On July 11, 2019, the Financial Industry Regulatory Authority released Regulatory Notice 19-23, providing new guidance on what constitutes “extraordinary cooperation” in FINRA investigations, and what credit FINRA may give to broker-dealers or individuals. How will this guidance affect firms that self-report violations under FINRA Rule 4530(b)?
Category Archives: Compliance
SEC approves investment advice standard of conduct rules
Yesterday, in a 3-1 vote, the US Securities and Exchange Commission (SEC) adopted a comprehensive package of rulemakings and interpretations governing the standard of conduct applicable to broker-dealers providing retail investment advice and the fiduciary duty applicable to SEC-registered investment advisers. The package includes the following specific components:
- a new rule establishing a standard of conduct (captioned as “Regulation Best Interest”) for broker-dealers and natural persons who are associated persons of a broker-dealer when making recommendations to retail customers of any securities transaction or investment strategy involving securities or regarding the opening of an account;
- the Form CRS Relationship Summary, requiring registered broker-dealers and investment advisers to provide a brief relationship summary to retail investors;
- an interpretation of the fiduciary duty applicable to SEC-registered investment advisers; and
- an interpretation of the “solely incidental” prong of Section 202(a)(11)(C) of the Investment Advisers Act of 1940 (which provides an exclusion from the definition of investment adviser for broker-dealers who provide investment advice on a solely incidental basis to their brokerage activities and do not receive any special compensation for it).
Commissioners Clayton, Peirce and Roisman voted to adopt the package of rulemakings and interpretations, while Commissioner Jackson did not. The SEC has released the adopted versions of Regulation Best Interest, Form CRS, the Investment Adviser Fiduciary Duty Interpretation, and the Solely Incidental Interpretation. A compliance date of June 30, 2020 is set for Regulation Best Interest and Form CRS. The SEC’s two interpretations under the Investment Advisers Act of 1940 will become effective upon publication in the Federal Register
Counting down to June 5
As we count down to this Wednesday’s open meeting in which the US Securities and Exchange Commission (SEC) will consider whether to adopt its proposed rulemaking package relating to the standards of conduct applicable to financial professionals, we are hopeful to receive answers to certain critical questions about the SEC’s proposals.
DC Circuit finds negligent, but not willful fraud for inadequate disclosures
In a much-anticipated decision, on April 30, 2019, the US Court of Appeals for the District of Columbia Circuit issued its decision in Robare, a case that concerned an investment adviser’s (IA) disclosure of conflicts of interest regarding its receipt of payments from a custodian. The court held that the Commission’s findings of “negligent” violations under Section 206(2) were supported, but the Commission’s findings of “willful” violations under Section 207, based on the same negligent conduct, “are erroneous as a matter of law.”
OCIE Lists Privacy Blunders; SEC Explains When Digital Assets become Securities; Ohio Mandates IARs and RR to Report Elder Abuse; FINRA Gives Broker an “F” in Email Review; and Google Searches Don’t Count as Due Diligence
Regulatory Updates from Jaqueline Hummel at Hardin Compliance Consulting LLC.
Topics include:
- Reg S-P Compliance Violations Spelled out by SEC
- Heads Up! Massachusetts Amended the Data Breach Notification Law
- Ohio Requires Registered Reps and Investment Adviser Reps to Report Elder Abuse
- SEC Issues Digital Asset Analysis and No-Action Letter
- FINRA Issues Guidance for Communications with Customers Regarding Departing Representatives
- Attention Underwriting Syndicate Members who enter into Backstop Agreements
- FINRA Will Permit the Use of Electronic Signatures for Discretionary Accounts
- SEC Issues Guidance on Mutual Fund Reporting Requirements
- Liquidity Risk Management FAQs Updated
- NFA updated its Self Examination Questionnaire to assist firms in preparing for 2-9
- Ever Wonder What Happens if Your Firm Blows the Private Offering Exemption?
- Google Searches and Phone Calls Don’t Count as Extensive Due Diligence
- When Absolute Power Corrupts Absolutely
- FINRA Gives Broker-Dealer an “F” in Email Review