On November 14, 2016, the SEC plans to hold its first-ever “Fintech Forum” to discuss technological innovations in the financial services industry. Among other things, the forum will analyze the impact of automated investment advisory programs or so-called “robo-advisers,” and the impact of blockchain on the traditional clearance and settlement of security transactions. The SEC has released its agenda for the forum, which includes panel discussions from industry experts and executives from the leading financial technology firms.
On November 3, 2016, FINRA issued an enforcement action against a registered broker-dealer for violations related to FINRA Rule 5110, which requires firms to make certain regulatory filings in connection with the public offering of securities. More specifically, the firm replaced the dealer manager of a real estate investment trust offering, and failed to seek or obtain FINRA approval, instead incorrectly believing that they could rely on the prior dealer manager’s FINRA approval. In addition, the firm failed to have adequate supervisory procedures to monitor the limits on underwriting compensation as required by FINRA Rule 5110. FINRA rarely issues enforcement actions for violations of FINRA Rule 5110, so this action may represent an increased regulatory focus on how firms handle and manage the offering of securities.
Last week, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a risk alert dealing with the whistleblower provisions arising out of the Dodd-Frank Act. While examining registered investment advisers and registered broker-dealers, the Staff is reviewing, among other things, compliance manuals, codes of ethics, employment agreements, and severance agreements to determine whether provisions in those documents pertaining to confidentiality of information and reporting of possible securities law violations may raise concerns under Rule 21F-17 under the Dodd-Frank Act. This review is included in examinations as staff deem appropriate. This exam focus follows several recent SEC enforcement actions charging violations of Rule 21F-17 of the Commission’s whistleblower regulations.