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

Cyber-Security: FINRA’s Targeted Examination Letter

As we posted earlier in outlining  FINRA’s  2014 Regulatory and Examination Priorities Letter, one focus included FINRA’s concern for the integrity of member firms’ policies, procedures and controls that are supposed to protect sensitive customer data.  In the letter, FINRA states that it will examine and conduct targeted investigations and followed up by issuing  a separate notice concerning  Targeted Examination Letters that some firms may get seeking information about how the … Read more

Advisers are reminded the SEC’s annual compliance outreach program National Seminar will be held on January 30, 2014, at its headquarters in Washington, D.C.   Investment adviser and investment company senior officers, including chief compliance officers (CCOs) are invited to register and attend. This year’s agenda will likely include panel discussions with SEC staff from the Office of Compliance … 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

As they were required to do under the Dodd-Frank Act, the SEC announced that it has now voted to adopt permanent rules requiring municipal advisors to register.  Previously, and immediately after Dodd-Frank,  municipal advisors were placed under a temporary registration requirement, and following it, more than 1,100 municipal advisors registered with the SEC. The permanent rule, the SEC says, will address the long concern about the fallout from losses suffered, in … Read more

SEC Risk Alert: Options Trading That Evades Short-Sale Rule Requirements

Short sale activity continues to be a significant focus of the SEC, particularly when it involves short sales without delivery, or “failures to deliver.” The SEC’s Office of Compliance Inspections and Examinations (OCIE) has now  issued a new Risk Alert raised by its examination staff’s observation that some options trading strategies are being used to evade the short-sale rule, Rule 10b-21.  … 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

Broker-dealers and other financial service firms using third-party service vendors, whether to reduce costs, enhance performance, and obtain access to specific expertise, and perform vital functions, sounds good in most instances.  But doing so is not without risks. FINRA’s recent disciplinary action against Ameriprise, tagging it with a censure and fine of $525,000, is a reminder of inherent risks when firms fail … 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