Alert: FINRA’s 529 Plan Share Class Initiative to Self-Report

Posted on February 4th, by in FINRA. Comments Off on Alert: FINRA’s 529 Plan Share Class Initiative to Self-Report

On January 28, 2019, FINRA released its Regulatory Notice 19-04 announcing its 529 plan self-reporting initiative. This initiative is part of FINRA efforts to have broker-dealers promptly remedy potential supervisory and suitability violations related to recommendations of share classes for 529 plans.

To encourage self-reporting, for a limited time FINRA will offer favorable settlements where violations are found. These terms include no fine and no designation of “statutory disqualification.” However, the deadline to give FINRA notice that you intend to engage in the 529 plan self-reporting initiative is 12:00 a.m. Eastern time on April 1, 2019. Therefore, time is of the essence. This initiative is further detailed in the Drinker Biddle Client Alert linked below.

Read More: FINRA’s 529 Plan Share Class Initiative to Self-Report


DOJ and SEC Announce Charges Connected to Hack of SEC’s EDGAR System

Posted on January 22nd, by and in Cybersecurity, DOJ, SEC. Comments Off on DOJ and SEC Announce Charges Connected to Hack of SEC’s EDGAR System

Last week, the Department
of Justice (“DOJ”) and the Securities & Exchange
Commission (“SEC”) announced charges connected to a large-scale,
international conspiracy to hack into the SEC’s Electronic Data Gathering,
Analysis and Retrieval (“EDGAR”) system and profit by trading on stolen
material, non-public information. The
conduct underlying these cases was one of the principal reasons that the SEC created
its Division of Enforcement “Cyber Unit” to target cyber-related
securities fraud violations.

In a 16-count indictment unsealed in
the United States District Court for the District of New Jersey, two Ukrainian
citizens, Artem Radchenko and Oleksander Ieremenko, were charged with
securities fraud conspiracy, wire fraud conspiracy, computer fraud conspiracy,
wire fraud, and computer fraud. The SEC’s complaint charged nine defendants – Ieremenko,
six traders in California, Ukraine, and Russian, and two entities – with antifraud
violations of the federal securities laws.

The charging documents allege that
Ieremenko and Radchenko hacked into the EDGAR system and stole thousands … Read More »


SEC and CFTC FY2018 Results: Looking Back . . . and Looking Forward

Posted on November 29th, by , and in CFTC, Enforcement, SEC. Comments Off on SEC and CFTC FY2018 Results: Looking Back . . . and Looking Forward

Earlier this month, the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission issued their annual reports about their Divisions of Enforcement results for fiscal year 2018. Analyzing these reports is a helpful way for us to learn from the recent historical enforcement efforts by both financial regulatory agencies. Also, both reports provide guidance about the divisions’ objectives and initiatives for the upcoming fiscal year and beyond. Below we explore and summarize the important topics covered in both reports.

The SEC issued its FY2018 Annual Report earlier this month. The last several pages categorize and list every action filed by SEC Enforcement during FY2018; this provides a useful reference tool. In addition, this report continues to evolve and provide more information than in years past. Not surprisingly, the report highlights SEC Chairman Jay Clayton’s direction to SEC Enforcement … Read More »


The Government Suffers a Spoofing Setback

Posted on April 27th, by and in CFTC, DOJ, Spoofing. Comments Off on The Government Suffers a Spoofing Setback

On April 25, 2018, a New Haven federal jury acquitted a former trader with a global bank accused of scheming to manipulate the precious metals futures markets with “spoofing,” a trading tactic that involves the use of allegedly deceptive bids or offers to feign the appearance of supply or demand. This appears to be one of the first setbacks for the Department of Justice (“DOJ”), U.S. Commodity Futures Trading Commission (“CFTC”), and futures self-regulatory organizations since they began aggressively investigating and civilly and criminally charging futures traders with spoofing several years ago. After successfully defeating Michael Coscia’s appeal to the U.S. Court of Appeals for the Seventh Circuit, this aggression accelerated with the CFTC’s and DOJ’s coordinated charges in January against several firms and traders. This verdict, however, may cause them to re-visit their aggression and certain strategies.

While it is … Read More »


SEC Cyber Unit Brings Groundbreaking Data Breach Case

Posted on April 27th, by and in Cybersecurity. Comments Off on SEC Cyber Unit Brings Groundbreaking Data Breach Case

On April 24, 2018, the Securities and Exchange Commission (SEC) announced its most significant case ever filed against a respondent for one of the world’s largest data breaches. Albata, Inc., f/d/b/a Yahoo! Inc., (“Yahoo”) settled with the SEC to charges of violating Section 17(a)(2) and 17 (a)(3) of the Securities Act of 1933 (“Securities Act”), amongst other charges, and agreed to various remedies, including a $35 million penalty.

In summary, the SEC alleged that in December of 2014 Yahoo’s information security team learned that Russian hackers stole what was referred to internally as the company’s “crown jewels”: usernames, email addresses, phone numbers, birthdates, encrypted passwords, and security questions and answers for more than 500 million users. Although information relating to the breach was reported to members of Yahoo’s senior management and legal department, Yahoo failed to properly investigate the circumstances of … Read More »


SEC Freezes $27 Million Related to a Blockchain/Cryptocurrency Acquisition

Posted on April 10th, by in Blockchain, Cryptocurrency, Enforcement, Manipulation, Registration, SEC. Comments Off on SEC Freezes $27 Million Related to a Blockchain/Cryptocurrency Acquisition

On April 6, 2018, the Securities and Exchange Commission (SEC) obtained a court order freezing more than $27 million in proceeds from alleged illegal distributions and sales of restricted shares of a public company, and charged the company, its CEO, and three other affiliated individuals. That same day, the Nasdaq Stock Market said it halted trading in the company’s stock. The SEC’s complaint alleges that shortly after the company began trading on the Nasdaq Stock Market and announced the acquisition of a purported blockchain-empowered cryptocurrency business that its stock price rose dramatically until its market capitalization exceeded $3 billion. The SEC further alleges that the CEO and the three other individual defendants then illegally sold large blocks of their restricted shares to the public while the stock price was excessively elevated and that they collectively reaped more than $27 million … Read More »


SEC Share Class Selection Disclosure Initiative to Encourage Self-Reporting

Posted on April 6th, by and in Enforcement, SEC Guidance, Self-Reporting. Comments Off on SEC Share Class Selection Disclosure Initiative to Encourage Self-Reporting

On February 12, 2018, the U.S. Securities and Exchange Commission (SEC) announced a “Share Class Selection Disclosure Initiative” (“SCSD Initiative”), led by the Asset Management Unit of the Division of Enforcement (“Enforcement”). To encourage self-reporting and participation in the SCSD Initiative, Enforcement advises in the release that it “will agree not to recommend financial penalties against investment advisers who self-report violations of the federal securities laws relating to certain mutual fund share class selection issues and promptly return money to harmed clients.” Enforcement also warns that it “expects to recommend stronger sanctions in any future actions against investment advisers that engaged in the misconduct but failed to take advantage of this initiative.”

The deadline for self-reporting is June 12, 2018. Firms contacted by Enforcement before the announcement regarding possible violations related to their failures to disclose the conflicts of interest associated … Read More »


The CFTC and DOJ Crack Down Harder on Spoofing & Supervision

Posted on February 6th, by and in CFTC, Civil Penalties, Criminal Liability, DOJ, Spoofing. Comments Off on The CFTC and DOJ Crack Down Harder on Spoofing & Supervision

Last week, the Commodity Futures Trading Commission (CFTC) and Department of Justice (DOJ) filed their most significant and aggressive actions against spoofers and the firms employing them for failing to supervise. The CFTC filed settled actions against each of the global firms for supervisory violations, amongst other charges, and the CFTC charged six individuals with alleged commodities fraud and spoofing schemes. In the parallel criminal actions, the DOJ announced criminal charges against eight individuals (the six charged by the CFTC plus two others). The CFTC’s and DOJ’s coordinated and complex investigative efforts and filings indicate increased aggressiveness by both in this area. Further, these efforts represent the greatest amount of cooperation ever between the CFTC and DOJ. As reported previously in this blog post, with the affirmation of the conviction of high-frequency trader Michael Coscia, we are likely witnessing a … Read More »


SEC Announces Enforcement Division Cyber Specialty Unit

Posted on September 26th, by in Cybersecurity, Enforcement, General. Comments Off on SEC Announces Enforcement Division Cyber Specialty Unit

On September 25, 2017, the Securities and Exchange Commission announced the creation of an Enforcement Division “Cyber Unit” that will focus on cyber-related violative conduct. The timing of this is much more than coincidental; indeed it’s obvious. Just last week, SEC Chairman Jay Clayton disclosed: 1) a 2016 intrusion of the SEC’s EDGAR system due to a software vulnerability in the test filing component of the system, resulting in access to nonpublic information; and 2) the creation of a senior-level cybersecurity working group. Since the disclosure of the EDGAR breach, the financial press has reported that SEC Enforcement, the Secret Service, and the FBI have been investigating, and that Chairman Clayton asked the SEC’s Office of Inspector General to investigate. On September 26, 2017, Chairman Clayton appears before the Senate Committee on Banking, Housing, and Urban Affairs where he will … Read More »


7th Circuit Affirms 1st Conviction For Spoofing

Posted on August 16th, by and in Futures, General, Spoofing. Comments Off on 7th Circuit Affirms 1st Conviction For Spoofing

Spoofing is not going away after all. Last week, the U.S. Court of Appeals for the Seventh Circuit unanimously upheld the first-ever criminal conviction for spoofing. The case, United States v. Coscia, 7th U.S. Circuit Court of Appeals, No. 16-3017, involved a multi-count indictment against futures trader Michael Coscia. The indictment alleged that Coscia engaged in illegal trading by employing computer algorithms that engaged in market activity that violated the anti-spoofing laws created and adopted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The indictment alleged that Coscia traded in a variety of futures products and made over $1.4 million as a result of his illegal trading.

By way of background, spoofing involves placing bids or offers to sell futures contracts with the intent to cancel the bids or offers before execution. By placing bids … Read More »




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In an effort to increase awareness and attention by regulated entities, the CFTC’s divisions of Market Oversight (DMO), Swap Dealer & Intermediary Oversight (DSIO), and Clearing...

Good Disclosure of Bad Internal Controls Is Not Enough

On January 29, the SEC announced settled charges with four public companies for failing to maintain adequate internal control over financial reporting (ICFR). According...

Alert: FINRA’s 529 Plan Share Class Initiative to Self-Report

On January 28, 2019, FINRA released its Regulatory Notice 19-04 announcing its 529 plan self-reporting initiative. This initiative is part of FINRA efforts to...