From Morgan Lewis’ LawFlash, the SEC’s division of Investment Management’s announcement that it would allow its October 26, 2017 no-action letter to SIFMA to expire on July 23, 2023 “pulls the rug out from under ‘Hard Dollar’ research arrangements,” and raises questions about the possible investment adviser status of broker-dealers that, after that date, accept cash or “hard dollar” payments for research from investment managers subject to the EU Markets in Financial Instruments Directive II.
Category Archives: Enforcement
Recent SEC Settlement Suggests CCOs Have Target on Their Backs
From Brian Rubin and Adam Pollet in Corporate Compliance Insights:
The SEC’s prosecution of chief compliance officers remains a fraught and controversial topic. A recent SEC enforcement settlement with a CCO and a registered investment adviser could raise even more questions about the role of CCOs and what standards the SEC uses in sanctioning them.
Proposed bipartisan legislation aims to clarify the crypto regulatory landscape
New, sweeping bipartisan legislation proposes to define the contours of regulating digital assets and the crypto industry. Among other things, the bill:
- Gives the CFTC primary jurisdiction over digital assets and exchanges, limiting the SEC’s ability to regulate the industry;
- Calls for federal and state cooperation in monitoring and regulating the various aspects of the industry, including tax and money transmitter issues; and
Includes a number of measures designed to address cybersecurity and ESG concerns.
DOJ brings first-ever NFT “insider trading” case
The US Department of Justice and Federal Bureau of Investigation announced the first-of-its kind indictment of an “insider trading” scheme involving non-fungible tokens (or NFTs).
- A former employee of an online marketplace for NFTs allegedly used confidential business information for personal financial gain.
- The charged individual used new blockchain technologies to conceal the proceeds of the alleged illicit activity.
- The DOJ brought charges without characterizing NFTs as securities.
Client Communications — The Importance of Documenting
Investment advisers that manage assets on a non-discretionary basis i.e., executing a transaction only after a client accepts an investment recommendation) face regulatory and legal risks if communications with clients are not properly documented. Because such authority is contingent on client consent, the failure to obtain consent in writing could lead to claims by clients, down the road, that they never authorized an adviser to proceed with a transaction, particularly if the client is unhappy with the results of the investment. Regulators could also charge an adviser with exceeding the authority granted by a client to an adviser if consent is not properly documented.