washington DC, Susan Axelrod, Executive Vice President of Regulatory Operations at FINRA, discussed internal guidelines that … Continue reading FINRA Backing Away From Reliance on Rule 8210 for Routine Information Requests

FINRA Announces Proposed Rules for Limited Corporate Financing Broker Category

Overview In late February, the Financial Industry Regulatory Authority (“FINRA”) released Regulatory Release 14-09, and requested public comment on the proposed rules (the “LCFB Rule Set”) for a new category of broker-dealer called the Limited Corporate Financing Brokers (“LCFB”). The LCFB Rule set will be comprised of new FINRA rules 010 to 1000. The comment … Continue reading FINRA Announces Proposed Rules for Limited Corporate Financing Broker Category

M&A Brokers Exempted From SEC Broker-Dealer Registration

In what appears to be a noteworthy departure from the Securities and Exchange Commission’s (“SEC”) long-held view that persons receiving transaction-based compensation in connection with facilitating the acquisition and or sale of a company must register with the SEC as a broker-dealer, the SEC issued a No-Action Letter on January 31, 2014, that was revised … Continue reading M&A Brokers Exempted From SEC Broker-Dealer Registration

Broker-Dealer & Investment Adviser Renewal Update for 2014

2014 Renewal Calendar On November 11, 2013, FINRA posted the online Preliminary Renewal Statements on Web CRD and Web IARD, which commenced the 2014 renewal season for broker-dealers and investment advisers. The FINRA renewal calendar is as follows: November 11, 2013    Preliminary Renewal Statements available on Web CRD/IARD. December 13, 2013    Full payment of Preliminary … Continue reading Broker-Dealer & Investment Adviser Renewal Update for 2014

SEC Enforcement Agenda Looks to Minor Rule Violations

Historically, the enforcement actions brought by the Securities and Exchange Commission (“SEC”) have focused more on fraud and misrepresentation, than books and records violations and not on compliance professionals. It appears this is changing. Mary Jo White, Chairperson of the SEC appears to be expanding the enforcement focus of the SEC, which potentially will significantly impact the … Continue reading SEC Enforcement Agenda Looks to Minor Rule Violations