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

Category Archives: SEC Enforcement

Subscribe to SEC Enforcement RSS Feed

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


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


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


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


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


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


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


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


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


Posted in SEC Enforcement, SEC Organization, SEC Structure

The SEC’s 2010 restructuring of its Enforcement Division has resulted in the agency taking on more complex cases with a new level of expertise.  The SEC has hired specialists, including highly educated analysts who understand quantitative and high-frequency trading to assist the SEC with its enforcement investigations.  The experts act in both the SEC’s enforcement… Continue Reading


Posted in SEC Enforcement

A company filed a lawsuit challenging the SEC’s decision to disclose information that the company submitted to the agency between 1998 and 2004 in connection with two investigations. See Chiquita Brands International v. SEC, D.D.C., No. 1:13-cv-00435, 4/4/13.  According to the complaint, the information included payments made by the company’s former subsidiary to certain groups… Continue Reading

SEC Looking At Insider Trading Rules For Commodities Markets

Posted in Dodd-Frank, SEC Enforcement

SEC Chairman Mary Jo White recently stated at a Senate Banking Committee hearing that the SEC was examining whether the insider trading rules should be expanded to include the commodities markets.  White’s statements were made in response to questioning about the role of several large banks in the commodities market.  Insider trading is enforced in… Continue Reading

A Secret Concern With Small Firm Supervision And Compliance

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

A recently released compliance testing survey of the Investment Adviser Association and ACA Compliance showed that 90% of all firms claimed to have a full-time person designated to the compliance function, but nearly two thirds of all chief compliance officers have multiple roles within the firm.  Unless I missed that day of new math, these… Continue Reading

The SEC Modifies Its Settlement Policy

Posted in SEC Enforcement

For decades, the SEC allowed defendants to enter into a settlement agreements where they neither admitted nor denied any alleged wrongdoing.  However, in response to political pressure from Senator Elizabeth Warren (D-Mass), who asked the SEC whether the SEC’s neither-admit-nor-deny settlement policy should be changed to better make use of the SEC’s leverage in the… Continue Reading

Do You Want To Know What Keeps The Regulator Up At Night

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

At a regulator’s round table during a recent National Society of Compliance Professionals meeting, the regulators framed out those issues that are keeping them up at night.  The issues include: The increasing complexity of investment products. Social media beyond things like Twitter or LinkedIn. Cyber security. Cyber fraud; i.e. hacking into customer accounts. AML issues… Continue Reading

Self-Funding And The SEC

Posted in SEC Enforcement

This has been the week of scandals.  With political forces, lobbyist and lots of deep pockets, our government is a breeding ground for scandals.  The SEC has certainly not been immune.  A few years ago, the SEC made headlines because several of its employees were watching pornography during working hours.  Recently, the former chief inspector… Continue Reading

Some Things You Should Know About Compliance And Ethics

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

At a recent conference held by the SEC, a panel highlighted the importance of compliance and ethics for broker-dealers.  The big take away from the conference was that a strong compliance program must have a solid ethical foundation. In other words, a compliance program is not simply making sure that your representatives check the right… Continue Reading