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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

Category Archives: SEC Compliance

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Are You Ready to Disclose Your Environmental, Social, and Governance Risks?

Posted in Compliance and Supervision, SEC Compliance, SEC Enforcement

Back in April, the Securities and Exchange Commission sought public comments on modernizing certain business and financial disclosure requirements in Regulation S-K.  In their Concept Release, the SEC noted that some investors and interest groups have “expressed a desire for greater disclosure of a variety of public policy and sustainability matters, stating that these matters… Continue Reading

The SEC Now Has A Lead Cybersecurity Senior Adviser: Now What?

Posted in Broker-Dealer Regulation, Corporate Governance, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

The SEC recently created a new position associated with cybersecurity; senior adviser to the chair for cybersecurity (Christopher R. Hetner). Mr. Hetner has an extensive background in information technology and, in particular, cybersecurity. According to the SEC, Mr. Hetner will be responsible for (i) coordinating cybersecurity efforts across the SEC; (ii) engaging with external stakeholders;… Continue Reading

Elder Abuse Takes Another Twist and Turn

Posted in Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, Public Customer Arbitrations, Registered Representatives, SEC Compliance

If you thought the SEC and FINRA were serious about elder issues, welcome to the Alabama, Indiana and Vermont. Each has focused on elder abuse issues. These states will have mandatory reporting to state officials in instances involving the disabled or those over 65 years of age. They will also allow advisors to cease disbursing… Continue Reading

What to do about a stupid client

Posted in Books and Records, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, Public Customer Arbitrations, Registered Representatives, SEC Compliance, Securities Litigation

Anyone in a professional service business, like being a stock broker, have been faced with a client who decides to make a stupid decision. But the issue we all face is when that decision results in the client losing money; who is to be held accountable. Fortunately, the law does not require you to stop… Continue Reading

It Is All About The Disclosures

Posted in Breach of Fiduciary Duty, Conflicts of Interest, Financial Industry Trends, SEC Compliance, SEC Enforcement

The SEC recently commenced an enforcement action against an investment advisory firm and its principal in connection with the failure to disclose material conflicts of interest in connection with new mutual funds that the firm recently created and managed. The SEC is seeking disgorgement and an injunction against the firm and its principal. Clients of… Continue Reading

To be a broker-dealer or not to be; that is the SEC’s question

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

The SEC recently announced that an equity advisory firm and its owner agreed to pay more than $3.1 million to resolve charges that they improperly engaged in brokerage activity, as well as charging fees without registering as a broker-dealer.  In other words, the firm acted like a broker-dealer but never bothered to register as one.… Continue Reading

SEC Announces Third Largest Whistleblower Award

Posted in Compliance and Supervision, SEC Compliance, SEC Enforcement, Whistleblowers

Business Insurance reported late last week that the Securities and Exchange Commission will award $5-6 million to a whistleblower who provided information on securities violations that would have been “nearly impossible” for the SEC to detect on its own.  Such an award would be the third larges award ever granted to a whistleblower by the SEC.… Continue Reading

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 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

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

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