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 →

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 →

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 →

The Board of Directors of Certified Financial Planner Board of Standards, Inc. (CFP Board)  has announced, effective August 27, 2012,  the adoption and  implementation of  new Sanction Guidelines. Typically, the CFP Board’s enforcement process involves them investigating incidents of alleged unethical behavior using  procedures established by the CFP Board’s Disciplinary Rules and Procedures. When violations are found, the CFP Board can … Read more →

So says a study conducted by Berkeley Law School professor, Stavros Gadinis.  The article appears in The Business Lawyer, published in the May 2012 issue  (Volume 67, Number 3)  by the American Bar Association. The study covers SEC enforcement actions against investment banks and brokerage houses during a period just before the 2007-2008 economic crisis (the dataset covers … Read more →

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 →

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 →