Broker- Dealer Law Corner

Broker- Dealer Law Corner

Tag Archives: SEC

When It Comes To Testifying To The SEC, Providing Alternative Facts Can Be A Bad Idea

Posted in Disciplinary Process, Enforcement, Examination, FINRA, SEC
At the beginning of most FINRA OTRs, the examiner reads from a script of sorts, outlining some of the basic rules governing the proceeding. One of the things the script calls for is an express acknowledgement by the witness that he or she is testifying pursuant to Rule 8210, and that, as a result, a… Continue Reading

SEC Gives Advisors A Break On Custody Rule

Posted in custody rule, SEC
A common complaint that I hear from broker-dealers and investment advisors is that it is nearly impossible anymore to obtain informal guidance from their regulators. Where it was once possible, even normal, to make a call and get casual advice how to comply with a particularly tricky rule, nowadays, regulators routinely decline to respond to… Continue Reading

SEC ALJs, Part 3: Separation Of Power/Removal Defense Rides On Coattails Of Reinvigorated Appointments Clause Defense

Posted in Administrative Proceedings, Defenses, Disciplinary Process, SEC
In my second post on constitutionally-based affirmative defenses to SEC administrative proceedings, I discussed the shift of momentum in favor of the defense that the process of hiring SEC ALJs violates the Appointments Clause of the U.S. Constitution. This post examines the defense that the process of removing SEC ALJs violates the separation of power… Continue Reading

Article II Appointments Clause Defense To SEC Administrative Actions Gains Momentum In The Courts

Posted in Administrative Proceedings, appeal, Dodd Frank, SEC
Here is Part II of Ken Berg’s analysis of constitutional defenses that have been raised in response to the SEC’s increased use of administrative proceedings.  In the interest of full disclosure, note that the Malouf case referenced towards the end is one that Heidi VonderHeide and I are handling.  In addition, it also worth mentioning… Continue Reading

No Surprise Here: Courts Take Constitutional Complaints About SEC Administrative Prosecutions More Seriously Than The SEC

Posted in Administrative Proceedings, Defenses, SEC
This is the first in a series of posts by my partner, Ken Berg, discussing the constitutional defenses to SEC administrative enforcement actions, which we are called upon regularly to defend. Each subsequent post will discuss one of the constitutional issues and report the current state of the law as to that defense.  Ken’s next… Continue Reading

Tell Me Something I Don’t Know: OCIE’s Tips To Surviving An SEC IA Exam

Posted in Examination, RIA, SEC
Let’s chalk this one up to “great minds think alike,” or maybe just “minds think alike.” You may recall that in his recent letter to member firms that accompanied FINRA’s 2017 Exam Priorities Letter, FINRA CEO Robert Cook said, “starting this year, we will publish a summary report that outlines key findings from examinations in… Continue Reading

2017 Off To A Bad Start For The SEC As The 10th Circuit Finds SEC ALJs To Be Unconstitutional

Posted in Administrative Proceedings, Disciplinary Process, Enforcement, SEC
Many industry authors – including me[1] – have devoted a lot of attention lately to the SEC’s increased use of Administrative Proceedings (rather than Federal court cases) in recent years, and questioned the fairness of such proceedings, given their relative lack of discovery tools, the short timeframe provided within which to prepare a case for… Continue Reading

Looking For A Silver Lining: Post-Election Thoughts On The SEC

Posted in Administrative Proceedings, appeal, Disciplinary Process, Enforcement, SEC
Wednesday morning marked the confluence of two events. First, like the rest of the world, I awoke to the reality of the results of the presidential race.  Then, as soon as I got to the office, I received the results of a case (on which I have previously blogged) that the SEC’s Division of Enforcement… Continue Reading

It’s Official: The SEC Has No Sense Of Humor

Posted in Administrative Proceedings, Disciplinary Process, Enforcement, SEC
One of my colleagues and I were busy the last two week defending an SEC administrative proceeding out-of-town, so I have not had much chance to blog. But…there was one development during our hearing that merits some immediate attention. My client has been accused, essentially, of making a number of material misrepresentations and omissions in… Continue Reading

In AML World, The Need To File A SAR Can, Apparently, Be Too Obvious To Ignore

Posted in AML, Compliance, Disciplinary Process, Enforcement, FINRA, SEC, Supervision
If you’re reading this, then you undoubtedly already know that FINRA and SEC are, simply, AML crazy. Rightly or wrongly, they are both focusing more than ever on broker-dealers’ fulfillment of their supervisory obligation to be sensitive to the laundry list of red flags first articulated in a Notice to Members back in 2002 that… Continue Reading

Updates: Two Losers + One Positive Note = A Bad Week For Broker-Dealers

Posted in Administrative Proceedings, appeal, Disciplinary Process, Enforcement, FINRA, Research analyst, Rule 2242, Rule 2711, SEC
There have been some developments this week in a few matters on which I have previously offered my views. To help you stay on the cutting edge of financial world current events as you mingle at your upcoming Cinco de Mayo fiestas, here are three updates.  Two, not surprisingly, represent wins for the regulators.  The… Continue Reading

Not So Naked And Not So Afraid: FINRA’s New Compensation Rule Does Not Require Brokers To Bare All (Financially) When Changing Firms

Posted in Compensation, Compliance, Disclosure, FINRA, Hiring practices, Rule 2272
Two years ago, FINRA first proposed to the SEC a rule that would require brokers to disclose to clients not only when they receive compensation (including signing bonuses and other payments) to switch from one broker-dealer to another, but, worse, the amount of that compensation. The industry was seriously not pleased with the rule.  FINRA,… Continue Reading

Highlights from Day Two of SIFMA-CL Conference

Posted in AML, CCO, CCO liability, Compliance, Culture, FINRA, Senior Investors, SIFMA
The Rick Ketchum Show. Today’s sessions opened with what was likely the highlight of the entire conference, Rick Ketchum’s swan song “conversation” with Ira Hammerman, GC of SIFMA, before he toddles off into retirement. Granted, these interviews never remotely approach Sixty Minutes intensity, but this year’s featured even more coddling than ever: What would you… Continue Reading

Highlights from Day One of SIFMA-CL Conference

Posted in Best execution, CCO liability, Culture, Fiduciary duty, Fiduciary Standard, FINRA, municipal securities, SEC, SIFMA, Supervision
Opening Session/Firm Culture/CCO Liability. If you are reading this blog, then you, like me, have been probably eagerly waiting for the start of SIFMA’s annual Compliance and Legal conference not just for the jumbo shrimp at the reception, but also to learn some insights from the regulators about their concerns and intentions. If you attended… Continue Reading

The First Circuit Makes The Case Against Cherry-Picking Instances Of Alleged Misrepresentations By Focusing, Instead, On “Context”

Posted in 17(a)(3), Administrative Proceedings, appeal, Defenses, Enforcement, FINRA, SEC
Years ago, I handled the defense of a FINRA Enforcement case that still galls me.  The client sent a series of emails, over many months, about a particular security to customers who already owned the stock.  The point of the emails was largely to provide updates, and, from time-to-time, to suggest that the customers consider… Continue Reading

What To Expect When You’re Expecting (An SEC Exam)

Posted in Annual Report, Examination, SEC
Tis the season for announcing the year’s top examination priorities. This week, the SEC released its own examination priorities. Top priorities include: liquidity controls; public pension advisers; product promotion; exchange-traded funds; and variable annuities. Thematically, the SEC’s priorities adhere to its larger objectives: protecting retail investors (especially retirement savings); assessing market-wide risks; and utilizing data analytics… Continue Reading

SEC Offers Guidance On Compliance: Don’t Forget The Basics

Posted in Compliance, Conflict of Interest, Examination, FINRA, Supervision
I posted several blogs this summer about our victory over the SEC in the Robare case (which, naturally, has been appealed by the SEC’s unhappy Division of Enforcement). One of the key elements in our ability to prevail in that matter was my client’s extensive use of outside securities consultants to assist in the preparation and… Continue Reading

The SEC’s Proposal To Improve The Fairness Of Administrative Proceedings: Not Nearly Enough To Impact Its Winning Percentage, But Enough To Make It Seem It Cares

Posted in Administrative Proceedings, appeal, SEC
In what many will likely consider to be an effort to quiet the increasing chorus of criticism over the SEC’s increased use of administrative proceedings over the last few years, today, the SEC announced a proposal to amend several of the rules governing those proceedings. While the SEC did not expressly acknowledge that the amendments… Continue Reading

Compliance Officer Liability: Findings Without Sanctions? The Plot Thickens

Posted in Administrative Proceedings, appeal, Compliance, Enforcement, RIA, Sanctions, SEC, Supervision
We have previously posted on the issue of CCO liability, a very sensitive subject, to say the least, for many readers of this blog.  If this is a subject that interests you, then there was a very intriguing development this past week in this area that merits your attention. It came in the form of… Continue Reading

If You’re a Respondent, Time is NOT on Your Side

Posted in Arbitration, Defenses, Disciplinary Process, Enforcement, FINRA, Registered Representative, SEC
There was a decision this week from the D.C. Circuit Court of Appeals on an appeal of a decision by a respondent who – stop the presses! – lost an SEC administrative proceeding, and then lost his appeal to the SEC. Montford and Company, Inc. v. SEC, No. 14-1126 (July 10, 2015). One of the… Continue Reading

Actions Speak Louder Than Words: The Regulation of Chief Compliance Officer (CCO) Conduct

Posted in Compliance, Disciplinary Process, Enforcement, SEC, Supervision
Yesterday, the SEC held its 2015 “National Compliance Outreach Program for Broker-Dealers.” The program was designed to “provide[] an open forum for regulators and industry professionals to share strong compliance practices and promote the exchange of ideas to develop an effective compliance structure.” In the spirit of this cooperation, SEC Chairwoman White opened the conference… Continue Reading
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