Header graphic for print
Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

Category Archives: Compliance and Supervision

Subscribe to Compliance and Supervision RSS Feed

Why Face-to-Face Meetings Are Necessary for Proper Supervision

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, Registered Representatives, SEC Compliance

In this day and age of instant information and overstretched supervisory personnel, you have to be careful to avoid forgoing a very useful supervisory tool. Meeting face to face with those associated persons under your supervision on a regular basis could mean the difference between routing out rogue advisors and being subject to regulatory and… Continue Reading

Why A Free Dinner Is Never Really Free

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, SEC Compliance, SEC Enforcement

The SEC recently charged four investment advisors who allegedly used free dinners to entice older clients to their firm. At these dinners, these individuals allegedly provided fraudulent marketing materials to the attendees and ultimately did not invest all of the money that they were given. Granted these four advisors may just be bad apples and… Continue Reading

Why stupid clients should not ruin your business model

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, Registered Representatives, SEC Compliance, Securities Litigation

Unlike lawyers, especially litigators, the business model of a financial advisor is not dependent upon clients being stupid. Instead, financial advisors depend on their clients making smart decisions after full disclosure and consideration after speaking with their financial advisor. So what do you do when clients make stupid decisions? In defending brokers over the years,… Continue Reading

Who wants to know how OBA disclosures can save your firm

Posted in Broker-Dealer Registration, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Ponzi Schemes, SEC Compliance, SEC Enforcement

Over the years that I have defended broker-dealers and investment advisors, a more robust overview of outside business activity (OBA) disclosures would have gone a long way to disprove a number of claims. So where did these firms go wrong? The biggest issue that I have seen is a firm’s willingness to take the OBA… Continue Reading

It’s All In The Documentation

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, Registered Representatives, SEC Compliance

In the near 20 years that I have been defending financial advisors against claims, many of which brought by seniors, the biggest issue that I have seen is the failure to document the file in a proper manner. Why does this matter you may ask? First and foremost, the way a file is documented tells… Continue Reading

Don’t Forget This Issue When Dealing With Seniors

Posted in Breach of Fiduciary Duty, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

It is no secret that FINRA and the SEC are sharply focused on issues regarding elder clients, including severe disciplinary action. There is another elder “issue” that must be kept in the forefront as well; senior designations. Senior designations are “certifications” that financial advisors tag onto their other designations like CFA, etc. Such designations are… Continue Reading

So Who Thinks FINRA Is Not Serious About Elder Issues

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA CRD, FINRA Enforcement, Registered Representatives

FINRA recently barred a registered representative and fined that person $52,270, which represented the commissions he received from the sale of debentures to 12 senior investors. So what was so bad about those transactions? For one, the high commission investments were not suitable for these elder investors. Second, there were misleading statements made to seven… Continue Reading

Don’t Forget This Data Security Risk

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Registered Representatives, SEC Compliance, SEC Enforcement

In a recent SEC enforcement action, a registered representative was suspended for 6 months and fined $75,000 for, among other things, forwarding confidential client information from his personal email to a former registered representative who maintained the initial client relationships. The representative also used his personal email to conduct firm business. In some instances, he… Continue Reading

Firm Culture; What Is It And Why Does FINRA Care

Posted in Broker-Dealer Regulation, Compliance and Supervision, Corporate Governance, Financial Industry Trends, FINRA Enforcement

FINRA has identified that firm culture is in its cross-hairs. But what is firm culture? Trying to figure out what’s meant by firm culture reminds of my law school days studying First Amendment law and, in particular, cases addressing pornography. A former Supreme Court Justice, Potter Stewart, seemed to get it right when he said… Continue Reading

Why is the cover-up worse than the crime

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement

A recent AWC demonstrates the old Watergate adage that the cover-up is always worse than the crime. In this AWC, FINRA suspended a registered representative for ten (10) months and fined her $15,000. Among other things, the representative entered inaccurately identified her assistant as the person placing trade orders where the assistant was the only… Continue Reading

Culture Shock: FINRA Begins Targeted Enforcement of Firm Culture

Posted in Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement

As we previously blogged about (here and here), FINRA is focusing on your firm’s culture as its top priority this year.  FINRA is planning to meet with your executive, compliance, legal, and risk management teams to discuss “how your firm communicates and reinforces those values directly, implicitly and through its reward system”, and in particular, “how… Continue Reading

It is never too late to learn about risk avoidance

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation, Registered Representatives, SEC Compliance, SEC Enforcement

Client relationships and expectations can be the source of success and liability at the same time.  Ernie Badway and I will be speaking on May 17 in New York City at a regional conference of the National Society of Compliance Professionals.  We will be speaking about risk avoidance techniques that you can use in the… Continue Reading

The bait and switch is alive and well.

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement

FINRA has issued an investor alert involving high-yield CD offers that are really bait for the sale of a high commission investment. Apparently, FINRA has received calls on its senior hotline making it aware of a sales practice that involves enticing a client in to the office to purchase a CD and then being sold… Continue Reading

Are regulations regarding elder investors inevitable

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation, Registered Representatives, SEC Compliance, SEC Enforcement, Securities Litigation

With the exception of those of you who have literally been asleep for the last few years, you are well-versed in the attention FINRA and the SEC are giving to issues surrounding elder investors. Among other things, there is a real focus on elder abuse. Some commentators believe that all of this attention may inevitably… Continue Reading

So, I guess it is all about supervision and risk management after all

Posted in Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, FINRA Compliance, FINRA Enforcement

Other than the non-defined “culture”, FINRA’s 2016 exam priorities are also focused on supervision and risk management. At least these categories are a bit more defined so that you are not left guessing what FINRA means. Under these broad topics, FINRA is focused on four primary areas, which include: Management of conflicts of interest, including… Continue Reading

Why Does FINRA Want to Regulate Your Firm’s Culture?

Posted in Compliance and Supervision, Corporate Governance, FINRA Compliance, FINRA Enforcement

FINRA released its 2016 Exam Priorities yesterday, and its top priority ventures into a very grey area.  FINRA has announced that beginning this year, it will formalize a process of assessing “firm culture”.  In doing so, FINRA appears to be focused primarily on ethics and conflicts of interest and insists that it “does not seek… Continue Reading

Who still thinks FINRA is not interested in elder investor issues

Posted in Broker-Dealer Registration, Compliance and Supervision, Federal and State Criminal Activities, FINRA Compliance, FINRA Enforcement

As you may know, FINRA, last April, launched a senior helpline to address issues pertaining to senior investors. According to recent reports, FINRA received calls on many different issues such as how to read an account statement up fraud targeted to senior investors. FINRA has reported that some of these calls resulted in follow-up calls… Continue Reading

Why does the SEC care about elder clients

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation, Registered Representatives, SEC Compliance, SEC Enforcement

     The SEC is conducting an exam sweep that focuses on retirement advice being given to clients of investment advisors and broker-dealers. Some commentators see this as a turf war between the SEC and the Department of Labor (DOL) because the sweep focuses on things that may come under the DOL’s jurisdiction. Whether the exam… Continue Reading

Ten New Year resolutions that will help your firm

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, Financial Industry Trends, FINRA Compliance, Public Customer Arbitrations, Registered Representatives, SEC Compliance, Securities Fraud, Securities Litigation

Most people say that New Year resolutions are only as good as the paper on which they are written. Notwithstanding that ringing endorsement, I will give it a shot. Here are some things that you should be resolved to doing in the New Year: Read the SEC and FINRA exam priority letters that each issue… Continue Reading

So what does the expedited release of a Form U-5 mean for you

Posted in Books and Records, Broker-Dealer Registration, Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA CRD, FINRA Enforcement

As of December 12, 2015, FINRA will release Form U-5s within three business days of a member firm’s submission, instead of the fifteen days currently provided for under Rule 8312. The current version of the rule was meant to provide the departing registered representative ample opportunity to comment on the disclosure either though a Form… Continue Reading

Who wants to know more risk avoidance techniques

Posted in Breach of Fiduciary Duty, Compliance and Supervision, Conflicts of Interest, Financial Industry Trends, FINRA Compliance, Registered Representatives, SEC Compliance, Securities Litigation

Ernie Badway and I have prepared a series of podcasts dealing with the relationships between broker-dealer, investment advisors and their customers.  Here is the third part of that series focused on risk avoidance techniques.  Here is the link: https://soundcloud.com/fox-rothschild-llp/securities-best-practices.