Securities Compliance Sentinel

Analysis of cutting-edge securities industry issues

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By: Fox Rothschild LLP

Blog Authors

Amit Shah
Fox Rothschild LLP
Ernest Badway
Eric Reed
Joshua Horn
Fox Rothschild LLP
Michael A. Rollin

Latest from Securities Compliance Sentinel

Fines
FINRA maybe in the process of allowing its examiners to punish member firms for rules’ infractions.  See  https://www.law360.com/assetmanagement/articles/1143015/finra-wants-to-let-examiners-lower-the-boom-on-brokers?nl_pk=5882ca7d-b76e-42a1-a1fe-eb96fcbcf60f&utm_source=newsletter&utm_medium=email&utm_campaign=assetmanagement.  There is no proposed rule as of today.  However, such a rule would be a game changer in the sense that examiners, who, generally, do not have the authority to enforce FINRA’s rules would now be in the proverbial “driver’s seat” without any of the ordinary checks FINRA usually provides in the enforcement process.  In any event,…
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Although songs and Broadway musicals routinely call upon “memories” as inspiration, it usually is not the province for decisions in FINRA arbitrations.  However, we were treated to a memory lesson in what, at first blush, seemed to be a run of the mill expungement case. See Evans v. Merrill Lynch Pierce Fenner & Smith Inc., FINRA Office of Dispute Resolution Case No.: 18-00845. As many know, registered persons may move to expunge certain information from their FINRA…
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Way back in 2017, the SEC obtained an emergency asset freeze against an internet-based ICO involving certain Canadian residents, who had raised over $15 million on a variety of social media sites through an alleged fraudulent scheme. http://www.sec.gov/litigation/complaints/2017/comp-pr2017-219.pdf. At the time, it made major news and helped launch the SEC’s Cybersecurity Unit.  Of course, there have been many other actions since that time, but this action demonstrates that, with technology, it is impossible to ignore the potential for cross-border fraud.  Essentially, do…
Fines
Over the last several months, there has been an increase in questions from registered investment advisers relating to using hypothetical performance information.  Generally, the use of such information is fraught with danger as well as SEC scrutiny.  Not so long ago, the SEC went after a number of investment advisers and forced them to pay a total in fines, interest, and disgorgement of nearly $10 million.  See  https://www.sec.gov/litigation/admin/2017/33-10443.pdf; https://www.sec.gov/litigation/admin/2017/34-82244.pdf; and https://www.sec.gov/litigation/admin/2017/ia-4823.pdf. The SEC complained that these advisers did…
FINRA litigants and arbitrators alike should take note of a federal court’s decision rejecting an unexplained FINRA award when it was unable to discern its basis, notwithstanding that FINRA rules did not require an “explained” decision, and later vacating the explained award once it demonstrated the panel’s manifest disregard of the law. This decision has potentially far-reaching tactical and practical implications, and suggests that arbitrators must be prepared to support their awards whether or not…
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FINRA has published cybersecurity guidance for all its member firms.  See https://www.finra.org/sites/default/files/p602363%20Report%20on%20Cybersecurity%20Practices_0.pdf. In particular, FINRA is indicating that it wants its member firms to bolster their cybersecurity regimes, and limit both internal and external threats.  The FINRA report also provides a number of resources for firms in applying this guidance. Please make no mistake about this report.  FINRA is not doing it out of the “goodness of its heart;” instead, member firms should assume FINRA will use…
Ever wonder what it’s like to argue in front of the Supremes? Fox partner Ernest E. Badway will moderate a forum with two Supreme Court advocates – Robert G. Heim and Howard Meyers – that will offer a fascinating glimpse into one of the most intense experiences in the practice of law.  The program will take place on January 3, 2019, from 12 p.m. to 1 p.m. E.S.T., and focus on their recent high court…
We wanted to announce that Ernie Badway has taken over the authorship of Chapter 7, Proxy Regulation, in Lexis-Nexis Matthew Bender’s Federal Securities Exchange Act of 1934 treatise: https://store.lexisnexis.com/products/federal-securities-exchange-act-of-1934-skuusSku10509.  His work will be available on November 26, 2018, just in time for the holiday season!…
Acknowledging the self-promotion aspect of this blog, we wanted to invite you to attend Josh Horn’s seminar at the NSCP National Conference in Atlanta.  Josh’s presentation is on Monday, October 29, 2018, at 1:55 p.m. and lasts 75 minutes.  Josh, along with Tanya Kerrigan, General Counsel & CCO, Boston Advisors, will be speaking on “Testing the Written Policies & Procedures Lab.”  We invite all to join Josh and Tanya for this very interesting program. Conference information may be…
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Just this week, a United States District Judge for the Eastern District of New York told a defendant in a criminal case that he was out luck with the claim there was no securities fraud because he was selling  digital tokens.  See United States v. Zaslavskiy, Case Number 1:17-cr-00647 (E.D.N.Y.). The defendant tried to argue that the digital tokens were not securities.  The court was simply not buying what the defendant was now selling.  The case involved claims the defendant…