Header graphic for print
Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

Category Archives: SEC Enforcement

Subscribe to SEC Enforcement RSS Feed

SEC RARELY SEEKS TO POSSESS ELECTRONIC DEVICES

Posted in SEC Enforcement

SEC staff has been instructed to seek subpoenas for devices such as computer hard drives and cell phones only rarely. In many cases, there could be unintended consequences, such as exposing authorities to other sensitive materials on a device outside the scope of the investigation.  The SEC claims to be sensitive to this situation.  Typically,… 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

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

SEC Says Dodd-Frank’s Statute of Limitations Doesn’t Apply to It

Posted in Dodd-Frank, SEC Enforcement

According to the SEC, the Dodd-Frank Act does not require the SEC to bring an enforcement action within 180 days of issuing a Wells Notice.  See http://www.sec.gov/litigation/opinions/2014/ia-3829.pdf. Although the Dodd-Frank Act amended the Securities and Exchange Act of 1934 Section 4E(a)(1) to require the SEC to bring the action within 180 days, the SEC said it was… 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

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

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

THE SEC DEFEATS INFLATION SORT OF… PENALTIES ADJUSTED

Posted in Broker-Dealer Regulation, Investment Adviser Regulation, Investment Company Regulation, Sarbanes-Oxley, SEC Enforcement

The SEC adopted a rule to adjust the maximum amounts it may recover for civil monetary penalties imposed under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940 and the Investment Advisers Act of 1940 for inflation.  The SEC’s new rule-was effective upon publication, and also adjusts… Continue Reading

ARE SEC OBEY-THE-LAW INJUNCTIONS CHANGING?

Posted in SEC Enforcement

There is an ongoing effort at the SEC to review its injunctions, and if they should be tailored more closely to the misconduct at issue. The Enforcement Division is becoming more creative about injunctive relief, and it is trying to tailor their injunctions in a way that makes them more meaningful and effective.  The injunctive… Continue Reading

SEC EXAM FOCUS REMAINS CONSISTENT

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

The SEC’S Office of Compliance Inspections and Examinations announced its examination priorities to highlight areas of “heightened risk” for registrants.  See http://www.sec.gov/news/press/2013/2013-26.htm.). The OCIE also disclosed areas of emerging risks for registrants, as well as topics to consider the priorities.   Generally, these priorities apply to all registrants as well as specifically to OCIE’s investment adviser… Continue Reading

BULLSEYE! ATTORNEYS DEAD CENTER FOR REGULATORS

Posted in Federal and State Criminal Activities, Law Firms and Lawyers, SEC Enforcement

We routinely report enforcement actions directed against lawyers because it simply never goes away. Attorneys are a major target for federal and state securities regulators.  Regulators salivate over “getting” attorneys, because they receive notoriety and money from the attorney’s malpractice carrier for investors.  Additionally, the SEC’s new cooperation initiative may result in even more enforcement… Continue Reading

FALSE AUM CLAIMS RESULT IN BAR

Posted in Investment Adviser Regulation, SEC Enforcement

A registered investment adviser was terminated and its principal barred because it failed to keep proper records.  This failure lead to a charge of false registration and Form ADV claims as well as overcharging clients.  See http://www.sec.gov/litigation/admin/2013/34-69601.pdf. The RIA misstated its AUM by nearly $30 million so that it could continue as a SEC-registered adviser. … Continue Reading

LAWMAKERS HAMMER SEC ON GABELLI

Posted in SEC Enforcement

Although we are not adverse to criticizing the SEC in this blog, we believe Congress’ actions may be overkill. Certain congressmen are requesting data on the SEC activities relating to the Gabelli appeal.  In Gabelli, the Supreme Court unanimously concluded that a general five-year statute of limitations pertaining to government civil penalty actions begins when… Continue Reading

WHAT IS HAPPENING WITH SECURITIES EXCHANGE ACT OF 1934 RULE 10b5-1 PLANS?

Posted in Insider Trading, SEA Rule 10b5-1 Plans, SEC Enforcement

The SEC has announced it is monitoring if there is abuse of so-called Securities Exchange Act of 1934 Rule 10b5-1 stock trading plans.  The SEC stated that it will monitor the situation, and, if it finds that there is abuse, the SEC will consider action, especially if it is a high level executive.  The SEC… Continue Reading

CONFLICTS OF INTEREST MAJOR ISSUE FOR RIAS AND SEC

Posted in Conflicts of Interest, Investment Adviser Regulation, SEC Enforcement

  While the overwhelming majority of registered investment advisers are operating in the best interest of their clients in a very complex business, others do not, according to the SEC.   These bad actors usually are either liars, cheaters, reckless or involved in conflicts of interest.  The former usually face the wrath of regulators sooner… Continue Reading