Category Archives: Enforcement

FINRA 5110 Enforcement Action. . . A Harbinger of Things to Come?

On November 3, 2016, FINRA issued an enforcement action against a registered broker-dealer for violations related to FINRA Rule 5110, which requires firms to make certain regulatory filings in connection with the public offering of securities.  More specifically, the firm replaced the dealer manager of a real estate investment trust offering, and failed to seek or obtain FINRA approval, instead incorrectly believing that they could rely on the prior dealer manager’s FINRA approval.  In addition, the firm failed to have adequate supervisory procedures to monitor the limits on underwriting compensation as required by FINRA Rule 5110.  FINRA rarely issues enforcement actions for violations of FINRA Rule 5110, so this action may represent an increased regulatory focus on how firms handle and manage the offering of securities.

OCIE Exam Reviews to Include Whistleblower Rule Compliance

Last week, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a risk alert dealing with the whistleblower provisions arising out of the Dodd-Frank Act. While examining registered investment advisers and registered broker-dealers, the Staff is reviewing, among other things, compliance manuals, codes of ethics, employment agreements, and severance agreements to determine whether provisions in those documents pertaining to confidentiality of information and reporting of possible securities law violations may raise concerns under Rule 21F-17 under the Dodd-Frank Act. This review is included in examinations as staff deem appropriate. This exam focus follows several recent SEC enforcement actions charging violations of Rule 21F-17 of the Commission’s whistleblower regulations.

Read more here: National Exam Program Risk Alert: OCIE Examining Whistleblower Rule Compliance

SEC Enforcement: Year of Firsts and Big Data

Last week, at the Securities Enforcement Forum in Washington, DC, senior staff of the SEC’s Division of Enforcement shed light on risks that asset managers and fund boards should be aware of. Their comments followed a record enforcement year resulting in more than $4 billion in disgorgement and penalties. Fueled in part by data collection technology, the SEC brought 868 enforcement actions the past fiscal year. Approximately 20% involved investment advisers or investment companies, the highest percentage in history, including one that found a private equity adviser to be acting as an unregistered broker/dealer, and others that involved alleged insufficient disclosure around accelerated monitoring fees.

Read more here: SEC Enforcement Staff Touts Year of Firsts and Big Data