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Category Archives: Investment Adviser Regulation

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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

FINRA Election Results: Shaken, not Stirred

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

The FINRA Board of Governors election results are in.  There were three vacancies among the 10 seats reserved for industry representatives:  one Large, one Mid-Size, and one Small Firm Governor.  John Thiel, head of Merrill Lynch Wealth Management, who ran unopposed, won the Large Firm Governor Seat.  Joe Romano, president of Romano Wealth Management, won… Continue Reading

FINRA Board Shake-up Coming?

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

Later this month, on July 30th, FINRA will hold its annual meeting in Washington, D.C., during which it will conduct an election for three open seats on its Board of Governors.  On FINRA’s 24-member Board of Governors, there are 10 seats that are reserved for industry representatives from small, medium and large firms.  Of those… 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

So why is that you want to be a CCO

Posted in Compliance and Supervision, Investment Adviser Regulation, SEC Compliance, SEC Enforcement

Recent SEC enforcement actions suggest that being a CCO is not all that it’s cracked up to be; the SEC recently sanctioned two CCOs. SEC Commissioner Gallagher’s dissents and his recent comments regarding those dissents have really framed the issue. The SEC Rules only provide that an “adviser” must have and implement written supervisory procedures.… Continue Reading

So What Does The SEC Think About Cybersecurity

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, FINRA Compliance, Investment Adviser Regulation, Investment Company Regulation, SEC Compliance

At the end of last month, the SEC provided a guidance update on cybersecurity for registered investment companies and registered investment advisors. This guidance is equally instructive for broker-dealers and registered representatives. Cyber threats are numerous and ever changing with technology. The SEC provided the guidance to highlight the importance of having a robust cybersecurity… 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

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

FINRA in 2015 – Sales Products

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

Earlier this month, FINRA released its 2015 Regulatory and Examinations Priorities Letter.  In the letter, FINRA lays out its 2015 priorities, which focus on three general areas: 1) Sales Practice; 2) Financial and Operational Priorities; and 3) Market Integrity.  This blog entry will discuss FINRA’s “Sales Practice” priority. FINRA is focused on various sales products… Continue Reading

What Is Big Brother Focused On In 2015

Posted in Broker-Dealer Regulation, Investment Adviser Regulation, Investment Company Regulation, Registered Representatives, SEC Compliance, SEC Enforcement

It is that time of year again.  The SEC Office of Compliance and Inspection (OCIE) has announced its examination priorities for 2015.  Knowing what these priorities are will help firms gauge their compliance and supervision efforts over the next year. For firms that are in the retail sector, OCIE has identified particular areas of interest. … Continue Reading

So What Can Be Done To Avoid The Quandary Of Clients With Dementia

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

As our population ages, more and more financial advisors will have to deal with clients who have dementia or get dementia.  If a client gets dementia, your options may be limited; it may be too late.  The question all firms should consider is are there things a firm can do before its clients show the… Continue Reading

My Client Has Dementia, Now What

Posted in Compliance and Supervision, Conflicts of Interest, FINRA Compliance, Investment Adviser Regulation

What do you do when your elderly client begins to make bizarre withdrawals?  Is there something wrong when your elderly client starts transferring funds to finance a Nigerian soccer teams?  What if a long lost relative comes on the scene and starts influencing the investments and cash withdrawals of an elderly client?  Unfortunately, many financial… Continue Reading

INDIVIDUAL MAY ACT AS SOLICITOR DESPITE SEC ADMINISTRATIVE ORDER

Posted in Investment Adviser Regulation, No-Action Relief, SEC Enforcement

The SEC Division of Investment Management determined that a solictor may receive a fee for the soliciation of clients for registered investment advisers notwithstanding a Commission administrative order against her.  See Matter of Stephanie Hibler, https://www.sec.gov/litigation/opinions/2013/34-70140.pdf. In deciding to allow the solicitor to receive cash solicitation fees, the SEC staff noted in its response letter… Continue Reading

What are Knowledgeable Employees?

Posted in Hedge and Private Equity Funds, Investment Adviser Regulation, Open-Ended Mutual Funds

The SEC’s Division of Investment Management issued updated guidance regarding the definition of “knowledgeable employees” under Rule 3c-5 of the Investment Company Act of 1940.  See Managed Funds Ass’n, SEC No-Action Letter, avail. 2/6/14, https://www.managedfunds.org/wp-content/uploads/2014/02/Staff-Response-to-MFA-3c-5-Letter-Final-Outgoing-2-6-14-no-sigs.pdf The SEC staff explained that “private funds” include private equity funds, hedge funds, and other pooled investment vehicles, excluded from… Continue Reading

Cash Solicitations Allowed Despite Court Bar

Posted in Hedge and Private Equity Funds, Investment Adviser Regulation

The SEC’s Division of Investment Management said it will not object if an investment adviser pays a cash fee for the solicitation of advisory clients, although a federal district court injunctive order precluded it.  RBS Sec. Inc., SEC No-Action Letter, avail. 11/26/13, http://www.sec.gov/divisions/investment/noaction/2013/rbssecurities-11252013-section 206.htm. In granting relief, the staff noted especially that the firm otherwise… Continue Reading

IM Division Has “Enhanced” Exam Unit

Posted in Investment Adviser Regulation, Investment Company Regulation, SEC Compliance

The SEC’s Division of Investment Management is working on two ways to make its Risk and Examinations Office effective. http://www.sec.gov/News/Speech/Detail/Speech/1370540048684#.Uml5uBAWkoo. According to the SEC’s website, REO was established in October 2012 to implement Section 965 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The provision requires IM to have a staff of examiners… Continue Reading

SEC OCIE Exam Priorities Include Dual Registrants, Technology Use, JOBS Act

Posted in Broker-Dealer Regulation, Compliance and Supervision, Investment Adviser Regulation, JOBS Act

The SEC’s Office of Compliance Inspections and Examinations’ exam priorities include issues arising from the continuing convergence of the broker-dealer and investment adviser professions. Other OCIE priorities include registrants’ use of technology; applying its “presence exams” to investment advisers who have never been examined; and reviewing the JOBS Act.  Presence exams are risk-based reviews of… Continue Reading

SEC “Presence” Exam Ahead of Schedule

Posted in Hedge and Private Equity Funds, Investment Adviser Regulation

The SEC’s push to conduct narrowly focused examinations of newly registered investment advisers is ahead of schedule and providing it with insights about compliance weaknesses, hedge fund advisers, and private equity companies. To date, the SEC has completed 210 presence exams while 42 are currently open.  Exam teams are focused on compliance associated with marketing… Continue Reading

RIAs Permitted to More Freely Advertise on Social Media

Posted in Investment Adviser Regulation, SEC Compliance

The SEC’s Division of Investment Management  issued guidance permitting advisers  greater use of social media while maintaining the  prohibition on testimonials.   See http://www.sec.gov/investment/im-guidance-2014-04.pdf. IM indicated that advisers could link public commentary from a third social media party site, and it would not violate the Investment Advisers Act of 1940 so long as the adviser had no ability to… Continue Reading

SEC Announces Exam Priorities

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, Hedge and Private Equity Funds, Investment Adviser Regulation, Investment Company Regulation, SEC Compliance, SEC Enforcement

Tis the season for the regulators to announce their examination priorities.  No less than the SEC’s Office of Compliance Inspections and Examinations released its 2014 Examination Priorities for its National Examination Program (“NEP”). In particular, the SEC identified several new issues for registered investment advisers, primarily for those RIAs, who are at least three years old and have never… Continue Reading

What To Expect In 2014 From The SEC’s Enforcement Division

Posted in Broker-Dealer Regulation, Hedge and Private Equity Funds, Insider Trading, Internal Investigations, Investment Adviser Regulation, SEC Compliance, SEC Enforcement, SEC Organization, SEC Structure, Whistleblowers

Now that 2014 is here, it is a good idea to understand what the Enforcement Division might focus on this year.  In a recent article that appeared in the BNA, David Marder, a partner with Robins, Kaplan, Miller & Ciresi identified fifteen things to expect in the coming year.  The fifteen things he noted to… Continue Reading