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Category Archives: SEC Enforcement

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So why is that you want to be a CCO

Posted in Compliance and Supervision, Investment Adviser Regulation, SEC Compliance, SEC Enforcement

Recent SEC enforcement actions suggest that being a CCO is not all that it’s cracked up to be; the SEC recently sanctioned two CCOs. SEC Commissioner Gallagher’s dissents and his recent comments regarding those dissents have really framed the issue. The SEC Rules only provide that an “adviser” must have and implement written supervisory procedures.… Continue Reading

So who really thinks the SEC is not focused on elder investors

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

If there is any question that the SEC is focused on elder investor issues, look no further than its recent program announcement. The SEC initiated a program designed to examine retirement planning guidance. Under this program, the SEC intends to explore whether the compensation advisers receive presents a conflict of interests and, if so, how… Continue Reading

Enforcement Settlements All Wrapped Up in a Bow

Posted in Municipal Securities, SEC Enforcement

Last year, the SEC’s Division of Enforcement launched the “Municipalities Continuing Disclosure Initiative” offering “favorable settlement terms” to municipal issuers and underwriters who self-report continuing disclosure violations.  At that time, it was claimed that there were a lot of problems and that it was expected there would be more such settlements in the future.  See… 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

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

Is the SEC that good? SEC Wins Every Administrative Case

Posted in Dodd-Frank, SEC Enforcement, Securities Litigation

In what is sure to add more “fuel to the fire,” it was recently reported that the SEC has won every case brought in its administrative courts over the last year.  The SEC has not been so successful with its federal court cases, winning 61% of those cases over that same period. Of course, regular blog readers know that the… Continue Reading


Posted in Investment Adviser Regulation, No-Action Relief, SEC Enforcement

The SEC Division of Investment Management determined that a solictor may receive a fee for the soliciation of clients for registered investment advisers notwithstanding a Commission administrative order against her.  See Matter of Stephanie Hibler, https://www.sec.gov/litigation/opinions/2013/34-70140.pdf. In deciding to allow the solicitor to receive cash solicitation fees, the SEC staff noted in its response letter… Continue Reading

Changes in SEC Enforcement Function

Posted in Compliance and Supervision, SEC Enforcement, SEC Organization

Adjustments to the SEC’s enforcement function is enabling it to be more aggressive with individuals and corporations when pursuing allegedly violative behavior. The SEC’s ongoing push to strengthen penalties for wrongdoing attempts to further deter current and future bad actors, stiff monetary penalties and sanctions not only punish alleged violations but send clear signals of… Continue Reading

The SEC Does Not Care About Collateral Impacts With Settlements

Posted in Collateral Consequences, SEC Enforcement

In determining whether to seek admissions in the settlement of an enforcement action, the SEC will not take into account any collateral consequences that might befall the defendant in question. Recent changes in the “nether admit/nor deny” policy is not about collateral consequences.  Instead, the SEC is determining if admissions are justified based upon the… 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

Will the SEC “Modernize” BDC Rules

Posted in SEC Enforcement, Securities Registration

Business development company representatives petitioned the SEC to “modernize” its rules pertaining to such entities.  BDCs are a type of private company that invests in small and mid-sized businesses. The SEC has long disfavored BDCs, but none of these representatives want the SEC to allow BDCs to operate under rules that apply to traditional public… 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

The More Things Change the More They Stay the Same…SEC Develops “New” Task Force Geared at Broker-Dealer Enforcement

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

The Securities and Exchange Commission Enforcement Division has created a new task force to scrutinize broker-dealer practices. This unit existed in the 1980’s and 1990’s and was phased out.  It is now being brought back.  The SEC started developing the task force in September and the Financial Industry Regulatory Authority has also established an enforcement… 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

Are SEC Defense Lawyers the Problem?

Posted in SEC Enforcement

The SEC’s Enforcement Division has expressed concerns to the SEC’s General Counsel about defense lawyers possibly obstructing agency investigations – a practice that could lead to disciplinary proceedings. The Sarbanes-Oxley Act of 2002 provided the SEC with explicit statutory authority to bring cases against lawyers and others under SEC Rule 102(e).  The SEC’s Enforcement Division… Continue Reading


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