OCIE Exam Reviews to Include Whistleblower Rule Compliance

November 2, 2016 Clifford E. Kirsch Leave a comment

Last week, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a risk alert dealing with the whistleblower provisions arising out of the Dodd-Frank Act. While examining registered investment advisers and registered broker-dealers, the Staff is reviewing, among other things, compliance manuals, codes of ethics, employment agreements, and severance agreements to determine whether provisions in those documents pertaining to confidentiality of information and reporting of possible securities law violations may raise concerns under Rule 21F-17 under the Dodd-Frank Act. This review is included in examinations as staff deem appropriate. This exam focus follows several recent SEC enforcement actions charging violations of Rule 21F-17 of the Commission’s whistleblower regulations.

Enforcement

SEC Enforcement: Year of Firsts and Big Data

October 20, 2016 BDIA Editors Leave a comment

Last week, at the Securities Enforcement Forum in Washington, DC, senior staff of the SEC’s Division of Enforcement shed light on risks that asset managers and fund boards should be aware of. Their comments followed a record enforcement year resulting in more than $4 billion in disgorgement and penalties. Fueled in part by data collection technology, the SEC brought 868 enforcement actions the past fiscal year. Approximately 20% involved investment advisers or investment companies, the highest percentage in history, including one that found a private equity adviser to be acting as an unregistered broker/dealer, and others that involved alleged insufficient disclosure around accelerated monitoring fees.

Regulatory, Standard of Care

Focus on Senior Investors: FINRA’s Latest Rule Proposals

October 20, 2016 Benjamin T. Marzouk Leave a comment

On October 19, 2016, FINRA filed with the SEC a proposed rule change that would amend FINRA Rule 4512 (Customer Account Information), and adopt new FINRA Rule 2165 (Financial Exploitation of Specified Adults). The proposed 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.

This rule proposal fits squarely within FINRA’s recent focus on protecting senior investors, particularly with FINRA’s recent launch of the “Securities Helpline for Seniors,” and should remain a continued regulatory focus moving forward.