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Category Archives: SEC Compliance

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Should The SEC Turn Its Attention to Culpability and Harm?

Posted in Compliance and Supervision, SEC Compliance, SEC Enforcement

Enforcement attention on activities involving the most culpable individuals and firms, and the most harm to investors may be the next phase in SEC enforcement. There is an opportunity cost to its enforcement actions.  It might be the best use of the SEC’s resources not to sue over technical violations and other deficiencies that do… Continue Reading

Guidance Assists Compliance and Supervision Decisions

Posted in Compliance and Supervision, SEC Compliance, SEC Enforcement

The “message” behind the SEC’s Division of Trading and Markets’ recent guidance on supervisory liability is that the agency will not target compliance officers as the “guarantors” of their firms’ compliance. The Division views compliance officers, typically, as having a more advisory consultative role and only when compliance personnel move out of that role and… Continue Reading

SEC Seeks Actions to Stress Support for Compliance

Posted in Broker-Dealer Regulation, SEC Compliance, SEC Enforcement

The SEC is looking for more cases to bring to emphasize its support for compliance programs, including a case against a former portfolio manager. OCIE has also several specialized working groups in areas such as securities valuation, marketing and sales practices, and fixed income and municipal securities, that are working with Enforcement staff to bring… 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

Supervisory Liability For Broker-Dealer Compliance and Legal Personnel

Posted in Broker-Dealer Regulation, Compliance and Supervision, SEC Compliance

The SEC’s Division of Trading and Markets issued guidance regarding supervisory liability that may arise under the Securities Exchange Act of 1934, concerning the role and duties of chief compliance officers and other legal and compliance personnel at broker-dealers.  See http://www.sec.gov/divisions/marketreg/faq-cco-supervision-093013.htm The SEC may institute proceedings against a “supervisor” associated with a broker-dealer, “if someone… Continue Reading

SEC Enforcement Division Shifts Focus to Dormant and Emerging Issues

Posted in SEC Compliance, SEC Enforcement

The SEC’s Enforcement Division will shift resources to some dormant and some new areas of possible noncompliance. “Old reliables” will include activities surrounding investment advisers, such as the perpetration of fraud and issues surrounding valuation and conflicts of interest.  Other adviser activities the Enforcement Division may focus on are fees and the boards that authorize… Continue Reading

What Are You Doing About Cyber-Security

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

It was apparently not enough that the SEC and FINRA made cyber-security an exam priority for 2014, but the Department of the Treasury has now focused on this pervasive issue.  In recent comments, Treasury Secretary Lew has urged financial firms to step it up when protecting against cyber-attacks.  Stories of cyber-attacks are becoming so common… Continue Reading

GOOD COMPLIANCE PROGRAMS EXALTED

Posted in Broker-Dealer Regulation, SEC Compliance, SEC Enforcement

Companies subject to enforcement actions will get more credit from regulators if the alleged misconduct is an exception in a compliance-driven corporate culture rather than a remedial step after discovery. In cases where the SEC finds fraud, there often are early warning signs, and inadequate corporate compliance may not have seen them.  The SEC believes… Continue Reading

Should You Even Care About A Uniform Fiduciary Duty

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, Dodd-Frank, FINRA Compliance, SEC Compliance, Uncategorized

In an Investment News article written by Mark Schoeff, he reported that the push for a uniform fiduciary standard for broker-dealers and investment advisors has become a bit stagnant. In fact, it was reported that the prospects for such a uniform rules have waned over the years notwithstanding the general consensus that there should be such a… Continue Reading

SEC COMMISSIONERS DEBATE ENFORCEMENT

Posted in SEC Compliance, SEC Enforcement, SEC Organization, SEC Structure

Two Securities and Exchange Commissioners – the agency’s two newest members – offered contrasting views of the commission’s use of its enforcement powers.  http://www.sec.gov/News/Speech/Detail/Speech/13705404038989#.Uo_nqCda-JQ(Stein);  http://www.sec.gov/News/Speech/Detail/Speech/1370540400457#.Uo_nvidA-JQ(Piwowar). Among other issues, one said the agency has delegated too much authority to its enforcement staff, while the other hailed the “incredible work” done by the SEC staff on a… Continue Reading

EFFECTIVE COMPLIANCE PROGRAM COULD HAVE ENFORCEMENT PAYOFF

Posted in Compliance and Supervision, SEC Compliance, SEC Enforcement

An effective corporate compliance program may temper a Securities and Exchange Commission enforcement action, or – if there is an enforcement action – limit the penalties imposed.  See http://www.sec.gov/News/Speech/Detail/Speech/1370539872783#.UlbOPVOHiJR. Agency enforcers make judgments every day regarding the entities and individuals under investigation, and companies that demonstrate an effective compliance program and a genuine commitment to… Continue Reading

I Tweet, You Tweet, We All Tweet

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, SEC Compliance, SEC Enforcement, Social Media

The SEC recently issued two interpretations that address your use of interactive social media, like Twitter, in accordance with the securities laws.   These interpretations permit your firm to now use a hyperlink to satisfy the legend requirements and, at the same time, limit your responsibility where your communications are retransmitted, like a retweet.  The major… Continue Reading

Do You Really Want To Be A Dual Registrant

Posted in Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, FINRA Compliance, Registered Representatives, SEC Compliance, SEC Enforcement

One of the priorities of the SEC National Examination Program is dual registrants; entities that provide both brokerage and investment advisory services.  The focus of the program on dual registrants begs the question why a firm would want to be one.  The answer to that question should be an obvious.  Being a dual registrant allows… Continue Reading

You Knew It Was Coming… SEC Cybersecurity Exams

Posted in Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, SEC Compliance

We have repeatedly warned broker-dealers and registered investment advisers that they needed to be prepared as it related to cybersecurity.  Now, the SEC’s Office of Compliance Inspections and Examinations has announced that it will conduct cybersecurity examinations of these entities.  See http://www.sec.gov/ocie/announcement/Cybersecurity+Risk+Alert++%2526+Appendix+-+4.15.14.pdf.  These examinations will be conducted as part of a ”sweep exam,” and will assess… Continue Reading

Data breaches and third-party vendors; what do you need to know.

Posted in FINRA Compliance, SEC Compliance, Securities Fraud, Securities Litigation, Uncategorized

I recently blogged about the pervasive nature of data breaches and the particular risks presented to this industry.  Many firms may think that they are secure because they used a vendor to build a secure environment, but history tells us that is not the case.  Cyber-attacks do not always come from a direct hit, but… Continue Reading

Why Should You Care About Cyber-Security

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

The short answer to this question is that the SEC and FINRA care.  Both regulators have made this issue an exam priority for the year, and it was recently a focus of an SEC roundtable.  We hear of data breaches on nearly a daily basis at retail stores, to name a common target.  But what… 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 Discourages Incentivizing Whistleblowers to Keep Complaints In-House

Posted in Compliance and Supervision, Dodd-Frank, SEC Compliance, SEC Enforcement

What’s good for the goose is apparently not so good for the gander, as the SEC warns in-house attorneys against whistleblower contracts.  The SEC has been financially incentivizing whistleblowers to bring securities fraud complaints to the agency’s attention for years, with increasing success.  The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 empowers… Continue Reading

What To Make Out Of FINRA’s Proposed Rule On Bonus Disclosures

Posted in Broker-Dealer Regulation, Conflicts of Interest, FINRA Compliance, SEC Compliance

Bonuses and other forms of compensation are frequently used by one firm to attract talent away from another firm.  FINRA has now proposed a rule that would require brokers who receive in excess of $100,000 to disclose that payment to their customers.  Does this make any sense?  FINRA’s rationale for the rule is that it… 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

Broker Custody and Financial Responsibility Rules Implemented

Posted in Books and Records, Broker-Dealer Regulation, Ponzi Schemes, SEC Compliance

A divided Securities and Exchange Commission adopted new rules to strengthen oversight of broker-dealers’ custody of customer assets. The regulations amend the SEC’s broker-dealer reporting rule Securities and Exchange Act of 1934 Rule 17a-5, requiring firms to file new quarterly reports — Form Custody — containing information as to if and how they maintain custody… Continue Reading

SEC EXAMS MAY NOT BE AS BAD FOR REGISTERED ENTITIES

Posted in Broker-Dealer Regulation, Investment Adviser Regulation, SEC Compliance

Despite registrants’ concerns about the increasingly close cooperation between the SEC’s examination and enforcement arms, only about 10 % of SEC exams over the last two years were referred for enforcement. In deciding to refer a case to the Enforcement Division, OCIE considers questions such as: Is there an ongoing fraud? Is there egregious harm… Continue Reading