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Category Archives: Securities and Commodities

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Compliance, Securities and Commodities

Pitfalls to Avoid in Investment Adviser Compliance Programs: SEC OCIE Risk Alert

On November 19, 2020, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a risk alert, OCIE Observations: Investment Adviser Compliance Programs, to provide the industry with insights regarding their findings in their examinations relating to Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Advisers Act”) or the Compliance Rule.… Continue Reading
Compliance, Financial Institution Regulation, Securities and Commodities, Uncategorized

OCIE Finds Supervision Failures at Multiple-Branch Office Investment Advisers

On November 9, 2020, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) announced the results of its examination of nearly 40 SEC-registered investment advisers that operate multiple branch offices (the “Risk Alert”). Most of the firms examined conducted their advisory business out of at least 10 branch offices. OCIE observed a wide range of… Continue Reading
Financial Institution Regulation, Securities and Commodities, Uncategorized

Yet Another Mutual Fund Fee Issue or “Death by a Thousand Cuts”: FINRA Sweep of Rights of Reinstatement Waivers

What is the Issue? It may not be “death by a thousand cuts” but it may feel like it, as yet another mutual fund fee issue is being raised by the regulators. FINRA issued a “targeted examination letter” focused on Rights of Reinstatement (“RoR”) due to customers in certain mutual fund sales and purchases. RoRs… Continue Reading
Compliance, Securities and Commodities

2020 NASAA Fintech and Cyber Security Symposium – A Download of Key Comments

On October 27, the North American Securities Administrators Association[1] held its 2020 symposium on Fintech and Cybersecurity. A key theme of the symposium was the impact that the pandemic has had on fintech, cybersecurity, and regulating the financial markets  –  given that regulators and securities industry professionals are largely working from home. The panelists also… Continue Reading
Compliance, Enforcement and Prosecution Policy and Trends, Securities and Commodities

The SEC Speaks 2020: Enforcement Panel Signals Full Speed Ahead Regardless of the Pandemic

Senior officials from the U.S. Securities and Exchange Commission Division of Enforcement convened at a virtual The SEC Speaks conference panel to discuss fiscal year 2020 enforcement results and report on enforcement priorities. To no one’s surprise, the impact of the pandemic on enforcement was a significant part of the discussion. Read our alert for… Continue Reading
Compliance, Enforcement and Prosecution Policy and Trends, Financial Institution Regulation, Securities and Commodities

SEC Enforcement Co-Directors Issue Statement on Insider Trading

Under the leadership of U.S. Securities and Exchange Commission Chairman Jay Clayton, the SEC’s Division of Enforcement has made the protection of Main Street investors its overarching priority.  On March 23, 2020, Division of Enforcement Co-Directors Stephanie Avakian and Steven Peikin issued a statement to financial market participants re-emphasizing the SEC’s commitment to safeguard the… Continue Reading
Compliance, Securities and Commodities

COVID-19: Securities Regulators and Industry Associations Issue Coronavirus Guidance and Relief

Update: Our May 21, 2020, alert provides our most recent discussion of information and guidance issued by the SEC, FINRA, MSRB and SIFMA. As the Coronavirus, or COVID-19, continues to spread, the widespread impact on the markets, trading, firm operations, compliance obligations – every facet of the market, firms, and individuals working in the industry… Continue Reading
Compliance, Securities and Commodities

FINRA 2.0: FINRA Releases Its 2020 Risk Monitoring and Examination Priorities

FINRA’s examination program has undergone its most significant reorganization in decades. As stated in a press release, Oct. 1, 2018, FINRA’s goal for the reorganization was to “consolidate its Examination and Risk Monitoring Programs, integrating three separate programs into a single, unified program to drive more effective oversight and greater consistency, eliminate duplication and create… Continue Reading
Compliance, Securities and Commodities

SEC 2020 National Exam Program Examination Priorities

On January 7, 2020, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) released its 2020 examination priorities.  OCIE is prioritizing practices, products, and services that it believes present heightened risks to investors or market integrity.  The examination priorities are organized around seven themes, many of which build on OCIE’s priorities from… Continue Reading
Enforcement and Prosecution Policy and Trends, Financial Institution Regulation, Securities and Commodities

SEC Continues Compensation Disclosure Focus With FAQs and Enforcement

On Oct. 18, 2019, the Securities and Exchange Commission (SEC) Division of Investment Management staff published Frequently Asked Questions Regarding Disclosure of Certain Financial Conflicts Related to Investment Adviser Compensation (FAQs). Many in the industry view the FAQs as overdue SEC guidance in an area that has been a focus of the SEC Division of… Continue Reading
Financial Institution Regulation, Securities and Commodities

The More Things Change, the More They Stay the Same –Joint Statement by FINRA and the SEC on the Customer Protection Rule and Digital Asset Securities

On Monday, July 8th, FINRA and the SEC took the unusual step of issuing a joint statement on broker-dealer custody of digital asset securities. In doing so, the Staffs of the SEC’s Division of Trading and Markets and of FINRA’s Office of General Counsel made clear that the SEC and FINRA will continue to apply… Continue Reading
Securities and Commodities

D.C. Circuit Vacates SEC Sanctions, Says Negligent Omissions Are Not ‘Willful’ Under Advisers Act

On April 30, the U.S. Circuit Court of Appeals for the District of Columbia Circuit vacated a Securities and Exchange Commission order imposing sanctions. The court held that an investment advisory firm and its owners did not violate Section 207 of the Investment Advisers Act of 1930, 15 U.S.C. § 80b-7, by negligently omitting material facts from the… Continue Reading
Securities and Commodities

SEC OCIE Highlights Potential Deficiencies in Firm Privacy Policies

On April 16, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert highlighting Regulation S-P compliance deficiencies and issues it found in recent examinations of broker-dealers and investment advisers. Regulation S-P is the primary SEC rule detailing the safeguards these firms must take to protect customer privacy. The Risk Alert provides… Continue Reading
Financial Institution Regulation, Securities and Commodities

Recent New Jersey Rule Proposal Progresses State Efforts to Impose Fiduciary Duties on Brokers

On April 15, the New Jersey Bureau of Securities (the “Bureau”) issued a rule proposal to establish a uniform fiduciary duty standard applicable to investment advisers, brokers-dealers and their registered representatives and agents.  Specifically, the proposed rule (N.J.A.C. 13:47A-6.4), which could take effect as early as the end of the year, will require all investment… Continue Reading
Enforcement and Prosecution Policy and Trends, Financial Institution Regulation, Securities and Commodities

SEC Charges Its First Robo Actions – Increasing Scrutiny of the Investment Platform

It was never a question of if, but rather, when the Securities and Exchange Commission would launch its first charges against robo-advisors and what those charges would be. Following then-SEC Chairperson, Mary Jo White’s keynote address at the SEC-Rock Center on Corporate Governance in 2016, regulators have been carefully monitoring robo-advisors’ compliance with the Investment… Continue Reading
Enforcement and Prosecution Policy and Trends, Financial Institution Regulation, Securities and Commodities

Does United States v. Ying Expand the Knowledge Requirement for “Classical” Insider Trading?

On March 14, 2018, the SEC and DOJ sued Jun Ying, a former Chief Information Officer within an Equifax Inc. business unit, for insider trading. Specifically, they accused him of knowing about a significant Equifax data breach prior to its public disclosure and, while in possession of that material nonpublic information, exercising his Equifax options… Continue Reading
Enforcement and Prosecution Policy and Trends, Securities and Commodities

SEC to Begin Regulating Initial Coin Offerings More Heavily

On November 16, 2017, U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton announced in a symposium on cybersecurity and financial crimes that the SEC would start taking enforcement action against coin offering issuers who fail to register with the SEC. As cryptocurrencies, like Bitcoin, have become increasingly popular, startup companies have turned to a… Continue Reading
Enforcement and Prosecution Policy and Trends, Financial Institution Regulation, Securities and Commodities, Uncategorized

SEC Approves New PCAOB Standard

Recently, the SEC approved the PCAOB’s new auditor reporting standard, AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. Hailed as the most significant change to the auditor report’s format in over 70 years, AS 3101 significantly changes the format of the existing auditor’s report, arming… Continue Reading
Enforcement and Prosecution Policy and Trends, Securities and Commodities

U.S. Supreme Court Rules Time Limits Apply to SEC Disgorgement Orders

A unanimous United States Supreme Court held Monday, in Kokesh v. Securities and Exchange Commission, that the five-year statute of limitations under 28 U.S.C. § 2462 applies to disgorgement sought by the Securities and Exchange Commission. Previously, the Circuits had been split on this issue. The issue in Kokesh was straightforward. Kokesh appealed a trial… Continue Reading
Financial Institution Regulation, Securities and Commodities

FINRA President and CEO Robert Cook discusses FINRA360 and Consolidating Enforcement Divisions

On May 17, 2017, at the annual FINRA conference in Washington D.C., FINRA President and CEO Robert Cook discussed the recently-launched FINRA360 initiative: a top-to-bottom review of FINRA’s operations and organization.  Cook recognized that 2017 marks FINRA’s  ten-year anniversary since its “successful” but “complicated” merger of the National Association of Securities Dealers (NASD) and the… Continue Reading
Anti-Money Laundering, Enforcement and Prosecution Policy and Trends, Securities and Commodities

SEC Opens Cease-and-Desist Order Proceeding against Broker-Dealer and Chief Compliance / AML Officer

As we have highlighted in prior posts, regulators of financial institutions, including FinCEN, FINRA and SEC, have increasingly brought actions to bring organizations – and individuals – into compliance with AML / BSA obligations.  This enforcement activity is consistent with FinCEN’s August 2014 Advisory, now nearly three years old, emphasizing the idea that U.S. financial institutions… Continue Reading
Compliance, Securities and Commodities

SEC Annual Exam Guidance: Cybersecurity, Robo-Advising, and Retirement

The SEC recently announced its Office of Compliance Inspections and Examinations’ (OCIE) 2017 priorities.  Though these listed priorities are not exhaustive and remain flexible in light of market conditions, industry developments, and ongoing risk assessment, it is helpful for companies to keep these items in mind when evaluating securities compliance programs in 2017. The 2017… Continue Reading

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