Articles Tagged with regulatory

Financial professionals handling compliance keep abreast with changes in the regulatory landscape to effectively allocate resources. At the start of each year, regulatory agencies Financial Industry Regulatory Authority and the Securities and Exchange Commission publish their priorities. FINRA’s recently released Risk Monitoring and Examination Priorities Letter states emerging issues as well as ongoing concerns for the upcoming year. In an introductory note, Robert Cook explains that this year’s letter more broadly relays FINRA’s priorities for risk monitoring with a more pronounced focus on new issues. Firms can use the information contained within this letter to ensure that their compliance, supervisory and risk management programs reach FINRA’s standards. Distinct from earlier times, the FINRA letter focuses on explaining new issues and risk analysis.

The main new issues on the regulatory agency’s radar are the firm’s involvement with online distribution platforms, fixed income mark-up disclosure, and regulatory technology. Specifically, FINRA is concerned with how firms meet AML requirements, supervise communications with the public and conduct suitability analysis when involved with the distribution of securities on online distribution platforms. FINRA plans to evaluate the risks of excessive or undisclosed compensation arrangements between firms and issuers for offerings exempt from registration under Regulation A. Furthermore, FINRA intends to assess how firms handle risks with sales of offerings under Regulation D to non-accredited investors. FINRA expects firms to follow FINRA rule 2232 and MSRB Rule G-15 to comply with mark-up or mark-down disclosure obligations on fixed income transactions. As more firms use regulatory technology for compliance, FINRA plans to examine the efficiency and risks involved.

While this year’s letter pays more mind to new issues, FINRA briefly restates ongoing problems that have already been named as top priorities. Notably, FINRA mentions suitability determinations, outside businesses activities, and private securities transactions; private placements; data quality and governance; communications with the public; trade and order reporting; anti-money laundering (AML); net capital and consumer protection; best execution; fraud; insider trading and market manipulation; record keeping, risk management and supervision related to these and other areas. As per usual, FINRA will be mindful of how firms supervise and respond to associated persons with flawed disciplinary records. In the rest of the letter, FINRA categorizes the other concerns into sales practice risks, operational risks, market risks, and financial risks.

As reported in the Wall Street Journal, there has been a recent trend at big brokerages of shifting the power from the headquarters to brokers and branch managers. Apparently big brokerages like Bank Of America, UBS Group, and Merrill Lynch are “unleashing” their brokers and moving power closer to the brokers and their managers, both to keep brokers from leaving their firms and to increase revenues.

These modifications come in the wake of declining revenues and broker exoduses several big brokerages have experienced after the financial crisis. They have also witnessed that brokers who dislike or disagree with their managers and find them unhelpful tend to leave the brokerages more easily. The big brokerages have had to deal with rising regulatory costs and competing with an increasing number of independent advisers. According to research conducted by consulting groups, the registered investment adviser model is more successful as it is a smaller and more tightly integrated groups. Taking a cue from that, the zillion dollar brokerages are making changes aimed at empowering, training and giving their brokers more control over day to day decisions over clients, growth, and resource allocation. Merrill Lynch has plans to restructure the brokerage leadership, emphasize more on productivity and training, and reduce the number of divisions. UBS also made similar changes last year.

There are plans underway to also automate investment advisory and make use of robos to cater to a younger clientele so that the brokers can be freed up to deal with high net worth clients. All in all, this gradual shift is geared towards taking things back to how they were before the financial crisis hit, when the field agents and managers had more autonomy to structure their branches, price and sell services, be less accountable to corporate headquarters, hold more power and sway.

You just received a Subpoena from the Securities and Exchange Commission (SEC).  What will you have to produce?  We regularly represent securities industry professionals and investors who have gotten these Subpoenas, and the reaction is usually the same: people are nervous and concerned.  How will this affect your business, and how what will it take the comply?

Getting an SEC Subpoena is a serious matter, and it is imperative that you carefully comply in a timely manner.  Subpoenas will typically require you to produce documents or testify, or both.  Your goal should always to limit your involvement with the federal authorities, and this begins with your production of documents in response to the Subpoena.

The first step is to remember that just because you received a Subpoena does not mean you automatically did something wrong.  You may not be the SEC’s target, but may be someone the Commission believes has information related to another person or business.  The SEC is not obligated to tell you whether they view you as a target or a witness, and you should not assume you are a target.

 The securities fraud attorneys at Malecki Law would like to hear from investors who have complaints against John T. Keyser of Dawson James Securities in Florida. In the past, Keyser has been the subject of a FINRA suspension and customer dispute, as well as an outstanding tax lien. Since 1986 he has been at 16 brokerage firms, including 3 that were expelled from the industry. His current firm has 7 regulatory and 1 arbitration disclosure. Two other firms he has worked with had a combined 30 regulatory & 9 arbitration disclosures on BrokerCheck.

According to FINRA’s BrokerCheck, there were customer dispute cases against him in 2010, 2006, and 2002. Further, as per FINRA’s BrokerCheck, in 2010 there were allegations made against him for churning, intentional and negligent misrepresentation, unsuitability, breach of fiduciary duty, and unauthorized trading, seeking damages for $650,000. As per BrokerCheck, the firm and Keyser denied the wrongdoings and refuted the allegations. FINRA’s BrokerCheck shows that in 2006 there was another customer dispute against him, alleging that a stop loss order had not been executed timely to cover his client’s position. The same FINRA site reveals that in 2002, there was an unauthorized trading complaint made against him, demanding damages of 80,000.

There are other disclosure events, regulatory investment and judgement liens, against his records on BrokerCheck, one of which resulted in NASD suspending his license for failure to pay an arbitration award, which was resolved upon award payment. It is noteworthy that on BrokerCheck several Florida firms Mr. Keyser has worked for in the past have been expelled by FINRA including Sterling Financial Investment Group and Barron Chase Securities.

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