In a January 21, 2016 Report of Investigation, the Inspector General for the Securities Exchange Commission found no evidence to substantiate allegations of pro-agency bias among SEC administrative law judges. The allegations of bias by a retired SEC ALJ appeared in a May 2015 Wall St. Journal article; the article's statistical analysis also revealed the SEC won 90% of contested cases brought in its "home court" administrative forum. The SEC's administrative forum has been under fire ever since Dodd-Frank expanded its jurisdiction to include non-registered persons. Then ...
The MSRB's Rule G-37 amendments applying pay-to-play prohibitions to Municipal Advisors and their third-party solicitors will become effective August 17, 2016. The proposed amendments extend Rule G-37 to municipal advisers and third-party solicitors:
- Imposing a two-year ban on business with municipal entities after any contribution to an issuer official who can influence municipal-advisory business, subject to $250 de minimis exclusion to officials for whom a contributor can vote;
- Prohibiting soliciting, coordinating ("bundling"), and contributions to state/local ...
White House officials this week said that President Obama's fiscal 2017 budget will seek major increases in funding for Wall Street regulators in the near term, and proposes to double their funding by 2021. The President's budget proposal would provide an 11% increase for the SEC (of $1.8 billion) and a 33% increase for the CFTC (of $330 million). The SEC reportedly plans to use the additional funding to hire 250 new staffers, about half devoted to investment-advisor examinations. The SEC also plans to add 52 new enforcement positions, and add a lawyer to its Municipal Securities staff ...
FINRA reported that, for 2015, Claimants won about half of private securities arbitrations: 47% for all-public panel decisions; 45% for majority-public panels. A colleague and securities mediator, Dana Pescosolido, recently studied FINRA's 2015 private securities arbitrations to see just what the results are when Claimants "win." The study can illuminate mediation (and other risk-assessment) expectations. FINRA Securities Arbitrations Of the 3,435 securities arbitrations filed in 2015, 2,341 (68%) were customer cases and 1,094 (32%) were intra-industry disputes ...
The SEC's Office of Compliance Inspections and Examinations ("OCIE") announced the agency's priorities for this year on January 11. Commission staff will focus on three broad areas: Retail Investors, Market-Wide Risks, and increased used of Data Analytics. Retail Investors Seniors top the list in this category, as the SEC continues its "ReTIRE" initiative announced last June. A nod to the aging boomer bubble, the ReTIRE program is a multi-year effort focusing on investment-adviser and broker-dealer issues in the retirement savings context, including: reasonable-basis ...
FINRA released its annual Regulatory and Examination Priorities Letter (so-called "Errico Letter") on January 5. FINRA's top five priorities:
- Firm Culture. FINRA's been pushing "culture of compliance" for years, but in 2016 will take it to the next level: "FINRA will formalize our assessment of firm culture while continuing our focus on conflicts of interest and ethics." In looking at a firm's culture, FINRA will focus on "Five Factors" to assess whether:
- policy or control breaches are tolerated;
- control functions are valued within the organization;
- managers are ...
As 2015 ended, FINRA fined Barclays Capital $13.75 million for mutual-fund switching and breakpoint supervisory failures that might have been avoided if that part of Barclay's WSPs had been properly calibrated and/or part of their annual compliance testing. The lapses stemmed in part from an inaccurate definition of switching in Barclay's WSPs and those undetected problems mounted over the years. A five-year look back review uncovered over 6100 unsuitable switches with customer harm of about $8.63 million; a similar six-month look back revealed 1,723 unsuitable mutual-fund ...