Category Archives: Standard of Care

Sleuthing Through State Elder Financial Exploitation Laws— A Morass for Broker-Dealers

The issues for broker-dealers are complicated because a good deal of research (or sleuthing) needs to be undertaken to grasp the breadth of potential liability a broker-dealer may face for not reacting to an indication of senior exploitation among the broker-dealer’s client base. This is an area where red flags mean everything and consistency in the law is a goal still to be achieved. In short, each state endeavors to protect its elderly and vulnerable populations from financial exploitation in its own unique way. A broker-dealer cannot wait until a particular case of potential financial exploitation presents itself; the complexity of determining the broker-dealer’s obligations under state law, if not researched in advance, could cause a broker-dealer to unwittingly expose itself to civil and/or criminal liability.

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Additional contributors to this post:

Holly H. Smith,  hollysmith@eversheds-sutherland.com

The Final Rule: June 9 is the Launch Date After All

With its announcements of May 22, 2017, starting with an op-ed in The Wall Street Journal, the Department of Labor confirmed that, absent last-minute action in the courts or by Congress, its new “investment advice” fiduciary definition and related exemptions will become applicable on June 9, on the terms specified on April 4. DOL also updated its stated enforcement policy for 2017 and released a third set of FAQs, which primarily address transition period issues.

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Additional contributor to this post:

W. Mark Smithmarksmith@eversheds-sutherland.com

Senior Investors Focus of New “Principal Consideration” in FINRA Sanctions

Last month, FINRA’s National Adjudicatory Council (NAC) introduced new Sanction Guidelines which allow the NAC and FINRA staff to take into consideration the “undue influence” of registered individuals over vulnerable customers in determining appropriate sanction levels. The last update to the Guidelines occurred approximately two years ago, and included changes related to unsuitable recommendations and misrepresentations. Last month’s changes to the Guidelines provide for the first time a “principal consideration that analyzes whether a respondent has exercised undue influence over a customer.” Now listed as a specific factor for adjudicators and FINRA staff to consider in determining appropriate sanctions is  “[w]hether the respondent exercised undue influence over the customer.”

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Additional contributors to this post:

Bruce M. Bettigole, brucebettigole@eversheds-sutherland.com

Sarah Razaq Sallis, sarahsallis@eversheds-sutherland.com

House Financial Services Committee Approves Revised “Financial CHOICE Act”

Chair Hensarling and the House of Representatives’ Financial Services Committee on Thursday May 4, 2017 completed mark-up of the Financial CHOICE Act (“FCA”) and reported out the bill to the House along party lines by a 34-26 vote.  If enacted, the FCA would significantly amend the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (“DFA”) and other banking and securities laws.  Among many other changes, the FCA would eliminate the systemic risk regulation program for non-banks under Titles I, II and VIII of the DFA and provide relief from DFA-imposed requirements for qualifying strongly-capitalized banks, as well as low risk and community banks. The FCA would also curtail the authority of the Consumer Financial Protection Bureau (“CFPB”), repeal the Durbin Amendment cap on debit card fees charged to merchants, roll back mortgage regulation, limit the credit risk retention rule to securitizations of home mortgages, and repeal the statutory authority for the SEC to impose restrictions on conflicts of interest in securitizations.

Continue reading House Financial Services Committee Approves Revised “Financial CHOICE Act”

FINRA Publishes New Guidance on Social Networking Websites and the Application of Rule 2210

In Regulatory Notice 17-18, FINRA provided additional guidance, in the form of 12 FAQs, on its earlier regulatory notices relating to the use of social media and the application of FINRA Rule 2210 (Communications with the Public). Specifically, the FAQs expand on the areas of recordkeeping, third-party posts and the use of hyperlinks to third-party sites. FINRA acknowledged that the use of social media and digital communications has expanded in the time since the last regulatory notice on the use of social media by member firms, which was in Regulatory Notice 11-29 in 2011.

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Additional contributor to this post:

Bradley Bermanbberman@mofo.com