Merrill Lynch’s settlement with FINRA reminds broker-dealers and reps that they can’t use contractual arrangements to deny arbitrating disputes between them arising out of their business activities…… In paying retention bonuses of $2.8 billion to 5000 of its registered representatives in January 2009, Merrill Lynch structured them as loans and required reps to agree to terms that required that any disputes regarding repayment of the … Read more →

The SEC’s Office of the Whistleblower posting of its Notices of Covered Action (“Notice”) should serve as a reminder to investment advisers and broker-dealers of the importance of developing a strong culture of compliance, including having policies and procedures designed to prevent and detect violations of law.  The SEC’s whistleblower rules govern how the SEC goes about awarding whistleblowers money for providing tips … Read more →

  FINRA has now provided regulatory guidance  to member firms about how its advertising rules  (NASD Rules 2210 and 2211) would apply to information they provide to participant-directed individual account plan participants under a U.S. Department of Labor rule.  The DOL rule, Rule 404a-5, was designed to ensure that plan participants are provided with sufficient information about the plan and … Read more →

Financial service firms may want to pay more careful attention to internal politics and turf battles involving issues like which adviser or rep gets credit or compensation for a particular client relationship or allegations of ”book poaching” and other territorial “coverage” disputes. The FINRA arbitration in Stephen Colavito, Claimant, vs. Deutsche Bank Securities, Inc.,Respondent (FINRA Arbitration 10-01557, December 27, 2011)  looks like a … Read more →

Despite the SEC’s adoption of Regulation S-P back in 2000, some reps still mistakenly believe that client accounts belong to them and that they are free to take them, including any information about the client, when they depart one firm for another.  And whether by bringing  improper recruiting practices or misuse of client information enforcement cases, FINRA and the SEC … Read more →

The SEC’s National Examination Risk Alert issued yesterday through the Office of Compliance Inspections and Examination comes at an interesting time.  Almost two years after FINRA issued specific guidance in its Notice to Members 10-6  defining the social media it sought toregulate and suggesting ways member firms should supervise use of social media, and on the same day the SEC’s Division of Enforcement issued an … Read more →

It’s a New Year!  And for advisers it’s again time for a new year’s resolution, only this kind of resolution is not voluntary.  Like holidays, it comes once a year, and while the responsibility for it falls on the adviser, the obligation to ”administer” (or the commitment to follow our new year’s theme) falls on the Chief Compliance Officer - it’s called the Annual Compliance Review.  Further, consider it … Read more →

As a follow up to our post of December 15, where we asked whether settling enforcement actions might become harder after Judge Jed Rakoff rejected the recent settlement between the SEC and Citigroup, one thing is clear, it will certainly be harder for the SEC to settle cases before federal judges like Rakoff who may be troubled by settlements in which a defendant is allowed to neither admit … Read more →