Over a year ago, on January 28, 2019, FINRA announced its 529 Plan Share Class Initiative (the Initiative) to encourage firms to self-report potential violations of rules governing 529 plan share class recommendations. FINRA’s concern centered around the potential that supervisory programs were not reasonably designed to determine whether representatives were making suitable share class recommendations given the varying time horizons of beneficiaries. Approximately 100 broker-dealers elected to participate. Other firms decided not to participate. The deadline for participation in the Initiative has long since passed, however, the issues and regulatory concerns underlying the Initiative remain relevant for both participating and non-participating firms.
All posts by Clifford E. Kirsch, Editor
Killing Eve (all others are fined or suspended): SEC and FINRA Enforcement Cases in May 2020
In May 2020, one of the most anticipated and watched television shows was Season 4 of Killing Eve. For those who have not seen this award-winning British comedy-drama, it’s about Eve (but not All About Eve), a British intelligence investigator. She becomes obsessed with Villanelle, real name, Oksana Astankova (a psychopath assassin for a mysterious group called The Twelve). Villanelle, in turn, becomes obsessed with Eve. It is a cat-and-mouse game involving rulemaking, rule-breaking, good guys, bad guys, and those in between, much like securities enforcement cases. However, in our world, while we don’t have assassinations by poisonous homemade perfume or by necktie, we do have fines and suspensions, and there are important lessons for compliance officers and other securities professionals (but not so much for hired assassins) contained in the enforcement actions from May 2020.
Additional contributors to this post:
Brian L. Rubin, brianrubin@eversheds-sutherland.com
Sarah Razaq Sallis, sarahsallis@eversheds-sutherland.com
Department of Labor’s Fiduciary Proposal 3.0
In an important development, the Labor Department has issued a new proposal to address conflicted investment advice provided by ERISA fiduciaries:
- Consonant with the vacatur of its 2016 rule, DOL reinstated the longstanding 5-part test of investment advice fiduciary status, but announced new interpretations of that test that will cause rollover advice and possibly other interactions to become fiduciary advice.
- DOL also proposed a new, principles-based class exemption broadly available for conflicted advice and intended to align with other bodies of law to which financial institutions are subject.
The Last Dance (But not the Last Enforcement Action): SEC and FINRA Enforcement Actions in April 2020
In April 2020, one of the most-watched television shows was the beginning episodes of ESPN’s “The Last Dance,” a 10-part documentary chronicling Michael Jordan and the 1997-98 Chicago Bulls. The documentary explores the ups and downs of the Bulls during Jordan’s last year as a Bull, and their successful attempt at a second three-peat. While the show doesn’t address securities enforcement cases directly (or, frankly, at all), it does provide a lot of lessons that compliance officers and others can think about as they are sitting at home during the age of coronavirus assessing enforcement actions and how they may impact their firms. Like so much in life, if you watch this series in just the right way, you’ll learn more than you would have expected.
Strict Liability Has No Place In ‘Should Have Known’ Case
In a May 21, brief filed with the U.S. Court of Appeals for the D.C. Circuit in Thaddeus North v. U.S. Securities and Exchange Commission, the SEC turned “should have known” liability into a strict liability standard.[1] The D.C. Circuit should not apply this interpretation.