Inconceivable: The Princess Bride Fences with SEC and FINRA Enforcement Matters from May 2021

From Brian Rubin and Jessica Rodgers in this month’s column for NSCP Currents:

This year marks the 35th Anniversary of the classic movie, The Princess Bride. According to the movie, the story is about:

Fencing. Fighting. Torture. Revenge. Giants. Monsters. Chases. Escapes. True love. Miracles. 

In other words, many of the elements we regularly see in enforcement actions. “Inconceivable” as it may sound, we can make a case for all of them, with the possible exception of “True love.” (Although, let’s be honest, who among us doesn’t love a cleverly drafted legal argument or a well-written Form ADV?)

Read more here.  As you wish. . . .

SEC Sanctions Firm for Policies that (Theoretically Could Have) Curtailed Whistleblowers

On June 23, 2021, the U.S. Securities and Exchange Commission (the “Commission”) entered an administrative order (the “Order”) that, among other things, fined a broker-dealer (“BD”) $208,912 for alleged violations of Rule 21F-17(a), which relates to individuals reporting possible securities laws violations to the Commission (a.k.a., whistleblowers).

Practice Tip: While the Order was entered against a broker-dealer, Rule 21F-17(a) applies to all entities subject to the Commission’s jurisdiction (e.g., public companies, broker-dealers, and investment managers). Indeed, the Commission has previously sanctioned public companies and investment advisers for violations of Rule 21F-17(a).

Read more here for both a summary of the Order’s findings, and take-aways for legal and compliance practitioners who support firms that are subject to the Commission’s jurisdiction.

SEC Conducts Sweep of Customers Impacted by SolarWinds Cyber Breach

Reuters reported today that the SEC is investigating last year’s hack of SolarWinds, focusing on whether SEC registrants failed to disclose that they had been impacted by the cyber breach.[1]   According to the article, the SEC sent voluntary requests for information to “a number of public issuers and investment firms…”  The SEC is reportedly investigating whether SolarWinds customers had been victims of the hack and failed to adequately disclose that fact.

Read more here.

Securities Regulators Focus on Forgivable Recruitment Loans/Bonuses, Social Media Influencers, and Rescission Offers

In recent weeks, we have observed significant new developments in securities regulation related to two enforcement actions by the Commission and an unexpected (and, to our knowledge, unprecedented) new rule adopted by a state securities regulator.  First, the Commission has published enforcement actions against registered investment advisers (“RIAs”), involving: (a) failure to make conflicts-related disclosures about payment of forgivable recruitment loans/bonuses; and (b) failure to comply with Rule 206(4)-3 (the “Solicitation Rule”) when using social media influencers acting as referral sources.  Second, the Tennessee Securities Division has fundamentally changed the process for issuers and broker-dealers attempting to shield themselves from civil liability arising from unregistered, non-exempt securities offerings through rescission offers.

Read more here.

Additional contributors:
Thomas B. Cain,  tcain@kilpatricktownsend.com
Alexandra M. Fenno,  afenno@kilpatricktownsend.com
Jeffrey T. Skinnerjskinner@kilpatricktownsend.com

DOL Weighs In With Cybersecurity Guidance, FINRA Issues Reminders on Options and Predispute Arbitration Agreements, NASAA Releases Annual State Advisers Report, Cayman Extends CRS Compliance Form Deadlines

June Regulatory Updates from Cari Hopsfenperger at Hardin Compliance Consulting LLC.

Topics include:

Read more here.