On December 17, 2020, SEC created the Division of Examinations by renaming the now defunct, Office of Compliance Inspections and Examinations, making it the SEC’s 6th Division joining Enforcement, Corporation Finance, Trading and Markets, Investment Management, and Economic and Risk Analysis (DERA).
A couple of months later, the new Examinations Division announced its 2021 examination priorities, carrying on OCIE’s long standing tradition of annually publishing its examination priorities. The publication of these priorities is supposed to provide a framework for those registered persons and entities to prepare for the onslaught of SEC examiners. These priorities will include a focus on climate-related risks; broker and RIA conflicts of interest; Reg BI; FinTech risks; ESG-related risks; proxy voting policies and practices; BCPs; mutual funds; ETFs; municipal securities and other fixed income securities; variable annuities; private placements; and microcap securities.
Read more here.
We were recently reminded of how difficult it is to re-register for a position in the securities industry after being barred. https://www.sec.gov/litigation/admin/2021/ia-5682.pdf
On February 9, 2021, the United States Securities and Exchange Commission refused to let a former investment adviser re-register, claiming that the barred adviser had not demonstrated “extraordinary circumstances” to merit re-entry . In particular, the Commission noted that the barred adviser had not paid his penalty, initially, imposed in 2011. The Commission also rejected his arguments that, by working with an actual registered adviser, he would be appropriately supervised. However, the Commission found that the person had failed to submit sufficient evidence to demonstrate this supervision.
As a result, the barred adviser was not let back into the business, demonstrating the difficulty for others, who seek to follow in his path. We are not suggesting it is impossible, but those barred persons interested in re-entering the securities industry should seek out securities counsel prior to making any filing.
Read more here.
In a stark 3-2 vote along political lines, the SEC announced today that it was proposing new rules relating to finders. Essentially, if the proposed rules are, ultimately, approved, the SEC will sharply change the position it has maintained for over 8 decades, allowing unregistered finders to sell securities to the investing public while receiving transaction based compensation. See https://www.sec.gov/news/press-release/2020-248.
If approved, the proposed rules would permit 2 categories of finders. Both types of finders would be allowed to solicit accredited investors for investments in various issuers. There are restrictions on the activities the finders could engage in as well as certain disclosure requirements for one category. Nonetheless, the breadth of the proposed rules is significant because it represents a sea change from the SEC’s previous position that any transaction based compensation paid to persons who solicit investors would require broker-dealer registration.