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Category Archives: Financial Industry Trends

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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

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

Why system passwords are not as easy as 123

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

As we all know, cybersecurity remains a top priority for the SEC and FINRA. Unfortunately, a recent Investment News article would suggest that firms do not take it as seriously, or, at least, firm employees do not. A recent study of passwords by SplashData demonstrates that advisers and firm employees are not taking to heart… Continue Reading

SEC Exam Priorities; It Seems Like Deja Vu All Over Again

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Conflicts of Interest, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation, SEC Compliance, SEC Enforcement

Those famous words of the immortal Yogi Berra hold true when it comes to the SEC exam priorities for 2016. Among those at the top of the list are two familiar friends; protecting retail investors and investors saving for retirement. It is clear that the SEC is looking in particular toward how retail firms are… 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

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.

Who wants some additional ideas about cybersecurity

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

A recent Investment News article highlighted issues investments advisors face regarding their cybersecurity programs when it comes to regulatory examinations. First; don’t assume that your insurance policy covers the aftermath of a cyber-event. If you think you have coverage, make sure you document that understanding so that you do not have a shock when it… Continue Reading

Who wants to know three key parts of a data security program

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

Any data security program has to have three critical components. Those key components are the following: First; risk assessment. You must test, retest, and retest your systems (including your staff) for gaps and vulnerabilities. Hackers are very sophisticated. Do what you can to stay ahead of the curve on understanding the risks to your systems… Continue Reading

Whistleblower Tips Rise Again in 2015

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

The Securities and Exchange Commission released its 2015 Annual Report on its Whistleblower Program this week and announced another rise in the number of whistleblower tips that it received.  The SEC reported receiving 3,923 tips during its 2015 Fiscal Year, which is up from 3,620 in 2014 (as we previously reported), and up over 30% from… Continue Reading

How can your clients be part of your data security program

Posted in Books and Records, Broker-Dealer Regulation, Cyber-Security, Financial Industry Trends, FINRA Compliance, SEC Compliance, SEC Enforcement

In order to have sound cyber-security protocols, you need to do more than just physically protecting your systems and having written supervisory programs. Specifically, you need to fully engage your clients to be part of the protocol. Their participation can make your program work that much better than without them. How so? For one, every… Continue Reading