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Category Archives: Enforcement

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Division of Investment Management Eases Compliance Deadline for New ADV Filing Requirement

Posted in Investment Adviser Regulation, SEC Enforcement

Currently pending amendments to Form ADV have a compliance date of October 1, 2017 and, as of that date, an adviser filing an initial Form ADV or an amendment to an existing Form ADV must use the revised Form ADV. In an August 2017 “Information Update,” the staff of the Division of Investment Management gave… Read More

FINRA Publishes “Frequently Asked Questions” on New Pricing Disclosure Rules for Securities Confirmations

Posted in Broker-Dealer Regulation, FINRA Enforcement

On July 12, 2017, FINRA issued guidance on its recent amendments to Rule 2232. The new requirements, which are scheduled to take effect on May 14, 2018, apply to transactions with retail (and not institutional, as defined in Rule 4512(c)) customers in corporate and agency debt securities. Beginning on the effective date, FINRA will require… Read More

U.S. Treasury Department Report on Core Principles for Regulating the United States Financial System

Posted in Broker-Dealer Regulation, Enforcement, Investment Adviser Regulation

As required by the President’s Executive Order 13772 setting forth the core principles that should be taken into account in connection with the regulation of the U.S. financial system, the U.S. Treasury Department published a report identifying regulations inconsistent with the seven principles articulated in the order. The report is the first of series of… Read More

FINRA Revises Its Sanction Guidelines

Posted in FINRA Enforcement

In April 2017, FINRA announced that it had revised its sanction guidelines for violations of its rules. The new revisions, among other things: contain a new factor requiring that the exercise of undue influence over a customer, such as an elderly investor, be considered when adjudicating violations; introduce three new sanction guidelines: “Systemic Supervisory Failures,”… Read More

SEC Approves FINRA’s Rules to Protect Seniors from Financial Exploitation

Posted in Broker-Dealer Regulation, FINRA Enforcement

On March 30, 2017, the SEC approved the adoption of new FINRA Rule 2165 (Financial Exploitation of Specified Adults) (see our related blog post about the proposal).  Among other things, Rule 2165 permits brokers to place holds on disbursements of funds or securities from the accounts of “specified adult” customers.  Specified adults include those 65… Read More

FINRA’s Engagement Initiative

Posted in FINRA Enforcement

In our capacity as advisers to financial institutions, we carefully monitor FINRA’s rulemaking and enforcement activities with a view to thinking about how these affect market participants and their activities.  FINRA’s March 2017 announcement of its engagement initiative provides an opportunity for the industry to consider FINRA’s activities on a much broader level. FINRA’s special… Read More

SEC Grants Limited Relief from the Custody Rule for Advisers Relying on Clients’ Standing Letters of Instruction

Posted in Investment Adviser Regulation, SEC Enforcement

In a letter to the Investment Adviser Association (IAA), the Staff of the Division of Investment Management said that investment advisers acting pursuant to a standing letter of instruction or other similar asset transfer authorization (SLOA) established by a client with a qualified custodian would be deemed to have custody of client assets for purposes… Read More

ALI CLE Webinar: SEC in 2017 – What’s Next? SEC Veterans Weigh In

Posted in Enforcement, Events

Thursday, March 9, 2017 12:30 p.m. – 2:00 p.m. EST As the Trump Administration takes charge in 2017, the only thing that seems inevitable is that the regulatory and enforcement outlook will change. Initial indications point to a desire to relax or repeal certain regulations that may be regarded as burdensome to public companies. Also, proposed… Read More

Enforcement Focus on Advisers’ “Cherry-Picking” Continues

Posted in Investment Adviser Regulation, SEC Enforcement

The SEC banned the managing member and chief compliance officer of a registered investment adviser from the securities industry for illegal “cherry-picking” investments among the adviser’s managed accounts.  The SEC staff uncovered the trades through data analysis used to detect suspicious trading patterns. The SEC filed a complaint in federal district court in the District… Read More

FINRA Issues 2017 Examination Priorities Letter

Posted in Broker-Dealer Regulation, FINRA Enforcement

Introduction Consistent with prior practice, with the arrival of the new year, FINRA has published its key examination priorities.  The letter may be found at the following link: http://www.finra.org/sites/default/files/2017-regulatory-and-examination-priorities-letter.pdf. As in prior years, the letter covers a broad array of topics.  This year’s topics include: Hiring and monitoring the activities of “high-risk and recidivist brokers;”… Read More

Former New York Pension Official and Two Broker-Dealers Charged In Pay-To-Play Scheme

Posted in SEC Enforcement

On December 21, 2016, the SEC charged the former Director of Fixed Income for the New York State Common Retirement Fund (the “NYSCRF”) with allegedly steering billions of dollars of NYSCRF assets to two broker-dealers in exchange for hotel room stays, restaurant outings, jewelry, concert tickets and vacations.  In total, according to the SEC, the… Read More

FINRA Fine Addresses Broker Compensation and Conflicts of Interest

Posted in Broker-Dealer Regulation, FINRA Enforcement

A recent enforcement action by FINRA underscores the regulator’s continuing concern regarding how financial advisers are paid to sell investment products.  In a case announced on November 28, 2016, a member firm settled charges brought by FINRA and agreed to pay a fine of $1,750,000.  The FINRA case includes a wide range of allegations involving… Read More

The SEC and FINRA Preview 2017 Enforcement Priorities at SIFMA’s C&L New York Regional Seminar

Posted in Cybersecurity/Privacy, FINRA Enforcement, SEC Enforcement

On November 2, 2016, several representatives from the SEC and FINRA spoke at SIFMA’s C&L New York Regional Seminar, including from the SEC, Stephanie Avakian, Deputy Director, Division of Enforcement, and from FINRA, Susan Axelrod, Executive Vice President, Regulatory Operations, and Susan Schroeder, Senior Vice President, Enforcement.  At a general session on enforcement during the… Read More

Inside FINRA’s “Cross-Selling Sweep”

Posted in Broker-Dealer Regulation, FINRA Enforcement

In response to recent highly-publicized scrutiny of bank cross-selling practices, FINRA announced in October 2016 that it is conducting a sweep of broker-dealers to determine the extent to which they are: promoting bank products of affiliated or parent companies to broker-dealer retail customers; and adding different features to broker-dealer retail customer accounts such as securities-based… Read More

FINRA Proposes Rules to Protect Seniors from Financial Exploitation

Posted in Broker-Dealer Regulation, FINRA Enforcement

In October 2016, FINRA filed with the SEC proposed rules designed to help brokers protect seniors and other vulnerable adults from financial exploitation. The proposal would amend existing customer account information rules to require brokers to attempt to obtain the name and contact information for a “trusted contact person” upon opening an account. Brokers would… Read More

Morrison & Foerster Sponsorship: Structured Products Washington Conference 2016

Posted in Broker-Dealer Regulation, Enforcement, Events

Wednesday, November 9, 2016 9:30 a.m. – 3:40 p.m. The Washington Court Hotel 525 New Jersey Avenue NW Washington, DC 20001 The 4th annual Structured Products Washington D.C. conference will be on November 9th. Speakers will address: The Department of Labor’s Fiduciary Duty Rule and structured products; Disclosure practices, new product approval, post-sale review, conflicts of… Read More

FINRA Rule 2210 – Communications with the Public

Posted in Events, FINRA Enforcement

Thursday, October 20, 2016 12:00 p.m. – 1:00 p.m. EDT The FINRA communications rule governs all aspects of communications by member firms. FINRA is in the process of amending Rule 2210. In this teleconference, we will discuss: Upcoming amendments to Rule 2210; The scope of Rule 2210; FINRA enforcement actions relating to communications; and Social… Read More

SEC FY 2016: A Record Year for Enforcement Cases Against Funds and Advisers

Posted in SEC Enforcement

On October 11, 2016, the Securities and Exchange Commission announced that it prosecuted a record number of enforcement cases against investment advisers and investment companies in the fiscal year ended September 30, 2016. During this period, the SEC brought a record-breaking 868 enforcement actions against companies and their executives and gatekeepers for alleged misconduct. Of this… Read More

Are Your Customer Accounts in Order? SEC Announces Sweep of Broker-Dealers and Implementation of the Customer Protection Rule Initiative

Posted in Broker-Dealer Regulation, SEC Enforcement

On June 23, 2016, the Securities and Exchange Commission (the “SEC”) announced that it would begin a coordinated effort across divisions to identify potential violations by broker-dealers of Rule 15c3-3 (the “Rule”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As part of this effort, also known as the Customer Protection… Read More

Double-Check the Math: Advisers Should Not Provide Clients With Performance Data Created by Other Investment Managers Without Verifying the Information

Posted in Investment Adviser Regulation, SEC Enforcement

In a series of enforcement actions this week, the SEC made it clear that investment advisers need to substantiate the performance records of investment management firms they recommend to their clients.  In these cases, failure to do so resulted in charges of spreading “false and misleading information” in violation of Section 206 of the Advisers… Read More