Category Archives: Standard of Care

House Financial Services Committee Approves Revised “Financial CHOICE Act”

May 5, 2017 David F. Freeman, Jr. Leave a comment

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.

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Compliance, Regulatory, Standard of Care

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

May 2, 2017 Anna T. Pinedo Leave a comment

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.

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

April 17, 2017 Clifford E. Kirsch Leave a comment

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).

The Final Rule: Delayed But (Perhaps) Not Denied

April 10, 2017 Clifford E. Kirsch Leave a comment

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.

New Protections for Senior Investors

March 31, 2017 Benjamin T. Marzouk Leave a comment

On March 30, 2017, FINRA issued Regulatory Notice 17-11 (Financial Exploitation of Seniors), announcing the SEC’s approval of amendments to the FINRA rulebook related to the financial exploitation of senior investors. More specifically, as adopted, the amendments to FINRA Rule 4512 would require broker-dealers to make reasonable efforts to obtain the name and contact information for a “trusted contact person” for a customer’s account. In addition, new FINRA Rule 2165 would permit (but not require) broker-dealers to place temporary holds on disbursements of funds or securities from the accounts of certain senior investors, as well as other investors with diminished capacity, when there is a reasonable belief of financial exploitation. The FINRA notice announces an effective date of February 5, 2018, and clarifies, among other things, that the temporary hold on disbursements should not apply to securities transactions.