While it is pretty likely that anyone reading this is already familiar with the Wells process, I am going to start with a short history lesson. Way back in 1972, the SEC created an Advisory Committee to take an objective look...more
As the song goes, time keeps on slipping, slipping, slipping into the future. While Steve Miller may not have had FINRA and the SEC in mind when he wrote that lyric, the shoe certainly fits. Because here’s the thing about...more
Well, Memorial Day is just past us, so we all know what that means: it’s time for FINRA to conduct its first annual assessment of its member firms to determine whether they should be branded a “Restricted” firm under new Rule...more
Let me say at the outset that I, myself, am an old (by most people’s definition, anyway), white man. So, selfishly, I’ve got nothing against old, white men. But, the fact is that FINRA arbitration panels are...more
There are certain topics that broker-dealers have been encountering for decades, yet continue unnecessarily to wrestle with due to the absence of clear guidance from the regulators. I have written about one such topic...more
My job frequently requires that I explain to someone – whether my client, an ALJ, an arbitration panel, even a regulator – the fundamental difference between a broker-dealer and an investment advisor. An IA operates pursuant...more
I continue to wade my way through a few months’ worth of cases, press releases, etc., looking for things that manage to catch my attention. I found this SEC settlement from the end of July involving Integral Financial, a BD...more
There have been tons of cases where firms got in trouble – in AML trouble, which is one the worst kinds of trouble – for failing to be sufficiently on top of third-party wires, i.e., where a customer wires money not to...more
FINRA Enforcement has often been accused (again, admittedly, by me, and not too infrequently) of going after the “low-hanging fruit,” that is, taking the easy case when it presents itself. Putting aside the question whether...more
I have always operated with the understanding that, per FINRA rules, one cannot supervise him- or herself. Hardly an outrageous proposition. Today, however, that fundamental, bedrock understanding was so shaken, it has left...more
Almost three years ago, in Reg Notice 18-08, FINRA wisely (but, nevertheless, still a bit late to the party) proposed to revise its own prior guidance regarding the troublesome intersection between outside business activities...more
A long time ago, long before there existed any whistleblower statutes, I had a client – a CCO of a broker-dealer – who discovered some pretty funky trading at his firm. As he tells the story, when he went to see his boss (who...more
1/29/2021
/ Broker-Dealer ,
Chief Compliance Officers ,
Compliance ,
Department of Justice (DOJ) ,
Documentation ,
Due Diligence ,
Enforcement Actions ,
Ethics ,
Financial Industry Regulatory Authority (FINRA) ,
Investment Adviser ,
Securities and Exchange Commission (SEC) ,
Settlement ,
Supervision
LPL may be the biggest BD in the country, with 21,500 reps operating out of almost 13,000 branch offices. Heaven knows how much money it brings in every year, but, goodness, it must be a lot. And good thing, too, given how...more
1/20/2021
/ Annual Reports ,
Board of Directors ,
Broker-Dealer ,
Comptroller ,
Financial Industry Regulatory Authority (FINRA) ,
Investment Adviser ,
OCC ,
Regulatory Oversight ,
Regulatory Requirements ,
Securities and Exchange Commission (SEC) ,
Supervision
While undoubtedly FINRA will be issuing its annual “examination priorities” letter any day now, that is hardly the best way to figure out exactly what FINRA is paying attention to now (as that letter kind of reads the same,...more
“The SEC score(s) one for the digital age.” These are the words of SEC Commissioner Heist, though, not my own. After a nearly year-long comment period, the SEC announced last week that it was replacing its former advertising...more
12/31/2020
/ Advertising ,
Compliance ,
Endorsements ,
Form ADV ,
Investment Adviser ,
Investors ,
Marketing ,
New Rules ,
Ratings ,
Securities and Exchange Commission (SEC) ,
Supervision ,
Third-Party
I dare you. In fact, I double-dog dare you to figure out how or why FINRA decides to charge willfulness in some cases but not in others. Bottom line is that it is nearly impossible (except if you’re a big firm, in which case...more
10/21/2020
/ Broker-Dealer ,
Enforcement Actions ,
Financial Industry Regulatory Authority (FINRA) ,
Financial Institutions ,
Investment Adviser ,
Misrepresentation ,
Professional Disciplinary Actions ,
Registered Representatives ,
Sanctions ,
Securities and Exchange Commission (SEC) ,
Settlement
For the third year, FINRA has published its now-annual (apparently) statistical accounting of its membership and the registered representatives who work for those firms. I went back and looked the blogs I posted after the...more
I have blogged before about hold recommendations. Surprisingly – at least to me – the statistics I get from the publisher of this blog reveal that more people have read that particular post than anything else I have written...more
My young boys will sometimes chase me around the house, catch me, and yell “gotcha” as they drag me off to their pretend jail. No matter how much I plead that I’ve done nothing wrong, I always end up in jail, despite having...more
12/19/2019
/ Broker-Dealer ,
Conflicts of Interest ,
Disclosure Requirements ,
Failure To Disclose ,
Investment Adviser ,
Investment Management ,
Investors ,
Lack of Interpretive Guidance ,
Regulation Best Interest ,
Regulation BI ,
Regulatory Requirements ,
Securities and Exchange Commission (SEC) ,
Securities Regulation ,
Securities Transactions
This post is about Reg BI, but if you really want to learn about it, as opposed simply to listening to me gripe, I urge you to register for the webcast that my partners Heidi VonderHeide and Rob Betman will present on...more
Last year, for the first time, FINRA produced a statistical report designed to provide some perspective on the firms that comprise its membership. I blogged about it, and concluded at the time that the report basically...more
I was catching up on my reading and came across a column in Investment News by Mark Schoeff that described the results of a recent FINRA arbitration, results which I found a bit alarming. I caution you: reading too much into...more
9/25/2019
/ Arbitration ,
Arbitration Awards ,
Broker-Dealer ,
Compensatory Damages ,
Investment Adviser ,
Investment Firms ,
Investment Management ,
Investors ,
Liability ,
Registered Investment Advisors ,
Securities Transactions ,
Unregistered Brokers
Nearly ten years ago, FINRA decided to update its old suitability rule, NASD Rule 2310. It had been around a long time, and while it seemed to work fine, FINRA decided to incorporate into the new amended rule – FINRA Rule...more
6/26/2019
/ Best Interest Standard ,
Books & Records ,
Broker-Dealer ,
Dismissals ,
Fiduciary Duty ,
Financial Industry Regulatory Authority (FINRA) ,
Investment Adviser ,
New Rules ,
Regulation Best Interest ,
Retail Investors ,
Securities and Exchange Commission (SEC) ,
Standard of Conduct ,
Statement of Claim ,
Suitability Rule
Most of the time, the cases I write about were some other lawyer’s. In some respects, it’s easier to offer comments when it isn’t my case. I can, hopefully, be more objective, less pissed off (when the result is one I...more
5/2/2019
/ Administrative Law Judge (ALJ) ,
Anti-Fraud Provisions ,
Audits ,
Conflicts of Interest ,
Disclosure Requirements ,
Form ADV ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
Negligence ,
Securities and Exchange Commission (SEC) ,
Settlement Agreements
I am hardly saying that SEC Regulation S-P is the sexiest of regulations. I mean, has any customer is history actually read one of those exciting statement stuffers that discloses in some dense font a BD’s privacy policy?...more
4/24/2019
/ Broker-Dealer ,
Civil Monetary Penalty ,
Customer Information ,
Cybersecurity ,
Data Privacy ,
Data Protection ,
Data Security ,
Encryption ,
Enforcement Actions ,
Incident Response Plans ,
Investment Adviser ,
Notice Requirements ,
OCIE ,
Opt-Outs ,
Personally Identifiable Information ,
Policies and Procedures ,
Popular ,
Privacy Policy ,
Regulation S-P ,
Regulatory Requirements ,
Risk Alert ,
Risk Assessment ,
Securities and Exchange Commission (SEC)