Home » Compliance Blog » Uncategorized

Category: Uncategorized

Top 5 Regulatory Alerts – February 2017

Here are our Top 5 Regulatory Alerts for February 2017, ranked by significance.  We have also included the Top 5 most read Alerts (other than Best of the Web and Top 5).

 

Top 5 Regulatory Alerts – February 2017

  1. SEC PUBLISHES LIST OF MOST CITED EXAM DEFICIENCIES (2/9/17)
  2. SEC ISSUES ROBO GUIDANCE ON DISCLOSURES, SUITABILITY, AND COMPLIANCE (2/24/17)
  3. SEC CHAIRMAN ATTACKS “ACCREDITED INVESTOR” CONCEPT (2/28/17)
  4. SEC CHARGES CCO WITH AML FAILURES (2/1/17)
  5. GENERAL COUNSEL AWARDED $7.9 MILLION FOR WRONGFUL WHISTLEBLOWER TERMINATION (2/13/17)

 

Most Read – February 2017

  1. SEC PUBLISHES LIST OF MOST CITED EXAM DEFICIENCIES (2/9/17)
  2. SEC CHAIRMAN ATTACKS “ACCREDITED INVESTOR” CONCEPT (2/28/17)
  3. SEC CHARGES CCO WITH AML FAILURES (2/1/17)
  4. INVESTMENT CONSULTANT LIED ABOUT CODE OF ETHICS COMPLIANCE (2/10/17)
  5. SEC STAFF ALLOWS MORE FLEXIBLE FUND-OF-FUNDS STRUCTURES (2/7/17)

Top 5 Regulatory Alerts – January 2017

Here are our Top 5 Regulatory Alerts for January 2017, ranked by significance.  We have also included the Top 5 most read Alerts (other than Best of the Web and Top 5).

 

Top 5 Regulatory Alerts – January 2017

  1. SEC STAFF PUBLISHES 2017 EXAM PRIORITIES (1/13/17)
  2. FINRA ANNOUNCES 2017 EXAM PRIORITIES (1/6/17)
  3. LARGE WRAP SPONSOR PAYS $18.3 MILLION FOR COMPLIANCE PROBLEMS IN BUSINESS SOLD 8 YEARS AGO (1/30/17)
  4. SEC FINES 10 FIRMS FOR VIOLATING ANTI-PAY-TO-PLAY RULE (1/18/17)
  5. EXECUTING BROKER TO PAY $22.6 MILLION FOR MISREPRESENTING ORDER FILLING PROCESS (1/24/17)

 

Most Read – January 2017

  1. SEC STAFF PUBLISHES 2017 EXAM PRIORITIES (1/13/17)
  2. SEC FINES 10 FIRMS FOR VIOLATING ANTI-PAY-TO-PLAY RULE (1/18/17)
  3. LARGE ADVISER FINED $13 MILLION FOR PREDECESSORS’ COMPLIANCE BREAKDOWNS (1/17/17)
  4. ADVISER FACES CRIMINAL PROSECUTION FOR CHERRY-PICKING (1/26/16)
  5. LARGE ASSET MANAGER PAYS $340,000 FINE BECAUSE SEPARATION AGREEMENTS VIOLATED WHISTLEBLOWER RULE (1/19/17)

General Counsel Awarded $7.9 Million for Wrongful Whistleblower Termination

 

A jury awarded a terminated General Counsel $2.9 Million in compensatory damages and $5 Million in punitive damages for wrongful termination due to his whistleblower activities.  In a key ruling, the Court (USDC for Northern District of California) ruled not to exclude evidence provided by the GC that his former employer claimed was privileged under California professional rules.  The Court held that federal law preempted the more stringent state law and that federal common law governing privilege applied to his Sarbanes-Oxley Act whistleblower retaliation claim.  The GC had raised Foreign Corrupt Practices Act compliance concerns.

OUR TAKE: While we sympathize with the plaintiff in this case, the broader policy of piercing lawyer-client privilege may result in limiting the role of in-house counsel.  Because the court can discard privilege, senior management and outside counsel may be less likely to include in-house lawyers in more sensitive matters.

Jury Verdict

WADLER v. BIO-RAD LABORATORIES, INC.

Top 5 Regulatory Alerts – December 2016

Top 5

Here are our Top 5 Regulatory Alerts for December 2016, ranked by significance.  We have also included the Top 5 most read Alerts (other than Best of the Web and Top 5).

 

Top 5 Regulatory Alerts – December 2016

  1. SUPREME COURT EXPANDS INSIDER TRADING LIABILITY (12/8/16)
  2. ETF SPONSOR WILL PAY $20 MILLION TO SETTLE CHARGES IT OVERSTATED PERFORMANCE (12/5/16)
  3. HEDGE FUND MANAGER CHARGED WITH CONCEALING LIQUIDITY CRISIS (12/20/16)
  4. BD FINED $16.5 MILLION FOR UNDER-RESOURCING AML COMPLIANCE (12/6/16)
  5. PRIVATE EQUITY FIRM FAILED TO OBTAIN APPROVAL FOR CO-INVESTMENTS (12/15/16)

 

Most Read – December 2016

  1. BD FINED $16.5 MILLION FOR UNDER-RESOURCING AML COMPLIANCE (12/6/16)
  2. SEC ENFORCEMENT DIRECTOR STRESSES INDIVIDUAL LIABILITY IN FCPA CASES (12/12/16)
  3. SEC IMPOSES $1.4 MILLION FINE FOR WHISTLEBLOWER RULE VIOLATIONS (12/21/16)
  4. FINRA FINES 12 FIRMS $14.4 MILLION FOR FAILING TO MAINTAIN DATA IN PROPER ELECTRONIC FORMAT (12/23/16)
  5. PRIVATE EQUITY FIRM FAILED TO OBTAIN APPROVAL FOR CO-INVESTMENTS (12/15/16)

Top 5 Regulatory Alerts – November 2016

 

Top 5

 

Here are our Top 5 Regulatory Alerts for November 2016, ranked by significance.  We have also included the Top 5 most read Alerts (other than Best of the Web and Top 5).

 

Top 5 Regulatory Alerts – November 2016

 

  1. SEC CHAIR CALLS FOR “ZERO TOLERANCE” ENFORCEMENT (11/28/16)
  2. FOREIGN OFFICIAL HIRING PROGRAM RESULTS IN $264 MILLION IN FINES AND PENALTIES (11/21/16)
  3. SEC SUES AUDIT ENGAGEMENT PARTNER FOR IGNORING CLIENT MISCONDUCT (11/1/16)
  4. BD FINED FOR HACK OF THIRD PARTY CLOUD PROVIDER (11/16/16)
  5. RELIANCE ON OUTSIDE PROFESSIONALS DOESN’T MEAN ADVISER WASN’T NEGLIGENT (11/9/16)

  

Most Read – November 2016

  1. BD FINED FOR HACK OF THIRD PARTY CLOUD PROVIDER (11/16/16)
  2. SEC SAYS STOCK-PICKING APP IS AN ILLEGAL SECURITY-BASED SWAP (11/2/16)
  3. SEC SUES AUDIT ENGAGEMENT PARTNER FOR IGNORING CLIENT MISCONDUCT (11/1/16)
  4. SEC CHAIR CALLS FOR “ZERO TOLERANCE” ENFORCEMENT (11/28/16)
  5. UNREGISTERED FUND MANAGER STILL LIABLE FOR BREACH OF FIDUCIARY DUTY (11/11/16)

Best of the Web – October 2016

 

Best of Web

“I’m so glad I live in a world where there are Octobers.” (L.M. Montgomery, Anne of Green Gables)

 

Welcome to the October 2016 BOTW.  Who doesn’t love October: changing leaves, pumpkin-spiced lattes, football?  The regulatory world is also experiencing its own transitions.  SIFMA addresses the consequences of financial regulation, Dechert offers advice on private equity compliance, and K&L Gates explains auditor independence.  For those with an interest, check out BBD’s piece on mutual fund accounting and Thompson Hine’s overview of the new liquidity risk management rules.

 

The Intended and Unintended Consequences for End Users of Post-Crisis Financial Regulation (SIFMA)

http://www.sifma.org/blog/intended-and-unintended-consequences-for-end-users-of-post-crisis-financial-regulation/

 

Managing the Compliance Aspects of Private Equity Investments (Dechert)

https://info.dechert.com/10/7315/landing-pages/managing-the-compliance-aspects-of-private-equity-investments.asp

 

Making Sense of Auditor Independence Issues (K&L Gates)

http://www.klgateshub.com/files/Publication/c061e86a-f8b0-4046-925c-dc262d6cf747/Presentation/PublicationAttachment/331a5d4e-eed7-4e7f-b6e4-e5473ef290dd/IM_Alert_10172016.pdf

 

Considerations for Mutual Funds for Allocating Earnings and Profits to Distributions (BBD)

http://www.bbdcpa.com/investment-company-notebook/allocatingearningsandprofitstodistributions

 

SEC Adopts Rule Requiring Liquidity Risk Management Programs for Funds (Thompson Hine)

http://www.thompsonhine.com/publications/sec-adopts-rule-requiring-liquidity-risk-management-programs-for-funds

 

DOL Releases Guidance on Best Interest Contract and other Exemptions (Groom)

http://www.groom.com/media/publication/1766_DOL_Releases_Guidance_on_Best_Interest_Contract_and_other_Exemptions.pdf

 

Regulatory Focus and Developments on Potential Broker-Dealer Requirements for Private Fund Sponsor Activities (Cordium)

http://www.cordium.com/briefing/regulatory-focus-and-developments-on-potential-broker-dealer-requirements-for-private-fund-sponsor-activities/

 

Summary of FINRA Regulatory Actions April – June 2016 (ACA)

http://www.acacompliancegroup.com/news/compliance-alert/summary-finra-regulatory-actions-april-%E2%80%93-june-2016

 

What You Need to Know About the SEC’s New Swing Pricing Rule (Stradley Ronon)

http://www.stradley.com/insights/publications/2016/10/fund-alert-october-24-2016

 

NYDFS: “First-in-the-Nation” Cybersecurity Proposal (Morgan Lewis)

https://www.morganlewis.com/~/media/files/publication/outside%20publication/article/wall-street-lawyer-nydfs-first-in-nation-cybersecurity-proposal-25oct16.ashx?la=en

 

New Proposed RIC Regulations (Greenberg Traurig)

http://www.gtlaw.com/News-Events/Publications/Alerts/198756/New-Proposed-RIC-Regulations

SEC Will Examine Firms that Hire Previously-Disciplined Advisers and Brokers

broker-check

The SEC’s Office of Compliance Inspections and Examinations has launched a “Supervision Initiative” to examine supervision practices of investment advisers that employ previously-disciplined advisers or brokers.  OCIE will focus on a firm’s compliance practices including its policies and procedures for hiring, reporting, oversight, and complaint handling.  The staff will also review disclosures, conflicts of interest, and marketing materials.  The Supervision Initiative cites a recent study concluding that reps with a disciplinary history are 5 times more likely to engage in misconduct (See http://cipperman.com/2016/03/04/academic-study-reports-widespread-financial-adviser-misconduct/.)

OUR TAKE: The SEC wants to discourage firms from hiring disciplined advisers and brokers.  This sweep puts the burden on such hiring firms to prove that they can prevent future violations.

https://www.sec.gov/ocie/announcement/ocie-2016-risk-alert-supervision-registered-investment-advisers.pdf

Wrap Sponsors Fined for Failing to Disclose Trading Away Commissions

gift-with-money

The SEC fined two wrap program sponsors $600,000 and $300,000, respectively, for failing to adequately disclose trading away commissions.  The SEC acknowledges that both firms did disclose that program sub-advisers could use non-program brokers to obtain best execution and that these trading away commissions would increase client costs.  However, the SEC faults the respondents for failing to analyze or detail these costs because they were embedded in securities prices when reported to clients.  The SEC asserts that the wrap sponsors violated the compliance rule (206(4)-7) by failing to implement policies and procedures necessary to ensure suitability and informed client consent.  The SEC said it will continue to assess wrap programs and “whether advisers are fulfilling fiduciary and contractual obligations to clients and properly managing such aspects as disclosures, conflicts of interest, best execution, and trading away from the sponsor broker-dealer.”

OUR TAKE: The SEC continues its assault on wrap programs, criticizing disclosures, brokerage commissions and investment selections.  We are not sure any amount of disclosure will pass muster, but wrap sponsors should consider a regulatory reexamination of their programs.

 

http://www.sec.gov/litigation/admin/2016/ia-4526.pdf

http://www.sec.gov/litigation/admin/2016/ia-4525.pdf