February Regulatory Updates from Cari Hopsfenperger at Hardin Compliance Consulting LLC.
Topics include:
On November 2, 2020, the Securities and Exchange Commission (the SEC) voted to adopt final amendments (the Amendments) 1 to “simplify, harmonize, and improve certain aspects of the exempt offering framework.” 2 The Securities Act of 1933, as amended (the Securities Act), requires that every offer and sale of securities be registered with the SEC, unless an exemption from registration is available. The current exempt offering framework includes ten exemptions or safe harbors from the registration requirements of the Securities Act, each with distinct requirements. The goal of the Amendments is to reduce unnecessary complexity within the exempt offering framework and to allow market participants (including business development companies, or BDCs) to navigate through the exempt offering framework more easily.
To summarize, the Amendments:
In a recent review of a disciplinary action charging a chief compliance officer (CCO) with committing “should have known” liability, the DC Circuit Court of Appeals, in a per curium opinion, ignored the FINRA rule that the CCO allegedly violated. The decision raises questions about how FINRA will charge firms and compliance officers for “should have known” violations.
The Holy Grail. Knights who say “Ni.” The list goes on and on. (Wink wink, nudge nudge, say no more.) Monty Python, the comedy group, is known for a lot of things. However, what most people don’t know is that if you watch their movies, TV shows and Broadway musical very carefully, you’ll actually learn a lot about compliance and securities enforcement.
To understand what Monty Python can teach us about the SEC, CFTC and FINRA enforcement actions brought in September 2020, read more here.
A recent 2-1 decision by the Financial Industry Regulatory Authority Office of Hearing Officers stretched Rule 8210 beyond its wording and intent, barring a registered representative in the process.
The case, Department of Enforcement v. Wilfredo Felix, et al., involved several issues, including Felix’s failure to produce his Wage and Income Transcript (IRS transcript), which he could have obtained by submitting an IRS Form.
An IRS transcript is an IRS-created document that shows “most line items” from tax returns, including adjusted gross income. During the investigation, FINRA staff asked Felix to produce his IRS transcripts (a very rare request), which he did not have in his possession, or to sign an IRS Form instructing the IRS to send them to him.
He refused, stating that FINRA’s request went beyond the scope of Rule 8210.