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Category Archives: Financial Industry Trends

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Who Wants To Avoid Being Sued In This Market

Posted in Arbitration, Financial Industry Trends, Public Customer Arbitrations, Punitive Damages, Registered Representatives

Now that I have your attention, there is a pretty tried and true method to avoiding customer complaints, especially in this volatile market. All too often, clients hide in their shelters when the market gets rough. The biggest mistake you can make is hiding in your own shelter. The best way to avoid a customer… Continue Reading

CEO-Pay Ratio Rule Adopted by the SEC

Posted in Corporate Governance, Dodd-Frank, Financial Industry Trends, SEC Compliance, SEC Enforcement

As we predicted last month, the Securities and Exchange Commission adopted a final rule that requires a public company to disclose the ratio of the compensation of its CEO to the median compensation of its employees.  This measure was mandated under Dodd-Frank (section 953(b)), but the SEC maintains that its rule “provides companies with flexibility… Continue Reading

The SEC May Be Getting A Longer Stick

Posted in Federal and State Criminal Activities, Financial Industry Trends, SEC Enforcement, Securities Fraud, Securities Legislation

Two years ago, the United States Supreme Court stated in an opinion that the five-year statute of limitations for the SEC to seek civil monetary sanctions began from the date of the fraudulent act, as opposed to when the SEC discovered the fraudulent act. In doing so, the Court rejected the discovery rule. The discovery… Continue Reading

Who wants some advice regarding cyber-threats?

Posted in Books and Records, Broker-Dealer Regulation, Collateral Consequences, Compliance and Supervision, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, Investment Adviser Regulation, Investment Company Regulation, SEC Compliance

A recent article in Onwallstreet.com highlighted certain areas of focus for investment advisors/broker-dealers when it comes to addressing cyber-threats. The article focused on four areas of particular significance. First, a firm must have a robust risk assessment approach to cyber-security. After all, a firm cannot develop and deploy cybersecurity policies and procedures unless and until… Continue Reading

A Look Ahead: SEC to Adopt CEO-Pay Ratio Rule?

Posted in Corporate Governance, Dodd-Frank, Financial Industry Trends, SEC Compliance

According to Andrew Ackerman and Joann Lublin of the Wall Street Journal, the Securities and Exchange Commission is “poised to complete a rule requiring companies to disclose the pay gap between chief executives and employees”. Under the proposed rule, companies would be forced to disclose median worker pay as compared to their CEO compensation.  This rule… Continue Reading

How can a phone call save your career

Posted in Cyber-Security, Financial Industry Trends, FINRA CRD, FINRA Enforcement

A 17-year veteran advisor recently agreed to a lifetime ban for falsifying the signatures of a client on 10 documents transferring money out of the client’s accounts over a period of two months. Part of this transfer also involved 17 unauthorized trades in the client’s non-discretionary accounts. So how could a phone call have saved… Continue Reading

Who wants to know some pre and post data breach considerations

Posted in Books and Records, Cyber-Security, Financial Industry Trends, Internal Investigations

In a recent blog by Chris Pogue (a digital forensic expert), he highlighted a handful of considerations for firms both pre and post data breach. After all, the issue is not really whether you will suffer a breach, but when and how bad will it be. Those considerations bear repeating, and include the following: Retention… Continue Reading

Who wants more cyber-security guidance

Posted in Books and Records, Cyber-Security, Financial Industry Trends

In a recent article written by Bill Winterberg in the Journal of Financial Planning he highlighted a number of pitfalls that advisors commonly fall into that expose sensitive client data and information to hackers and phishers. By falling into these pitfalls, advisors are unknowingly becoming the tool of the fraudster. Winterberg noted that the following… Continue Reading

Do you really need a reason why not to provide your client with a personal email address

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, Investment Adviser Regulation, Law Firms and Lawyers, Public Customer Arbitrations

Not too long ago, I tried a case that had, among other issues, the improper use of the advisor’s personal email account. That improper use serves as a valuable lesson of what can go wrong when you deviate from using the firm approved email. The client emailed complaints about the handling of the account to… Continue Reading

Twitter: More than just Social Media

Posted in Financial Industry Trends, Social Media

Since Al Gore invented the internet, we have had an unprecedented amount of information and data right at our fingertips.  However, given the immeasurable quantity of this information, it has always been a challenge to quickly and efficiently gather intel and perform research on the internet, especially in the context of a securities practice.  While… Continue Reading

You just suffered a cyberattack, now what

Posted in Cyber-Security, Financial Industry Trends, FINRA Compliance, Registered Representatives, Securities Fraud, Social Media

A recent Investment News article highlighted the pervasive problem associated with cyberattacks and offered some guidance in the event of an attack. Before visiting that guidance, understand how pervasive these attacks are. The SEC recently conducted a sweep on cyberattacks. This sweep revealed that 88% of broker-dealers and 74% of advisors have experienced some form… Continue Reading

Who Wants Additional Guidance On Dealing With Customers With Diminished Capacity

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

On June 2, the SEC published an investor Bulletin on Planning for Diminished Capacity and Illness (the “Bulletin”). Previously, the SEC and FINRA issued a National Senior Investor Initiative. Clearly, FINRA and the SEC think that senior issues, such as diminished capacity, require a heightened focus by firms and individual advisors when it comes to… Continue Reading

Does FINRA Really Want To Make It Easier To Communicate With The Public

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

In FINRA Notice to Members 15-16, FINRA has solicited comments to its proposal that would make communications with the public a bit easier. FINRA proposes to change Rule 2210 (communication with the public), 2214 (requirements for the use of investment analysis tools), and 2213 (requirements for the use of bond mutual fund volatility ratings). All… Continue Reading

Who You Gonna Call? FINRA!

Posted in Financial Industry Trends, FINRA Compliance, FINRA Enforcement

Last month, FINRA launched a toll-free FINRA Securities Helpline for Seniors at 844-57-HELPS (844-574-3577) to provide older investors with assistance from FINRA staff related to concerns they have with their brokerage accounts and investments, such as: understanding how to review your investment portfolio or account statements; concerns about the handling of a brokerage account; and investor… Continue Reading

Why Reverse Churning Does Not Create Cream From Butter.

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Public Customer Arbitrations, Registered Representatives

For years, firms have been using wrap products to charge an annual fee based upon the value of assets under management regardless of the number of trades, as opposed to fees per trade. In other words, wrap accounts were an effective tool to avoid churning claims because the customer theoretically could trade daily and only… Continue Reading

So Who Wants To Give A Vendor Access To Your IT Systems

Posted in Books and Records, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, FINRA Enforcement

At one time or another, member firms will likely need the services of an outside vendor. This may be particularly true for smaller member firms. Outside vendors have their place, but FINRA’s Report on Cybersecurity Practices details that level of vigilance needed when it comes contracting with vendors who have access to your IT systems.… Continue Reading

The SEC Cracks Down on Anti-Whistleblower Agreements

Posted in Compliance and Supervision, Financial Industry Trends, SEC Compliance, SEC Enforcement, Whistleblowers

Around this time last year, the Securities and Exchange Commission’s Office of the Whistleblower warned lawyers that they may be disciplined for drafting contracts to incentivize whistleblowers to not bring alleged company wrongdoing to the SEC’s attention.  It appears the SEC is beginning to make good on its threat.  Last week, the SEC resolved its… Continue Reading

Cybersecurity: FINRA’s Take

Posted in Compliance and Supervision, Cyber-Security, Financial Industry Trends, FINRA Compliance, SEC Compliance

We recently highlighted the Security and Exchange Commission’s 2014 OCIE Cybersecurity Initiative.  Not to be outdone, FINRA also released its Report on Cybersecurity Practices, which provided a much more in-depth report on cybersecurity.  Therein, FINRA offered its own insights into what it expects from firms’ cybersecurity risk management practices: FINRA recommends that firms have a… Continue Reading

New Look For FINRA.org

Posted in Financial Industry Trends, FINRA Compliance, FINRA Enforcement

Earlier this week, FINRA launched its redesigned website FINRA.org.  The website boasts a cleaner and more intuitive design, making information easier to find and read for users.  Streamlined navigation also allows users to more quickly access tools and resources on this site, such as BrokerCheck, investor education, and information about registration and qualification exams.  In… Continue Reading

Do Not Fall Behind On Cybersecurity

Posted in Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, Financial Industry Trends, FINRA Compliance, Investment Adviser Regulation, SEC Compliance

Cybersecurity is more than just a trending topic.  As hacks and leaks continue to be publicized, the Securities and Exchange Commission is stepping up its game and increasing its focus on cybersecurity compliance. The SEC’s Office of Compliance and Inspections recently released an initial summary of their findings from their 2014 OCIE Cybersecurity Initiative.  The… Continue Reading

What FINRA Is Doing About Private Placements

Posted in Broker-Dealer Regulation, Financial Industry Trends, FINRA Compliance, Private Placements

FINRA recently censured and fined a broker-dealer $175,000.00 for failing to perform appropriate due diligence and supervision regarding private placements that the firm and its registered representatives offered. This penalty should serve as a wake-up call that FINRA is taking a sharp look at the due diligence that firms perform before and after offering a… Continue Reading

FINRA in 2015 – High-Risk and Recidivist Brokers

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

FINRA is planning on turning up the heat on perceived “high-risk” brokers this year, and the firms that hire them.  Continuing our discussion regarding FINRA’s 2015 Regulatory and Examinations Priorities Letter, this blog entry will discuss FINRA’s planned activities to prevent and/or stop registered representatives from engaging in actual misconduct. In an effort to protect the… Continue Reading

FINRA in 2015 – Wealth Events

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

FINRA’s 2015 Regulatory and Examinations Priorities Letter provides guidance regarding areas of focus in the “Sales Practice” for this year.  Previously, we discussed the various sales products that FINRA will be monitoring this year; and yesterday, Josh Horn discussed FINRA’s recently adopted Supervision Rules that affect the Sales Practice.  This blog entry will discuss FINRA’s focus… Continue Reading

So How Is Your Cybersecurity

Posted in Books and Records, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement, Social Media

The SEC and FINRA have continued to designate cybersecurity as an exam priority.  Both the SEC and FINRA have also recently published the findings of their exam sweeps.  As reported by the Investment News, the results of those sweeps when it comes to cybersecurity are telling. The sweeps show that firms, much like with compliance,… Continue Reading