The issue over the Fiduciary Rule, and whether it will be implemented, revised, vacated, forgotten, etc. has been ongoing. In March 2018, the Fifth Circuit Court of Appeals ruled in favor of several business groups who challenged the Fiduciary Rule. See (https://www.ca5.uscourts.gov/opinions/pub/17/17-10238-CV0.pdf).
Specifically, the business groups challenged the Rule on multiple grounds, including:
(a) the Rule's inconsistency with the governing statutes,
(b) DOL's overreaching to regulate services and providers beyond its authority,
(c) DOL's imposition of ...
FINRA recently proposed to remove the broker's "control" of a securities account as a required element of a "quantitative suitability" violation under Rule 2111.
For many decades, case law on broker-dealer fraudulent practices under Rule 10b-5 and others recognized a cause of action for "churning:" Knowingly recommending an unsuitable volume or frequency of trading in an account, by a broker exercising actual or constructive control over that account, as a form of self-dealing to generate commission revenue at the customer's expense.
When FINRA revised its "suitability" rule ...
FINRA has proposed a new $100 per-arbitrator fee and a $100 per-arbitrator honorarium for the late cancellation or continuation of prehearing conferences in FINRA arbitrations. The proposed rule change would affect both customer cases and industry cases, and FINRA is seeking to amend FINRA Rules 12214(a), 12500, 12501, 13214(a), 13500, and 13501. In essence, if one or more of the arbitrating parties cancels or obtains a continuance of a prehearing conference within three business days of the scheduled hearing (for example, an Initial Prehearing Conference or "IPHC"), the ...
A unanimous Supreme Court today held that "covered class actions" over exchange-traded securities are not removable from state courts under SLUSA when they assert only '33 Act claims.
The Court held the removal provisions of the Act are in aid of its state-law claim bar (removed to ensure dismissal), and do not otherwise affect the long-standing grant of concurrent jurisdiction for '33 Act claims.
"Under our reading of SLUSA, all covered securities class actions must proceed under federal law; most (i.e., those alleging 1934 Act claims) must proceed in federal court; some (i.e ...
In Cyan, Inc. v. Beaver County Employees Retirement Fund, the Supreme Court resolved two critical issues for class action claims brought under the Securities Act of 1933 (1933 Act). First, the Supreme Court held that state courts retain jurisdiction to adjudicate class actions brought under the 1933 Act. Second, the Supreme Court held that defendants may not remove class actions alleging only 1933 Act claims.
Cyan has its origin in an initial public offering. Cyan, a telecommunications company, and its officers and directors (the Petitioners), offered and sold shares of Cyan ...
It was the Ides of March for the Obama Administration's "fiduciary duty rule" that sought to remake much of nation's financial markets by back-door regulation of anyone dealing with IRA investors. The US Fifth Circuit vacated the regulation entirely in a stinging rebuke by Judges Edith Jones and Joy Clement; Chief Judge Carl Stewart dissented.
The Court held that the "novel assertion of DOL's power," Op. at 7, "fundamentally transforms over fifty years of settled and hitherto legal practices in a large swath of the financial services and insurance industries…." Op. at 3.
"The ...
FINRA currently requires registered representatives to inform their broker-dealer of any proposed outside business activities that they may be engaging in so that the firms can determine whether to permit the representative to proceed with the activities. This requirement has a far reaching impact, which includes compliance concerns, reporting requirements, and investor protection protocols.
The proposed rule seeks to clarify the obligations and further strengthen investor protection. It would require representative's to provide "prior written notice for all ...
Last week, the unanimous Supreme Court clarified that the "clearing and settlement" exception to a bankruptcy trustee's avoiding powers covers only payments "to," not merely through, financial market participants.
The Bankruptcy Code provides trustees with various avoiding powers, including the ability to recoup for the estate actual or fraudulent transfers, under 11 U.S.C. § 548(a) (1). The Code also provides a number of exceptions to the trustee's avoiding powers, including some designed to protect the integrity of the clearing and settlement processes of the nation's ...
In a triumph of positive statutory law over Chevron deference to the administrative state, the unanimous Supreme Court held this week that Dodd-Frank whistleblower protections require SEC reporting, because the statute defines "whistleblower" as someone who reports "to the Commission."
I'm relieved to know the Court agrees that "'When a statute includes an explicit definition, we must follow that definition,' even if it varies from a term's ordinary meaning. This principle resolves the question before us." Slip Op. § II at 9. The Ninth Circuit and the U.S. Solicitor General ...
After several years of examination focus and a series of enforcement actions, the SEC's Enforcement Division on February 12 announced a "Share Class Selection Disclosure Initiative" in an attempt to level-set industry compliance and bring investment-advisers in from the cold. See SEC Press Release No. 2018-15.
Investment advisers have a fiduciary duty to their customers. Investment Advisers Act of 1940 ("Advisers Act") § 206(2). That precludes self-interesting action and includes full disclosure of all compensation conflicts. And the Act prohibits Advisers from making ...