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Category Archives: Registered Representatives

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Take Away From The NSCP New York Regional Conference

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

It was great speaking at the May 17 New York NSCP regional conference on risk issues facing firms where Ernie Badway and I discussed cyber-security, risk issues, regulatory matters, issues involving elder clients and ways compliance personnel can protect themselves.  For those of you who could not make the conference, these topics are frequently discussed… Continue Reading

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 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

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

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

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

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

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 to hear about pitfalls in the advisor/broker-client relationship

Posted in Arbitration, Breach of Fiduciary Duty, Compliance and Supervision, Conflicts of Interest, FINRA Compliance, FINRA Enforcement, Registered Representatives, SEC Compliance, Securities Litigation

Ernie Badway and I have prepared a series of podcasts that highlights client-issues and risk avoidance techniques for broker-dealers and investment advisors.  We hope you’ll take a listen.  

Why elder issues are not just about your clients

Posted in Books and Records, Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, Cyber-Security, FINRA Compliance, Ponzi Schemes, Registered Representatives, SEC Compliance, SEC Enforcement, Securities Fraud, Securities Litigation

The SEC and FINRA have made it very clear that they are focused on senior customers and elder abuse. Granted, firms must be focused on the elder customers, but, at the same time, must also focus on the fact that many advisors are included in the graying generation. What are firms to do about that?… Continue Reading

Who wants more reasons to focus on data security

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, Registered Representatives, SEC Compliance, SEC Enforcement, Social Media

The SEC recently issued an investor bulletin regarding one of our favorite topics; data security of customer accounts. The primary areas of the SEC’s focus were: Have a strong password, keep it secure and change it often. Use a two-step verification process if the firm offers it. Use different passwords for different on-line accounts. Avoid… Continue Reading

What qualities should a CCO have; here are nine.

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

Andrew Donohue, SEC Chief of Staff, recently commented on what a person needs in order to be a competent CCO; he identified nine things. The overarching theme from this list is experience. According to Donahue, in no particular order, a CCO must: Have a “first hand knowledge” of the regulatory environment. Have a detailed understanding… Continue Reading

Do you want to know 5 things that lead to a culture of compliance

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

In a recent blog, Michael Volkov noted five ingredients to ensure a culture of compliance. Why should you care? It is quite simple, firms that do not promote a culture of compliance are bound to find themselves face to face with their regulator, and not at a holiday party sharing cocktail weenies. So what are… Continue Reading

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

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

So You Think That You Really Know Your Customer

Posted in Arbitration, Compliance and Supervision, Registered Representatives

If the recent National Senior Investor Initiative of the SEC and FINRA taught us anything, it was the tremendous importance to know your customers. This takes on more significance when you are working with seniors. You may ask why does “knowing your customer” take on any more significance for these clients. For one, an investor’s… 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

Is This A Preview of FINRA’s Approach to Rule 3110(e)

Posted in Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA CRD, FINRA Enforcement, Raiding/Moving Firms, Registered Representatives

In a recent Acceptance, Waiver and Consent (“AWC”) a broker dealer was censured and fined for, among other things, the failure to conduct an adequate pre-hire investigation of a registered representative. The importance of this AWC is that it may signal FINRA’s mindset for what firms must do under Rule 3110(e). Under Rule 3110(e), FINRA… Continue Reading