The Securities and Exchange Commission (“SEC”) began the first month of the year 2014 with a range of new regulatory charges and fines issued against financial individuals and advising firms, including a portfolio manager formerly associated with a private equity firm. Specifically, Oppenheimer & Co. was charged with fraud for its fund valuation in late January. Brian Williamson was first faced with charges in August 2013, and on January 22, 2014, he agreed to settle the matter. This included paying a $100,000 fine, a cease-and-desist order and being banned from the securities industry for two years for “making misrepresentations about the valuation of a fund consisting of other private equity funds.”

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Last year, the Securities and Exchange Commission (“SEC”) amended Regulation D of the Securities Act of 1933 (the “Securities Act”), by adding Rules 506(c), 506(d) and 506(e). As we have described previously, there are several considerations and requirements of Rule 506(d). In an effort to further clarify these rules, the SEC’s Division of Corporation Finance publishes updates to the Securities Act Rules Compliance and Disclosure Interpretations (“C&DIs”) section of their website titled Questions and Answers of General Applicability. This resource presents the SEC’s views, general guidance and interpretations of these and other rules adopted under the Securities Act.

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On January 7, 2014, a deferred prosecution agreement was released, describing the settlement between J.P. Morgan Chase & Co. (“J.P. Morgan”) and U.S. prosecutors regarding J.P. Morgan’s compliance failures in its dealings with Bernard Madoff (“Madoff”) and his firm Bernard L. Madoff Investment Securities, LLC.

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This month, the Financial Industry Regulatory Authority (“FINRA”) released a regulatory notice reminding member firms of their responsibilities concerning individual retirement account (“IRA”) rollovers and potential conflicts of interest. A conflict exists when brokerage firms have an economic incentive to rollover retirement assets into an IRA sold by the brokers. Consequently, FINRA is reminding brokers that they must evaluate whether it is in the clients best interest to transfer money from the client’s previous 401(k) Plan into an IRA rather, than having a client leave its money in the company plan. Failure to do so could constitute a violation of Rule 2111, relating to FINRA’s suitability rule.

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