Category Archives: Enforcement

One-Two-Three Punch: SEC and FINRA Announce Actions Against Unregistered Broker, Digital Asset Manager and FINRA Registered Person

September 20, 2018 Lilya Tessler Leave a comment

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.

Susan Schroeder: Avoiding Regulation by Enforcement

February 13, 2018 Clifford E. Kirsch Leave a comment

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.

Susan Schroeder’s SIFMA AML Remarks

Compliance, Enforcement, Standard of Care

12b-1 fees — A Brand New Twist

February 13, 2018 Clifford E. Kirsch Leave a comment

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

October 3, 2017 Anna T. Pinedo Leave a comment

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

Mixed Results for FINRA’s Disciplinary Actions in First Half of 2017

September 25, 2017 Clifford E. Kirsch Leave a comment

A midyear analysis of the disciplinary actions reported by FINRA from January through June 2017 indicates:

Certain program areas and restitution are up, but fines and the number of disciplinary cases are significantly down
FINRA appears to be focusing on more “nuts and bolts” issues like trade reporting, record retention, and supervisory policies and procedures
Despite an overall reduction in fines and the number of disciplinary actions, firms should still concentrate on core issues like suitability and books and records, among others