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Tag Archives: broker-dealer

Additional Fees on Securities Transactions – FINRA Sees No Justification

Posted in Broker-Dealer Regulation, FINRA Enforcement

In an area of broker-dealer practices with relatively little guidance—the appropriate level of commissions or mark ups on securities trades—FINRA recently brought another in a series of cases that provides insight into the regulator’s view on additional transaction-based fees.  In this particular case, FINRA found that a broker-dealer characterized a $60.50 charge on its customer… Read More

VA Switches: FINRA Disciplinary Action Reminds Firms About the Need for Adequate Supervisory Procedures

Posted in Broker-Dealer Regulation, FINRA Enforcement

In a case involving unsuitable variable annuity (VA) transactions, FINRA found that having good procedures and discovering improper conduct are not enough.  A member firm must also ensure that it has adequate supervisory systems in place to ensure that its procedures are properly implemented.  In this case, two of the firm’s registered representatives—who were independent… Read More

FINRA Announces and Publishes Its Sweep of Order Routing Practices

Posted in Broker-Dealer Regulation, FINRA Enforcement

FINRA announced this week that it is conducting a review of its member firms’ order-routing processes and procedures and the execution quality of customer orders in exchange-listed stocks.    We previously reported in this blog that an academic paper on this subject had gotten the attention of FINRA and the SEC.  That article, by professors at… Read More

Stay on Municipal Advisor Rules Expires July 1, 2014

Posted in Broker-Dealer Regulation, Investment Adviser Regulation

The temporary stay previously imposed on the SEC’s final municipal advisor rules expires July 1, 2014.  Accordingly, municipal advisors will be required to register with the SEC on Form MA on a phased-in schedule beginning July 1, 2014, and ending October 31, 2014. Registration of “municipal advisors” under Section 15B of the Exchange Act was… Read More

Something Old, Something New: SEC Brings Action for Prohibited Principal Transactions and Retaliation Against Whistleblower

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

Clearly signaling its intention to support whistleblowers who provide actionable evidence of wrong-doing, the SEC this week settled the first case brought under the authority granted by the Dodd-Frank Act enabling anti-retaliation enforcement actions.  The case arose after an employee of a hedge fund advisory firm reported potentially illegal activity related to improper principal transactions…. Read More

SEC Decision Regarding TIC Advertisements Offers Broader Lessons About Providing Fair and Balanced Disclosures

Posted in Broker-Dealer Regulation, FINRA Enforcement

Earlier this year, the SEC found that CapWest Securities, Inc., a defunct broker-dealer, had failed to comply with advertising rules in promoting investments that use Section 1031 of the Internal Revenue Code (“1031 Exchanges”) or tenant-in-common investments (TICs).  The SEC’s decision, recently reported by FINRA, upheld FINRA’s decision and sustained the sanctions of a censure… Read More

Pre-IPO Selling Procedures Need to Be Adequately Supervised, According to FINRA

Posted in Broker-Dealer Regulation, FINRA Enforcement

Broker-dealers selling interests in IPOs need to have adequate supervisory systems to ensure that registered representatives do not make actual sales before the securities are registered, according to a settlement of a formal disciplinary proceeding announced by FINRA yesterday. In this particular case, FINRA found that for a little  more than a year, a firm… Read More

Cybersecurity: SEC Is Starting to Scrutinize Registrants’ Practices

Posted in Broker-Dealer Regulation, Cybersecurity/Privacy, Enforcement, FINRA Enforcement, Investment Adviser Regulation, SEC Enforcement

The SEC plans to examine the cybersecurity practices of over 50 registered broker-dealers and investment advisers. The SEC announced its plan in an April 15, 2014 Risk Alert, which closely follows the March 26 Cybersecurity Roundtable at which Chair Mary Jo White underscored the importance of cybersecurity to market security and customer data protection. At… Read More

A Blast from the Past: The SEC Fines Investment Adviser/Broker-Dealer for Breakpoint Violations

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

In a case reminiscent of the “breakpoint” enforcement actions brought 10 years ago by securities regulators, the SEC recently found that a registered investment adviser and broker-dealer overcharged clients because it improperly calculated advisory fees. According to the SEC’s settlement order, the firm offered breakpoint discounts designed to reduce advisory fees payable by clients who… Read More

SEC Sanctions Non-U.S. Firm for Failing to Register as Broker-Dealer/Adviser

Posted in SEC Enforcement

The SEC charged a non-U.S. multi-national financial institution with a large U.S. presence with violating federal securities laws by providing brokerage and investment advisory services to U.S. clients without registering with the SEC. The company agreed to pay $196 million to settle charges that it established as many as 8,500 accounts containing an average of… Read More

A New SEC Enforcement Direction for 2014

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

Each year, the SEC puts on its most informative conference of the year: The SEC Speaks.  During the course of the two-day conference, held this year on February 21 and 22, the Chair and each Commissioner, as well as the most senior staff of each division of the SEC, provide their thoughts and insights into… Read More

FINRA Invites Public Comment on a Modified Regulatory Scheme for Broker-Dealers Specializing in M&A and Corporate Finance

Posted in Broker-Dealer Regulation

FINRA is seeking public comment on a much needed overhaul of the regulatory requirements for broker-dealers who specialize in M&A and corporate finance.  The overhaul would be accomplished by creating a new category of broker-dealers to be known as “Limited Corporate Financing Brokers.”  Qualifying broker-dealers would then be subject to a new set of rules… Read More

FINRA Protects Seniors by Disciplining Inadequate Supervision of VA Sales

Posted in Broker-Dealer Regulation, Enforcement, FINRA Enforcement

As baby boomers continue to age, securities regulators focus on protecting the growing population of seniors and retirees. For example, the regulators are seeking to ensure that broker-dealers’ systems and procedures for assessing the suitability of particular types of investments and the mental competence of their customers are adequate. Regulators are also focusing on suitability… Read More

Toke on This: FinCEN Issues Guidelines for Marijuana-Related Businesses

Posted in Broker-Dealer Regulation, Fund Regulation

The Financial Crimes Enforcement Network (FinCEN) got a whiff of the fact that financial institutions provide services to burgeoning marijuana-related businesses and published guidance to clarify customer due diligence expectations and reporting requirements for financial institutions.  Baked into the unusual guidance, dated February 14, 2014, is the government’s tacit acknowledgment that financial institutions can provide… Read More

AML Enforcement Focuses on BDs Doing Business in Mexico

Posted in Anti-Money Laundering, Broker-Dealer Regulation, FINRA Enforcement

FINRA recently took formal disciplinary action against a New York-based broker-dealer that is affiliated with a Mexican broker-dealer and with a Mexican bank for inadequate anti-money laundering (AML) systems and procedures. FINRA also found that the broker-dealer failed to register 200 to 400 foreign finders who functioned as the firm’s primary points of contact with… Read More

Another Bestseller: The SEC’s Examination Priorities for 2014

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

Following closely on the heels of FINRA’s publication of its examination priorities for 2014 (see our recent client alert), OCIE’s National Exam Program (NEP) released a summary of its 2014 priorities. OCIE’s priorities represent a cross-divisional effort at the SEC and reflect the staff’s assessment of information including: data from reports filed with the SEC;… Read More

FINRA Continues Focusing on Suitability of Complex, Non-Traditional ETFs

Posted in Broker-Dealer Regulation, Enforcement, FINRA Enforcement

FINRA recently announced another settled disciplinary proceeding alleging unsuitable sales of levered and inverse exchange-traded funds (ETFs). This second such announcement in recent months involving non-traditional ETFs sends the clear message that FINRA continues to be intensely focused on the retail sale of complex structured products. In the recent consent order, two brokerage firms agreed… Read More

Retirement Funds Rollovers: FINRA Ends 2013 By Identifying Its First 2014 Priority

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

It is the end of the year, and many people are thinking about the status of their retirement accounts and planning any changes to their investments. FINRA also has retirement accounts on the brain. It is thinking about the ways member firms recommend investments in retirement accounts, and planning what to do about that. FINRA… Read More

FINRA Continues Its Crackdown on Companies That Fail to Respond to Red Flags

Posted in Anti-Money Laundering, Broker-Dealer Regulation, Enforcement, FINRA Enforcement

FINRA continues to discipline broker-dealers that fail to detect and investigate so-called “red flags” of suspicious account activity. Yesterday, FINRA announced a $1 million fine against COR Clearing LLC (the “Firm”) – formerly Legent Clearing LLC – citing its failure to implement procedures designed to detect suspicious account activity and to report that activity once… Read More