As part of its “Fiscal Year 2017 Agency Financial Report” released by the U.S. Securities and Exchange Commission (“SEC”) last month, the SEC discussed enforcement cases for its fiscal year of 2017 (which for the SEC concludes on September 30th).  According to the Report, the SEC filed 754 enforcement actions in 2017,[1]  resulting in disgorgements and monetary penalties of roughly $3.8 billion.[2]  From the $3.8 billion, the SEC returned a record $1.0 billion to harmed investors, and ordered over $50 million in payments to whistleblowers.[3]  These enforcement actions also led to 625 bars and suspensions in 2017.[4] 

Introduction

During the Thanksgiving season, many of us spend time reflecting on what we are most thankful for.  Immediately, my family, and those closest to me (including my clients), come to mind.  As we meditate and think about life’s various changes, often we are faced with contemplating the effects and challenges of aging. Certain vulnerabilities can surface, such as diminished capacity and financial exploitation, which require forward thinking and purposeful action.

Introduction

FINRA Rule 8210 allows FINRA staff and adjudicators the ability to inspect and copy certain books, records and accounts of their member firms and those associated with such member firms.  Generally, Rule 8210 is used as a means through which FINRA obtains information for examining, investigating or proceeding against a member firm and its associated persons. 

Introduction

On September 14, 2017, the Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examination (“OCIE”) released its latest Risk Alert titled “The Most Frequent Advertising Rule Compliance Issues Identified in OCIE Examinations of Investment Advisers” which is based on the results of over 1,000 examinations of registered investment advisers, including examinations in connection with the SEC’s “Touting Initiative” focused on accolades used by advisers in marketing materials.[1]

In recent years, more and more financial institutions are electing to conduct a risk assessment as part of an annual compliance program check.  Not only does a risk assessment help in the development of policies and procedures, but also can serve as a mitigation tool to help identify and proactively address potential threats to lower risk exposure.  In this month’s Legal Risk Management Tip, we will explore the starting points for creating a risk inventory, provide tips and factors for evaluating risks, discuss tools and systems to use as risk management controls and summarize actions to help support your compliance program. 

In the April 2017 Legal Risk Management Tip, What You Need to Know About Expungement, we focused on FINRA expungement as it pertains to customer complaints.  Pursuant to Rules 2080 and 2081 and in Arbitrator Rules 12805 and 13805, in order to have a customer complaint removed from the CRD system and your BrokerCheck report, one must demonstrate that:

Selecting the best corporate entity for your business can be daunting. What contributing factors should you consider? This article will provide a roadmap for the selection and creation of a business entity.  It will focus on critical factors to consider when forming an entity, types of entities available and important characteristics of such entities.  While this article will not discuss every topic that may be pertinent when creating an entity, it will provide entrepreneurs with a framework and practical considerations for doing so.

Over the past few years, private equity compliance has been a focus of the Securities and Exchange Commission’s (“SEC”) Office of Compliance, Inspections and Examination (“OCIE”), and has been the topic of a variety of public speeches and comments from senior SEC personnel.[1]  Not surprisingly, private equity private equity advisers have remained a top SEC Examination Priority during that time period.[2]

The bane of every registered person is a bad mark on their Central Registration Depository (“CRD”) or BrokerCheck reports.  This mark can be caused by a number of things, but it is predominantly the result of a customer complaint.  If you have been a registered representative for any number of years, the likelihood of receiving one of these complaints increases.   As soon as a customer complaint is received, whether by you or your firm, it must be reported to FINRA. Once shared with FINRA, it is entered onto your BrokerCheck file.  The end result has both positive and negative results.  Positively, if the complaint is valid it serves as an alert to the public, making people more aware of these complaints.  Additionally, from FINRA’s perspective, this transparency is vital for investor protection.  On the other hand, such complaints can have a negative impact if the complaint is from an angry client who happens to have lost money and is simply blaming the representative.  As individuals or companies, we cannot make the decision whether a complaint is valid or not; simply, all complaints must be reported.

New regulatory developments seem to occur with ever-increasing frequency.  The past twelve months in particular have seen a bevy of new rules, regulations and guidance that will have significant impacts on the daily practices of advisers.  With so much new information being promulgated by regulatory bodies, it could be quite easy to miss ones that could have a substantial impact on your business.