Category Archives: Standard of Care

Senior Investors Focus of New “Principal Consideration” in FINRA Sanctions

Last month, FINRA’s National Adjudicatory Council (NAC) introduced new Sanction Guidelines which allow the NAC and FINRA staff to take into consideration the “undue influence” of registered individuals over vulnerable customers in determining appropriate sanction levels. The last update to the Guidelines occurred approximately two years ago, and included changes related to unsuitable recommendations and misrepresentations. Last month’s changes to the Guidelines provide for the first time a “principal consideration that analyzes whether a respondent has exercised undue influence over a customer.” Now listed as a specific factor for adjudicators and FINRA staff to consider in determining appropriate sanctions is  “[w]hether the respondent exercised undue influence over the customer.”

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Additional contributors to this post:

Bruce M. Bettigole, brucebettigole@eversheds-sutherland.com

Sarah Razaq Sallis, sarahsallis@eversheds-sutherland.com

House Financial Services Committee Approves Revised “Financial CHOICE Act”

Chair Hensarling and the House of Representatives’ Financial Services Committee on Thursday May 4, 2017 completed mark-up of the Financial CHOICE Act (“FCA”) and reported out the bill to the House along party lines by a 34-26 vote.  If enacted, the FCA would significantly amend the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (“DFA”) and other banking and securities laws.  Among many other changes, the FCA would eliminate the systemic risk regulation program for non-banks under Titles I, II and VIII of the DFA and provide relief from DFA-imposed requirements for qualifying strongly-capitalized banks, as well as low risk and community banks. The FCA would also curtail the authority of the Consumer Financial Protection Bureau (“CFPB”), repeal the Durbin Amendment cap on debit card fees charged to merchants, roll back mortgage regulation, limit the credit risk retention rule to securitizations of home mortgages, and repeal the statutory authority for the SEC to impose restrictions on conflicts of interest in securitizations.

Continue reading House Financial Services Committee Approves Revised “Financial CHOICE Act”

FINRA Publishes New Guidance on Social Networking Websites and the Application of Rule 2210

In Regulatory Notice 17-18, FINRA provided additional guidance, in the form of 12 FAQs, on its earlier regulatory notices relating to the use of social media and the application of FINRA Rule 2210 (Communications with the Public). Specifically, the FAQs expand on the areas of recordkeeping, third-party posts and the use of hyperlinks to third-party sites. FINRA acknowledged that the use of social media and digital communications has expanded in the time since the last regulatory notice on the use of social media by member firms, which was in Regulatory Notice 11-29 in 2011.

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Additional contributor to this post:

Bradley Bermanbberman@mofo.com

Caveat Compliance: Can Firms Rely on Advice Received from Compliance Consultants?

Broker-dealers (BDs) and investment advisers (IAs) regularly hire compliance consultants to obtain advice about regulatory requirements. A recent Securities and Exchange Commission (SEC or Commission) enforcement proceeding against an investment adviser (IA) calls into question whether firms may rely on compliance consultants as a defense to violating the law.  However, if firms take proper steps, BDs and IAs may still be able to retain consultants and defend themselves based on the advice they receive. Otherwise, “caveat emptor” (as the saying goes) or “caveat compliance” (as the SEC seems to be saying).

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Additional contributors to this post:

Brian L. Rubinbrianrubin@eversheds-sutherland.com

Rebekah R. Runyonrebekahrunyon@eversheds-sutherland.com

The Final Rule: Delayed But (Perhaps) Not Denied

On April 4, 2017, the Department of Labor released its final rule postponing the applicability date of its new “investment advice” fiduciary definition and related exemptions. This extension, which was published in the April 7 Federal Register, generally delayed the applicability dates under the rule for 60 days, until June 9, 2017, and also modified limited but important conditions in the rule for 2017.

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Additional contributor to this post:

W. Mark Smithmarksmith@eversheds-sutherland.com