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Category Archives: SEC Compliance

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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

The SEC Cracks Down on Anti-Whistleblower Agreements

Posted in Compliance and Supervision, Financial Industry Trends, SEC Compliance, SEC Enforcement, Whistleblowers

Around this time last year, the Securities and Exchange Commission’s Office of the Whistleblower warned lawyers that they may be disciplined for drafting contracts to incentivize whistleblowers to not bring alleged company wrongdoing to the SEC’s attention.  It appears the SEC is beginning to make good on its threat.  Last week, the SEC resolved its… Continue Reading

Cybersecurity: FINRA’s Take

Posted in Compliance and Supervision, Financial Industry Trends, FINRA Compliance, SEC Compliance

We recently highlighted the Security and Exchange Commission’s 2014 OCIE Cybersecurity Initiative.  Not to be outdone, FINRA also released its Report on Cybersecurity Practices, which provided a much more in-depth report on cybersecurity.  Therein, FINRA offered its own insights into what it expects from firms’ cybersecurity risk management practices: FINRA recommends that firms have a… Continue Reading

Do Not Fall Behind On Cybersecurity

Posted in Broker-Dealer Regulation, Compliance and Supervision, 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

So How Is Your Cybersecurity

Posted in Books and Records, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement, Social Media

The SEC and FINRA have continued to designate cybersecurity as an exam priority.  Both the SEC and FINRA have also recently published the findings of their exam sweeps.  As reported by the Investment News, the results of those sweeps when it comes to cybersecurity are telling. The sweeps show that firms, much like with compliance,… Continue Reading

Are You Charging Your Customers Too Much

Posted in Books and Records, Breach of Fiduciary Duty, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

If you are not asking that question, FINRA may as its recent $350,000 fine levied against a major brokerage house indicates.  In that instance, FINRA found that the brokerage charged 20,000 customers a total of $2.4 million too much for certain transaction fees. For its part, the SEC is going after private equity firms because… 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

Whistleblower Tips Continue to Rise in 2014

Posted in Compliance and Supervision, Dodd-Frank, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

The number of whistleblower tips to the Securities and Exchange Commission (SEC) continues to rise, according to the SEC’s 2014 Annual Report to Congress on the Dodd-Frank Whistleblower Program.  In the November 17, 2014 report, Sean X. McKessy, Chief, Office of the Whistleblower, notes that his office received 3,620 whistleblower tips in Fiscal Year 2014,… Continue Reading

Reverse-Flash: SEC and FINRA Looking to Slow High-Speed Traders?

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

High-frequency trading is the latest craze hitting the market.  Popularized by Michael Lewis’s Flash Boys, high-frequency or high-speed trading involves the use of sophisticated technological tools and computer algorithms to rapidly trade securities.  According to Bloomberg BusinessWeek, high-frequency trading has been “blamed for making stock exchanges less transparent and markets more volatile [and] has disrupted the process… Continue Reading

No Admit, No Deny – No Longer?

Posted in Compliance and Supervision, SEC Compliance, SEC Enforcement

Admissions by companies in enforcement actions brought by the Securities and Exchange Commission (SEC) can open the floodgates to follow-on private civil litigation.  Fortunately, the SEC has traditionally settled with companies on a “no admit, no deny” basis.  That has begun to change. As you may recall, in 2011, U.S. District Judge Rakoff of the Southern District of… Continue Reading

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

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