SEC Grants Capital Relief to Owners

Posted by Ernest E. Badway on February 08, 2013

In an interesting no-action letter presented by FINRA, the SEC staff granted relief in that where FINRA saw multiple class ownerships where some of these classes indicate almost a relationship between a broker dealer and a customer, the staff would permit such ownership classes without it affecting SEC Exchange Act Rule 15c3-3.

The SEC would allow such arrangements so long as there is an outside lawyer’s opinion letter indicating it was a good legal standing, that the person is actually an equity participant in the firm, the relationship between the person and the brokerage is spelled out in writing, and that their investment is not considered protected under the securities Laws or Securities Investors Protection Act, this person must reaffirm this in writing each year, and the registered person is appropriately registered.

This no-action letter will permit those who wish to invest in broker dealers who seem to be customers are in fact owners.  See Financial Industry Regulatory Authority, SEC No-Action Letter, (12/10/12), and http://sec.gov/divisions/marketreg/mr-noaction/2012/finra-121012-15c3-1.pdf.

What Brokers Need to Know About Receiving Cash Fees

Posted by Ernest E. Badway on January 31, 2013

The SEC's Division of Investment Management allowed a sanctioned broker-dealer official to be paid a cash solicitation fee from a RIA.  See J.P. Turner & Co. LLC, SEC No-Action Letter, avail. 9/10/12, and http://www.sec.gov/divisions/investment/noaction/2012/jpturner091012-206-4.pdf.

The SEC Staff allowed the cash fees because the sanctioned official was not engaged in cash solicitation activities in his individual capacity.  The SEC Staff granted the relief noting the firm will conduct any cash solicitation arrangement in compliance with IA Rule 206(4)-3, and will comply with the terms of the administrative order for 10 years. 

This broker has to follow the SEC rules to permit this individual to receive cash fees, any other approach would be a serious violation.