- FINRA Warns Firms to Finalize Forms U4 and U5 Today!
- The SEC Withdraws Proxy Voting Letters
- GIPS Proposes Changes
- The SEC Targets Advisers for Misleading Investors, Advertising Missteps, and Violations of Reg. S-ID.
Category Archives: Enforcement
One-Two-Three Punch: SEC and FINRA Announce Actions Against Unregistered Broker, Digital Asset Manager and FINRA Registered Person
On September 11, the Securities and Exchange Commission and Financial Industry Regulatory Authority separately announced three “first of their kind” enforcement actions related to digital assets. Over the past year, regulators have repeatedly stressed the need for compliance with the securities laws when transacting in digital assets that are securities. These actions emphasize the need for all market participants — not just issuers — to comply with the securities laws, and further underscore that compliance with the securities laws extends beyond avoiding fraudulent conduct.
Additional contributors to this post:
Nathan A. Howell, NHOWELL@SIDLEY.COM
Verity A. Van Tassel Richards, VVANTASSELRICHARDS@SIDLEY.COM
Daniel Engoren, DENGOREN@SIDLEY.COM
Susan Schroeder: Avoiding Regulation by Enforcement
FINRA’s head of enforcement’s speech yesterday at SIFMA AML was noteworthy. Schroeder signaled a commitment by FINRA to avoid regulation by enforcement. She said “(t)ransparency is particularly important in Enforcement. In order for the industry to be able to follow a rule, FINRA’s expectations have to be clear and rule violations have to be foreseeable. We want to avoid any perception of “rulemaking by enforcement.” That is why as we continue to integrate two enforcement teams, we are also thinking about our internal processes when we bring a case. In particular, we are considering how to identify any novel issues early, and ensure that we flag and discuss these issues with the rest of FINRA to develop the most effective regulatory response on behalf of the organization. Enforcement actions are one type of tool that FINRA can use to effect compliance. Other departments have other tools, and we want to make sure that we consult and collaborate early and often with our FINRA colleagues to consider issues holistically, and to think about the range of actions we might take, from an enforcement action to a Regulatory Notice or even a new rule.
12b-1 fees — A Brand New Twist
Under a new self-reporting initiative just announced by the SEC staff, the SEC’s Enforcement Division will recommend “standardized, favorable settlement terms” to investment advisers that self-report that they failed to disclose conflicts of interest associated with the receipt of 12b-1 fees. This is the latest effort by the SEC to crack–down on inadequate disclosure of adviser receipt of 12b-1 fees in connection with advisory accounts where a lower -cost share class of the same mutual fund was available for the advisory clients. The SEC States that among other things, the Division will recommend settlements that will require the adviser to “disgorge its ill-gotten gains and pay those amounts to harmed clients. ” The plus: no civil monetary penalty. Investment advisers must notify the Division of Enforcement of their intent to self-report no later than June 12, 2018.
SEC Chairman Clayton Shares His Thoughts With the Senate
On September 26, 2017, SEC Chairman Jay Clayton delivered to the U.S. Senate Committee on Banking, Housing and Urban Affairs his first testimony as Chairman. A copy of his prepared remarks may be found here.
Mr. Clayton’s testimony was fairly broad in scope, covering a variety of issues of concern to the Committee, from the SEC’s budget request to its activity in the enforcement arena. Of interest to BDIA’s were his comments on:
- Encouraging Initial Public Offerings and Investor Choice
- A Fiduciary Duty for Broker-Dealers
- Examinations of Broker-Dealers
Additional contributor to this post:
Lloyd S. Harmetz, lharmetz@mofo.com