Many companies that transitioned to a work-from-home environment in early 2020 may have reasonably anticipated a return to the normalcy of in-office operations by the end of the year. Yet as 2021 commences, remote work has become the new normal and firms can expect this arrangement to continue through the first quarter of the year, if not longer. While working from home poses challenges for all businesses, it poses unique concerns for broker-dealers whose associated persons are conducting business from their homes. Broker-dealers must remain keenly attuned to the risks posed by work-from-home arrangements, including specifically the risk that registered representatives and other associated persons use their personal devices or other unapproved and unmonitored channels to communicate with clients and conduct business.
Category Archives: Regulatory
What to Expect from the SEC Under the Biden Administration
We know there will be new leadership at the SEC. President Biden has already nominated Gary Gensler as the new SEC Chair. Mr. Gensler, who served as chairman of the CFTC under Obama, was widely perceived as an aggressive CFTC chairman during the financial crisis. At that time, this aggressiveness eased progressives’ concerns that President Obama was appointing a Wall Street executive (Gensler is an alumnus of Goldman Sachs) to head the CFTC. Now, opposition to Gensler is more likely to come from conservatives, who may regard him as an overzealous enforcer.
Meanwhile, the Commission is being led by acting Chair Allison Herren Lee. Chair Lee is a long-time SEC enforcement attorney who also acted as counsel to Commissioner Kara Stein before assuming her position as a commissioner in mid-2019. She is regarded as pro-enforcement and will be an ally of Mr. Gensler should he be confirmed as Chairman.
What will this new leadership mean for market participants?
ADV Season is Here; Compliance Resources for Brokers and RIAs; Don’t Forget Your CPO Annual Affirmations; SEC Creates 5-Year “Sandbox” for BD Custody of Digital Assets
February Regulatory Updates from Cari Hopsfenperger at Hardin Compliance Consulting LLC.
Topics include:
- Custody of Digital Asset Securities by Special Purpose Broker-Dealers
- Annual Amendments to Form ADV and CRS Due March 31, 2021
- Brokers Named as Beneficiary or Holding a Position of Trust on Behalf of Customers
- Reminder: Background Check Rules Now Apply to Funds Reaffirming Rule 4.13 Exemption
- Robinhood Failed to Disclose True Cost of Commission-Free Trades to Customers
On the right track: Securities & Exchange Commission adopts rules to streamline private offering exemptions
On November 2, 2020, the Securities and Exchange Commission (the SEC) voted to adopt final amendments (the Amendments) 1 to “simplify, harmonize, and improve certain aspects of the exempt offering framework.” 2 The Securities Act of 1933, as amended (the Securities Act), requires that every offer and sale of securities be registered with the SEC, unless an exemption from registration is available. The current exempt offering framework includes ten exemptions or safe harbors from the registration requirements of the Securities Act, each with distinct requirements. The goal of the Amendments is to reduce unnecessary complexity within the exempt offering framework and to allow market participants (including business development companies, or BDCs) to navigate through the exempt offering framework more easily.
To summarize, the Amendments:
- clarify the ability of issuers to move from one exemption to another;
- revise certain offering and investment limits to address inconsistencies in current rules;
- set clear and consistent rules governing offering communications between investors and issuers (e.g., “test-the-waters” and “demo day” activities); and
- harmonize certain disclosures, eligibility requirements and bad actor disqualification provisions.
FINRA Panel Stretched Rule 8210 Too Far
A recent 2-1 decision by the Financial Industry Regulatory Authority Office of Hearing Officers stretched Rule 8210 beyond its wording and intent, barring a registered representative in the process.
The case, Department of Enforcement v. Wilfredo Felix, et al., involved several issues, including Felix’s failure to produce his Wage and Income Transcript (IRS transcript), which he could have obtained by submitting an IRS Form.
An IRS transcript is an IRS-created document that shows “most line items” from tax returns, including adjusted gross income. During the investigation, FINRA staff asked Felix to produce his IRS transcripts (a very rare request), which he did not have in his possession, or to sign an IRS Form instructing the IRS to send them to him.
He refused, stating that FINRA’s request went beyond the scope of Rule 8210.
