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.
Category Archives: Enforcement
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
Mixed Results for FINRA’s Disciplinary Actions in First Half of 2017
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
Additional contributor to this post:
Brian L. Rubin, brianrubin@eversheds-sutherland.com
A Record-Breaking Year for FINRA in 2016; What May Come in 2017?
2016 will be remembered as an historic year: the Olympics, the Chicago-Cleveland World Series, and the presidential election. In the regulatory world of FINRA, there was also an historic year as FINRA continued its trend of ordering significant fines, shattering its
previous record set in 2014. If firms and their representatives were not paying attention to this trend, they should be now. Although some have speculated about a reduction in the SEC’s Enforcement program with the new administration, FINRA shows no signs of slowing down. By analyzing FINRA’s 2016 sanctions and cases, including the issues that resulted in the most significant fines and emerging enforcement trends, what predictions can we make about key issues for FINRA for 2017 and beyond?
Additional contributor to this post:
FINRA Holds Regulator Forum on Distributed Ledger Technology
FINRA recently held a Blockchain Symposium which included a Regulator Forum with representatives from FINRA, OCC, CFTC, the Federal Reserve and the SEC. The regulators discussed the work they have undertaken to assess the use of DLT in the financial services industry, and the regulatory considerations associated with potential uses of DLT. The Symposium follows FINRA’s publication of a report earlier this year discussing the implications of DLT for the securities industry and soliciting comments from market participants.
Additional contributor to this post:
Issa J. Hanna, issahanna@eversheds-sutherland.com