Category Archives: Regulatory

FINRA Rule 5110 — Should it be Modernized?

On March 8, 2017, FINRA’s Board of Governors will meet to discuss certain proposed rulemaking considerations, including proposals to streamline and modernize FINRA Rule 5110 (Corporate Financing Rule – Underwriting Terms and Arrangements).  FINRA Rule 5110 governs member firm participation in the public offering of securities, and imposes certain filing requirements and related compensation restrictions for members participating in a public securities offering.  Upon approval from FINRA’s Board of Governors, any formal proposal will still need to be published for comment to FINRA member firms (typically through a “Regulatory Notice” filing) and also published for review and approval by the SEC.

DOLFR Delay Proposal

A proposal seeking to delay the applicability date of Department of Labor’s fiduciary duty rule (“DOLFR”), which impacts the compensation received by broker-dealers and investment advisers for the distribution of covered retirement accounts, was published on Thursday, March 2, 2017.  According to the federal register’s notice, the applicability date (which had been scheduled for April 10, 2017) was proposed to be delayed by 60-days to June 9, 2017.  The proposal allows for a 15-day comment period from the March 2, 2017 publication date, which would end on March 17, 2017.  The proposal also invited comment on a February 3, 2017 Presidential Memorandum to the Secretary of Labor, requesting broader review of DOLFR and its related exemptions.

For more on the DOLFR, including legal alerts and commentary, see www.dolfiduciaryrule.com.

SEC Guidance on Robo-Advisers

The SEC staff’s recent guidance on robo-advisers is the most comprehensive SEC guidance to date concerning the considerations robo-advisers should keep in mind in meeting their legal obligations under the Advisers Act. The staff notes that robo-advisers, like all registered investment advisers, are subject to the substantive and fiduciary obligations of the Advisers Act. The staff further  indicates that because robo-advisers rely on algorithms, provide advisory services over the internet, and may offer limited, if any, direct human interaction to their clients, their unique business models may raise certain considerations when seeking to comply with the Advisers Act.

Continue reading SEC Guidance on Robo-Advisers

Not Throwing Away Your Shot: Relying on Compliance Consultants to Defend Regulatory Actions

You are a CCO responsible for completing and filing Form ADV. You hire a compliance consultant to advise you on what information to include. You act in accordance with that advice, but you later find out that the SEC has instituted a proceeding against you and the firm due to the firm’s inadequate disclosures.

  • So, what now?
  • How do you defend yourself and the firm in this proceeding?
  • Is reliance on compliance consultants an available defense?
  • Will that succeed?

Who lives, who dies, and who tells your story (as Alexander Hamilton might say)?

Read More Here

Additional contributor to this post:

Brian L. Rubinbrianrubin@eversheds-sutherland.com

Analysis of FINRA Cases Shows Record-Breaking 2016

Eversheds Sutherland (US) LLP has completed its annual study of the disciplinary actions reported by FINRA in 2016.  Key takeaways:

  • In 2016, the amount of fines ordered by FINRA shattered its previous record set in 2014
  • While the number of cases reported was on par with prior years, the amount of restitution declined significantly from 2015’s record total
  • Top enforcement issues and emerging trends for FINRA

View the results here

Additional contributor to this post:

Brian L. Rubinbrianrubin@eversheds-sutherland.com