Thinking of conditioning the settlement of  a customer arbitration claim on the customer agreeing to expunge her complaint against you? Think again.  The FINRA is now awaiting the SEC’s approval of a FINRA rule proposal that would prohibit associated persons from conditioning settlements of customer disputes on, or otherwise compensating customers for, an agreement not to … Read more

FINRA has ordered Atlanta-based broker-dealer, J.P. Turner & Company, L.L.C. to pay $707,559 in restitution to 84 customers for sales of unsuitable leveraged and inverse exchange-traded funds (ETFs) and for excessive mutual fund switches. FINRA’s action against J.P. Turner is another reminder of the need for broker-dealers to carefully scrutinize the suitability of such non-conventional investments products like inverse exchange-traded funds. While FINRA mutual … Read more

Two SEC enforcement cases last week demonstrate (i) how using affiliated brokerage on an agency or principal basis raises potential conflicts of interest  when dealing with ” best execution” concerns , and (ii) the importance of having robust best execution policies and procedures and then following them.  In both cases, the SEC sanctioned investment advisers for not heeding … Read more

THE UPWARD TREND IN MUNCIPAL SECURITIES CASE ENFORCEMENT

The past two weeks has seen the SEC’s continued ratchet upward the number of enforcement actions against municipal securities participants for disclosure violations. These enforcement actions also continue to ensnare an array of players in municipal securities transactions, that include underlying obligors, their chief executive officers, national and regional investment banks, the heads of public finance departments at several investment banks, as well as individual investment bankers … Read more

Reporting on Mary Jo White’s speech at a Wall Street CFO Network function, the Washington Post notes her comments about the long-simmering topic of failure of securities law violators to admit guilt when they settle with the SEC.  As a matter of practice, the SEC has routinely allowed defendants to settle cases “without admitting or denying wrongdoing.”  In light of … Read more

Effective July 1, 2013, add to the types of  individuals who are no longer eligible to serve as public arbitrators in FINRA arbitrations persons associated with, or registered through, a mutual fund or hedge fund. The list has been growing and already includes  (i) attorneys and accountants who derive a certain percentage or a certain amount of their income from the securities industry, … Read more

SEC 2012 Enforcement Actions Against Investment Professionals

In a press release yesterday, the Securities and Exchange Commission  announced enforcement results for its fiscal year ending September 30, 2012. The results include the SEC having filed 734 enforcement actions, just one case shy of last year’s record of 735.  According to the Division of Enforcement, the cases,  involved everything from highly complex products, transactions, and practices, … Read more

Compliance Officers and In-house Attorneys Remembering Rule Number One

Back on July 25, 2011, we blogged about the importance attached to chief compliance officers’ understanding the regulatory framework and guiding principles for what it is they do.  As we said then, “Rule Number One : Your Job is to “Administer” the Compliance Program: The CCO’s job function as mandated by Rule 206(4)-7 (the “rule”) is limited to … Read more

Add a few recent SEC actions against hedge funds that include a hedge fund manager running a $37 million Ponzi scheme; a former director in a compensation scheme that netted hundreds of thousands of dollars in undisclosed income; co-founders of a Chicago-area investment firm misleading investors and supervisory failures resulting in penalties of more than $1 million; a private fund … Read more

The Employee versus Independent Contractor Saga Continues

Last week, in the ever-evolving ”employee versus independent contractor” battle, Judge Anthony Battaglia of the U.S. District Court for the Southern California in a decision added additional fuel in a decision in the broker-dealer/registered representative arena.  Battaglia upheld Waddell & Reed’s classification of its reps as independent contractors, ruling against two brokers who claimed that they should have been treated as employees.  Earlier, in … Read more