- Posts by Thomas K. Potter, III
PartnerTom Potter is a Partner in the firm's Nashville office, and his practice focuses on securities, corporate disputes, and appellate litigation. Tom has over 35 years of experience representing business interests.
Tom represents ...
The citadel of the SEC's administrative forum has been under assault from several vectors over the past year or so, as a chorus of dissenting Respondents have mounted increasing challenges to its constitutional legitimacy, as well as it policy wisdom. The arguments were starting to get some traction, but two recent appellate decisions have repulsed the attack, including the D.C. Circuit's September 29 Jarkesy opinion. The arguments were gaining some momentum. First, they elevated the policy discussion to new prominence. SDNY Judge Jed Rakoff weighed in expressing doubt about the ...
The SEC recently - and predictably - rejected a Respondents' arguments challenging the constitutionality of the agency's administrative forum. The September 17 Timbervest decision was the first of the constitutional challenges to reach the full Commission itself, on appeal from the agency's internal administrative law judges ("ALJ"). The Commissioners rejected the Article II "appointments clause" argument, holding its ALJs were indistinguishable from those of the FDIC and thus were not "inferior officers" under Landry v. FDIC. That holding conflicts with those of ...
The SEC has announced a series of proposed changes to the Rules of Practice governing its internal enforcement actions. The changes update the decade-old Rules and respond in small part to a groundswell of criticism about the Commission's administrative forum. A. Lengthening the "rocket docket." Rule 360 presently requires actions to go from the Order Instituting Proceedings ("OIP" - the charging document) through to decision within 120, 210 or 360 days. That's a very fast schedule for Respondents to digest and defend a case the Enforcement Division might have taken up to 5 ...
Two rulings last week ordered the SEC to stop administrative proceedings in two cases, pending the Second Circuit's ruling on the constitutionality of its administrative forum. The Second Circuit stayed the SEC's prosecution of Lynn Tilton, pending appeal of her case. Tilton v. SEC, No. 15-2103 (2nd Cir. Sept. 17, 2015). The same day, Judge Richard Berman, denied the SEC's motion to allow its administrative case to proceed (by staying his preliminary injunction). Duka v. SEC, No. 15 Civ. 357 (USDC S.D.N.Y. Sept. 17, 2015). Judge Berman cited the "goose/gander" rule, noting the ...
This week the SEC's Office of Compliance Inspections and Examinations ("OCIE") announced a second-round of cybersecurity examinations, continuing its initiatives on the issue. The move follows the SEC's: March 2014 roundtable of regulators and industry representatives; April 2014 Risk Alert announcing a sweep exam to identify risks and issues; and February 2015 summary observations from that sweep. In this second round of exams, OCIE will engage in more testing directed at firms' implementation of key controls and procedures, especially:
- Governance & Risk Assessment
An SEC administrative law judge ("ALJ") found that former Wells Fargo trader Joseph Ruggieri traded on material nonpublic information tipped him by former analyst Greg Bolan, but dismissed the insider-trading charges against Ruggieri, because the Division of Enforcement did not prove personal benefit to his tipper. The bottom line: It doesn't violate anti-fraud rules to trade on material non-public information obtained from a casual acquaintance who "simply could not follow the rules and keep his mouth closed," where there is no clearly-demonstrable personal benefit to ...
The Municipal Securities Rulemaking Board ("MSRB") announced September 2 that it has submitted for SEC approval proposed amendments extending its gift-limitations Rule G-20 to municipal advisors. In general, the Rule prohibits gifts or services (including gratuities) exceeding $100 per year to any person if they relate to the provision of municipal advisory services, with some exceptions, including:
- Normal Business Dealings: Occasional gifts of meals or tickets to events hosted and attended by advisors, or sponsored business functions recognized by the IRS as deductible ...
Unless you live under a rock, you've heard about "Deflategate:" The Patriots' use of allegedly under-inflated footballs during their 45-7 win over the Colts in last-year's AFC Championship. In a 40-page opinion issued September 3, Southern District of New York federal Judge Richard Berman overturned the NFL's four-game suspension of Patriot quarterback, Tom Brady. Commissioner Goodell said the League will appeal. Deflategate also proves that it's not impossible to overturn an adverse arbitration award under Federal Arbitration Act ("FAA"). Cross-Motions on an ...
FINRA this week released its targeted exam letter requesting information on firms' conflict-of-interest policies surrounding broker compensation and retail accounts. The sweep follows up on FINRA's Conflicts Report from October 2013, which recommended changes to firm supervision and oversight of conflicts of interest. The letter requests extensive categories of information covering retail accounts during the period from August 2014 through July 2015. FINRA seeks information about firm policies and procedures to:
- Identify and manage conflicts;
- Surveillance of ...
The MSRB responded August 12 to the SEC's initiation of proceedings on proposed conduct standards for Municipal Advisors, filing some amendments to the proposed Rule. The MSRB's Amendment No. 1:
- Eliminates "includes, without limitation" language from the fiduciary-duty standard in Proposed Rule G-42(a)(ii) in response to SIFMA's comment that it raised unnecessary ambiguity, because a fiduciary duty generally is understood to encompass duties of both care and loyalty. MSRB retained that language in Supplementary Material .02 to be clear that the Rule doesn't purport to ...
The SEC's administrative forum has been under increasing scrutiny over the past year. Now the SEC has removed an ALJ from a high-profile case, after he refused the Commission's "invitation" to provide a no-bias affidavit in similar case. In a May 6 article, "SEC Wins With In-House Judges," the Wall Street Journal reported that former ALJ Lillian McEwen felt pressured by the SEC's Chief Administrative Law Judge over her failure to rule more often in the Commission's favor. Respondents appealing an administrative case to the full Commission have alleged the process is unfair and ...
The Department of Justice today appealed the Second Circuit's Newman decision to the U.S. Supreme Court, after several extensions. United States v. Newman, No. 15-137 (U.S. filed July 30, 2015). Last December's ruling narrowed the scope of tippee liability in insider-trading cases. The latest extension of the cert-petition deadline resulted in a bit of row, when the government hand-delivered the request June 15 and Justice Ginsburg granted it June 16, (extending the filing deadline to August 1). But Newman's counsel apparently wasn't even served with the government's request ...
On June 5, the Tennessee Supreme Court rejected a per se rule of unconscionability for non-mutual arbitration clauses, holding them enforceable if not too-one-sided and commercially reasonable under the circumstances. Berent sued his mobile-home sellers in chancery court, arguing that foreclosure exceptions for the seller within a generally broad-form arbitration clause rendered it unconscionable and unenforceable. The trial and intermediate appellate courts agreed, under the Supreme Court's prior decision Taylor v. Butler, 142 S.W.2d 277 (TN 2004). The Sellers sought ...
For over a year, critics have questioned the fundamental fairness of the SEC's administrative forum, including whether the Agency should act as prosecutor, judge and jury. Even as criticisms mount, the Commission Staff steadfastly declaims there's no issue here - and if there is, they should be the ones to decide it (through two layers of administrative proceeding, with judicial Chevron deference to their expertise, if ever judicially reviewed). Commissioner Piwowar and former SEC Staff have suggested that more transparency might be in order; but the Staff's response included ...
In an opinion Thursday, the Delaware Supreme Court held that independent directors should be dismissed from shareholder derivative litigation - even over transactions presumptively subject to "entire fairness" review - unless plaintiffs adequately plead non-exculpated claims against them. Prior precedent suggested, and the lower courts in these consolidated appeals adopted, a transactional approach to the issue: If the transaction was subject to entire-fairness review, then all the directors presumptively remained in the case through discovery to summary judgment at ...
The Financial Industry Regulatory Authority's disciplinary appellate body (the National Adjudicatory Council or NAC) has revised the Sanction Guidelines used to determine penalties in enforcement cases. The revisions increase the severity of some Guidelines and generally index monetary fines to the Consumer Price Index. Key among the changes, the NAC:
- Urges "strong consideration" of individual bars or firm expulsion for intentional fraud or cases in which aggravating circumstances predominate
- Emphasizes more severe sanctions for recidivists;
- Increases the upper ...
The SEC confirmed Friday that it may choose to be prosecutor, judge and jury in novel cases where it thinks it knows best and can urge Chevron deference when others seek judicial review.
The Commission dressed up the language a bit, of course:
If a contested matter is likely to raise unsettled and complex legal issues under the federal securities laws, or interpretation of the Commission's rules, consideration should be given to whether, in light of the Commission's expertise concerning those matters, obtaining a Commission decision on such issues, subject to appellate review in the ...
Deutsche Bank, a German lender agreed to plead guilty and pay $2.5 billion to settle with regulators in the United States and the United Kingdom in connection with criminal charges that it rigged and manipulated the London interbank offered rate ("Libor"). Regulators announced the settlement Thursday, April 23, 2015. According to the regulators Libor is a benchmark for interest rates that apply to trillions of dollars of financial contracts. (Eyk Henning, "Deutsche Bank to Pay $2.5 billion to Settle Libor Investigation With U.S., U.K. Authorities," Wall Street Journal (April 23 ...
The MSRB filed its Municipal-Advisor conduct rule proposal with the SEC on April 15. The Rule G-42 proposal has been around the block twice, since the Board first floated it in January last year (Reg. Notice 2014-01). The Revised Draft was issued last July (Reg. Notice 2014-12). I discussed them in our July 30, 2014 and January 23, 2014 blogs. As proposed for adoption by the SEC, the Rule broadly imposes:
- A fiduciary duty to Municipal Entities, but only of care to Obligated Persons;
- An "engagement letter" disclosure regime requiring conflicts and disciplinary disclosures ...
The Wall Street Journal reported Thursday that the SEC is in the midst of a sweep to crack down on companies' use of NDAs or employment agreements that might impede whistleblower reporting in violation of Dodd-Frank amendments. Wall St. J. at C1 (Feb. 26, 2015). We reported last November on a letter from eight House Democrats asking the SEC to examine the issue, here. SEC Chair White's January 5 response is here. SEC Rules prohibit using agreements to restrict or prevent whistleblower reporting. 17 C.F.R. § 240.21F-17(a). And the SEC's broadened administrative jurisdiction now gives ...
Addressing SIFMA's Anti-Money Laundering ("AML") conference Wednesday, SEC Enforcement Director Andrew Ceresney said that - when it comes to AML - the lack of red flags itself is a red flag. Bank Secrecy Act ("BSA") AML requirements under the Currency & Foreign Transactions Reporting Act of 1970, as amended, 31 U.S.C. §5311, et seq. (31 C.F.R. Chap. X and related laws / regulations: here) require financial institutions to file "suspicious activity reports" ("SARs") with the Financial Crimes Enforcement Network ("FinCEN") within the Department of Treasury. Examples ...
Short fish, Long fish, Red fish, Gone fish.[1] Old fish, New fish,[2] Red fish, Few fish.[3] This one is tangible,[4] That one's an object[5] The evidence was tampered.[6] Say, wasn't investigation hampered?[7] "Records" and "files" With Latin canon wiles What does it say? No! Don't read it that way.[8] Verbs and nouns[9] Dissenters frown[10] Four plus one, The statute's done.[11] (with apologies to Theodor Geisel). Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Managing Partner of the Nashville ...
In a brief filed last week, the SEC urged the D.C. Circuit to give Chevron deference to the Commission's unnecessary conclusion that Congress's 180-day enforcement deadline doesn't matter. The conclusion is consistent with case law, but the approach turns basic judicial tenets on their head in a sharp-elbowed approach to Commission authority. The Commission barred investment-adviser Montford from the industry, and also required disgorgement and civil penalties, over undisclosed solicitor kickbacks and conflicts of interest. See Advisers Act Rel. No. 3829 (May 2, 2014).
FINRA Dispute Resolution filed with the SEC a proposed change to Code of Arbitration Rules 12214 and 12601 (and industry Rules 13214 and 13601) to increase late cancellation fees from $100 to $600 per arbitrator and expand the notice period for late hearing cancellations from 3 to 10 days. See SR-FINRA 2015-003 (filed SEC Feb. 5, 2015). Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Managing Partner of the Nashville office, Tom is licensed in Tennessee, Texas and Louisiana. He has over 28 years' experience ...
The SEC and FINRA each issued February 3 cyber security "alerts" summarizing last year's sweep exams and pointing out the obvious. In two parts, the SEC's press-release covered the results of the Commission's 2013-2014 sweep exams and an investor bulletin. SEC Press Release 2015-20, here. The Commission's Office of Compliance Inspections and Examinations ("OCIE") conducted a "sweep exam" - or wide industry survey on the subject among broker-dealers and investment advisers- during 2013 and 2014. The good news is that a wide majority of them have have information security ...
On January 29, the Commission dismissed its insider-trading suit against Canadian analyst Jordan Peixoto in connection with his purchase of puts on the stock of Herbalife in advance of a negative hedge fund presentation on the company. The SEC instituted proceedings against Peixoto last September in its administrative forum - something it could not have done before Dodd-Frank against the non-registered Canadian-citizen research analyst. In the Matter of Jordan Peixoto, AP File No. 3-16184 (SEC Sept. 30, 2014)(OIP here) Dodd-Frank reforms expanded the availability of the ...
The SEC's Office of Compliance Inspections and Examinations ("OCIE") released its 2015 Exam Priorities January 13. Director Andrew Bowden's annual list details OCIE's subject of focus for the coming year. The hot topics for 2015 include: For Retail securities sales: - The "retail-ization" of private funds, illiquid investments and structured or other alternative products that pose extra risks when complex products are sold to "mom and pop" investors; - Fees & "reverse churning" (a fixed asset-based fee on accounts with little or no activity) - when account or commission ...
The Financial Industry Regulatory Authority ("FINRA") released its 10th annual Exam Priority Letter earlier this week (Jan. 6, 2015). The so-called "Errico Letter" advises broker-dealer member firms of the operational risks the regulator expects to focus on in its examination (and enforcement) program. Moving a little closer to a principles-based regulatory approach than the usual "hot issue" laundry list from past years, this year's Letter first addresses five key areas of concern: 1. Alignment of Customer/Firm Interest 2. Standards of Ethical Behavior 3. Strong ...
The US Second Circuit this Wednesday narrowed the scope of "tippee" liability for insider trading, rejecting the "doctrinal novelty" of recent government prosecution theories. In United State v. Newman, Nos. 13-1837-cr c/w 13-1917-cr (2nd Cir. Dec. 10, 2014), the Court reversed the insider-trading and conspiracy convictions of two portfolio managers. They were downstream tippees, who traded on information passed along from corporate insiders to securities analysts and, ultimately, Newman and Chaisson. The Court of Appeals reversed, because the jury instructions had ...
In an unusual three-page concurrence to a November 10 cert denial, Justice Scalia (joined by Justice Thomas) virtually called for a case that would subject the SEC's insider-trading interpretations to scrutiny. Because courts owe no deference to a prosecutor's interpretation of a criminal law, asked Scalia, then why should they owe Chevron deference to an executive agency's interpretation of a law [like '34 Act § 10(b)] that's enforced both criminally and administratively? Scalia also criticized deferring to the SEC's expansive insider-trading theory in the case as turning ...
The SEC continues to ramp up its Enforcement efforts in the municipal-securities realm. The agency announced a series of settled actions on November 6. First "Control Person" Charge Against Issuer Officials The Commission announced a settled administrative proceeding against municipal issuer Allen Park, Michigan and settlements in federal-court actions against the City's former Mayor and City Administrator. The SEC charged that offering documents for two bond issues knowingly painted too rosy a picture for a $146 million film-studio project, which had been all but ...
Last week the Fifth Circuit weighed in on how inartfully crafted arbitration and forum-selection clauses might trump one another. Together with recent decisions from the Second and Ninth Circuits - each with cert petitions pending - the issue seems poised for Supreme Court determination. Forum-Selection vs Arbitration Pending Supreme Court? The Second and Ninth Circuits held that a subsequent contractual forum-selection clause requiring all disputes to be resolved in a specified federal-court trumps FINRA's base requirement that FINRA member firms must arbitrate upon a ...
The MSRB last week proposed an extension of its gift-limitations Rule G-20 to encompass municipal advisors. The Proposed Rule generally limits gifts in relation to municipal securities or advisory services to $100 per year. The limit excludes normal-course (not excessive) business entertainment or sponsorships, transaction commemoratives, or personal gifts (e.g. birthdays, weddings). Comments on the G-20 proposal are due by December 8 and the MSRB will hold a webinar on the release November 13. See MSRB Reg. Not. 2014-18, here. The MSRB also has proposed amendments extending ...
The SEC last week approved new MSRB Rule G-44 implementing supervision and compliance requirements for municipal advisors. The MSRB touted the Rule as "its first dedicated rule for municipal advisors" under the Dodd-Frank mandate for greater regulation of the nation's municipal-securities markets. See MSRB Reg. Not. 2014-19, here. New Rule G-44 requires Municipal Advisors to follow the same supervision and compliance regime otherwise applicable to registered broker-dealers under FINRA Rules 3110- 3130. It requires, among others: - Written supervisory procedures ...
The drumbeats of discontent grow louder against the SEC's more frequent use of its internal administrative forum for enforcement cases. I wrote about the current spate of Constitutional challenges to the agency's forum in an October 9 Law360 article, A Renewed Fight Over SEC's Admin Forum's Constitutionality, here. The SEC instituted administrative proceedings accusing Canadian Jordan Peixoto of insider-trading in options on shares of Herbalife Ltd. in advance of a hedge fund's announcement of its short position in the stock. See In re Peixoto, Admin. Proc. File No. 3-16184 ...
Since 2004, FINRA has required its member firms to include in settlement-agreement confidentiality clauses an exception expressly allowing a customer to respond to regulatory inquiries. See Notice to Members 04-44. FINRA recently updated that requirement to include express permission to be a whistleblower. FINRA's suggested language provides: Any non-disclosure provision in this agreement does not prohibit or restrict you (or your attorney) from initiating communications directly with, or responding to any inquiry from, or providing testimony before, the SEC, FINRA, any ...
Carlo DiFlorio, FINRA's Chief Risk Officer and Head of Strategy, told the annual meeting of the National Society of Compliance Professionals Monday that FINRA is emphasizing efforts to mitigate market risks, even as it regards US capital-market integrity as at its strongest historically. HFT & Algorithmic Trading DiFlorio addressed thee initiatives. First, FINRA examiners are focusing on firms' supervision of HFT and algorithmic trading, including pre-implementation testing and firm-wide "kill switch" procedures when something goes awry. Second, FINRA's Board decided ...
The US Sixth Circuit last week narrowed its standard for adequately pleading scienter in PSLRA cases using a collective-knowledge theory to impute knowledge to a corporate defendant from among various employees. In Omnicare, the Court limited collective-knowledge scienter by imposing the helpful, but unremarkable, requirement that such a pleading demonstrate a reasonably close connection between the collectively-held-knowledge and the issuance of the misstatement (or decision not to correct a prior omission). In re Omnicare, Inc. Securities Litigation, No. 13-5597 (6th
Ruling in a case of first impression, the Sixth Circuit rejected an implied cause of action under Section 36(a) of the Investment Company Act of 1940, 15 U.S.C. § 80a-1 et seq. Although the Circuits remain split, recent decisions (after 2001) agree on the point. Two pension funds sued an exchange-traded fund (ETF), its investment advisor (IA) and its trust-company-affiliate (BTC), claiming BTC's Lending Agent fee "' 35% of all net revenue on the ETF's securities-lending activity - was excessive. The Court affirmed dismissal of the express Section 36(b) claim for breach of fiduciary ...
The Second Circuit stayed its mandate last week to allow public-pension litigants to file cert petitions seeking review of its August holding that a subsequent account-agreement forum-selection clause requiring federal-court litigation trumps FINRA's rules requiring all member firms to arbitrate on a customer's request. Goldman, Sachs & Co., v. Golden Empire Schools Financing Auth., Nos. 13-797-cv, 13-2247-cv (2nd Cir. Aug. 21, 2014), here. We discussed the opinion here. The public-pension litigants argued three grounds for the stay. First, they wrote the Second Circuit's ...
FINRA celebrated its 75th Anniversary this September 18. It is the "largest independent regulator for all securities firms doing business in the United States," with a notionally voluntary membership of over 4,100 securities firms. Its mission is protecting investors, and FINRA is the primary cop on the beat, policing over 634,000 registered securities representatives. FINRA employs 3,400 people in 20 offices. It monitors 6 billion share trades a day and fined Wall Street over $74 million last year. Read the release here. FINRA is a voluntary membership organization you have to ...
The SEC's Office of Compliance Inspections and Examinations ("OCIE") announced August 19 a two-year, three-phase examination initiative targeting newly-registered municipal advisors. SEC Press Rel. 2014-170 (Aug. 19, 2014). The MA Examination Initiative hopes to engage a significant portion of newly-registered MA's. In the first phase, Engagement, OCIE will engage in nationwide outreach to inform MA's of their obligations under Dodd-Frank, the SEC's new MA Rule and related implementing Rules by MSRB and others. The second phase, Examination, will review identified ...
The SEC recently announced another issuer settlement under its Continuing Disclosure Cooperation Initiative (see our blogs First Settled Proceeding (July 23, 2014) here). In this settled action, Kansas consented to the standard sanctions offered municipal issuers under the Initiative - a settled administrative action (without admitting or denying) charging negligence under '33 Act §17(a)(2-3) and requiring remedial efforts (new policies and procedures), disclosure of the sanction during the next five years, and continuing cooperation. The charges arose from eight bond ...
The MSRB proposed a Revised Draft of Rule G-42 ("Duties of Non-Solicitor Municipal Advisors") by Reg. Not. 2014-12 issued July 23, 2014. We addressed the original proposal in our January 23 blog post, here. The Revised Draft Rule G-42 contains the same basic structure and objectives as originally proposed. It establishes (a) DUTIES owed by Municipal Advisors ("MA's") to Municipal Entity ("ME") clients and to Obligated Person ("OP's"); (b) An engagement-letter-type disclosure regime with certain required DISCLOSURES; (c) A suitability requirement MA's must follow ...
On July 22, the SEC approved amendments to FINRA Rule 2081 that prohibit member firms from conditioning arbitration settlements (or seeking to) upon a customer's assent to CRD expungement relief. The Rule amendments prohibit paying any consideration or compensation for expungement relief and apply even if a customer suggests such a bargain. SEC Rel. No. 34-72649 (July 22, 2014). In cases that may warrant expungement relief under the conditions specified in Rule 2081, SIFMA's comment letter suggested, and FINRA responded approvingly to, using settlement-agreement language ...
The SEC recently made the unusual move of asking the Eleventh Circuit to publish its previously-unpublished per curiam decision in SEC v. Monterosso, 2014 WL 2922670 (11th Cir. June 30, 2014). The decision was not merely a win for the Staff, who presumably sought publication due to the Court's unwarranted language purporting to limit the Supreme Court's Janus precedent only to cases explicitly charged solely under Rule 10b-5(b). In Monterosso, the Commission's Enforcement Staff pursued civil prosecution of three individuals who - in their roles as the issuer's COOs and officers of ...
I wrote earlier that the SEC was wrong to extend its "admission of wrongdoing" policy (once reserved for extreme cases) to negligent software-glitch misreporting of trade-data in the Scottrade case. Burr blog here, (April 17, 2014); Law360 Securities article here, (June 2, 2014). On June 4, FINRA announced that its response to similar blue-sheet violations by three firms was a standard AWC ("neither admit nor deny") with a fine of less than half the amount assessed Scottrade by the SEC. As in Scottrade, the firms' violations stemmed from software problems and FINRA also found ...
I recently wrote about Judge Rakoff's refusal to enter the SEC's proposed consent decree in SEC v. Citigroup Global Markets, Inc., 827 F. Supp. 2d 328 (SDNY 2011) - and the shift in SEC enforcement policy that it prompted. Burr blog here, (April 17, 2014); Law360 Securities article here, (June 2, 2014). On June 4, the Second Circuit reversed the Citi ruling, holding the District Court "abused its discretion by applying an incorrect legal standard." United States Securities & Exchange Comm'n v. Citigroup Global Markets, Inc., Nos. 11-5227-cv(L); 11-5375-cv(con); ...
The SEC's new MA Rules become effective July 1, 2014, 17 CFR 240.15Ba1-1 through 1-8 and 15Bc4-1. Required by Dodd-Frank § 975, the Rules were adopted last year, but the SEC postponed their implementation from January to July 1. Rel. No. 34-71288 (stayed January 13 until July 1, 2014); Final Rule, Rel. No. 34-70462, here: http://www.sec.gov/rules/final/2013/34-70462.pdf
The Rules implement a registration regime and impose a fiduciary duty upon any person deemed a Municipal Advisor. The Rules are very specific about which circumstances and relationships impose that duty and what ...The SEC famously announced last year that it would insist upon admissions in settled cases involving egregious conduct - instead of its long-standing "neither admit nor deny" rubric. But its recent Scottrade action has the industry wondering if Commission staff are adhering to that standard. Scottrade entered an Offer of Settlement in administrative proceedings, admitting the Commission's factual and legal findings of books-and-records violations. A software code change in March 2006 inadvertently caused Scottrade's system to omit Error Account trades from its ...
Effective July 5, 2014, the Municipal Securities Rulemaking Board ("MSRB") implements a consolidation and re-write of its prior fail-dealing Rules and Guidance for municipal securities dealers. On March 7, the SEC approved: - Revisions to Rule G-19 on suitability. The revisions harmonize the Rule with FINRA's suitability Rule 2111, including its "reasonable-basis," "customer-specific" - including investment profile, "quantitative" (f/k/a churning), "investment strategies" (including explicit hold recommendations), with accompanying technical changes ...
The Securities and Exchange Commission last Thursday, February 27, approved a new consolidated set of registration forms and requirements for municipal market participants, MSRB Rule A-12. SEC Rel. 34-71616; MSRB Reg. Notice 2014-05. Municipal registrants will have until August 10, 2014 to update their registration information with the MSRB, using the new forms. For more information on securities litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.
On February 25, the Municipal Securities Rulemaking Board ("MSRB") proposed new Rule G-44 imposing a supervision and compliance requirements for Municipal Advisors ("MA's"). The Dodd-Frank Act imposed a new regulatory regime for MA's. New Rule G-44 imposes requirements familiar from broker-dealer regulation, including:
- A supervisory system reasonably designed to assure compliance with applicable laws and regulations;
- Written supervisory procedures ("WSP's") tailored to a registrant's business;
- Registered principals in supervisory roles; and,
- A Chief ...