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The SEC’s Reg BI Package Time to Vote

Posted on May 30th, by in Guidance, SEC. Comments Off on The SEC’s Reg BI Package Time to Vote

On June 5, the SEC will hold an Open Meeting to consider whether to adopt certain measures to reform retail investment standards. In this alert, the Best Interest Compliance Team provides a brief preview of the key topics and potential concerns about the proposed standards.


The Robare Ruling Regarding “May” Disclosures and “Willfulness”

Posted on May 7th, by , and in Administrative Proceedings, Enforcement, Form ADV, Investment Advisers. Comments Off on The Robare Ruling Regarding “May” Disclosures and “Willfulness”

Over the last year, the SEC has continued to intensify its focus on disclosures from investment advisers on Forms ADV regarding several issues, including—but not limited to—revenue sharing arrangements. Last week, the D.C. Court of Appeals handed down a decision that will likely have significant ramifications for investment advisers and the SEC’s Division of Enforcement (“Enforcement”). In Robare Group, Ltd., v. SEC, the D.C. Circuit upheld the SEC Commission’s decision that the use of the word “may” in a disclosure regarding an investment adviser’s conflicts of interest pertaining to revenue sharing violated the negligence-based fraud provision of Section 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”).
On appeal, The Robare Group, Ltd., a Texas-based investment adviser, argued that the evidence presented by Enforcement in an administrative proceeding did not support the Commission’s ruling, upon review, that their disclosures … Read More »


SEC Issues Risk Alert Regarding Reg S-P, Privacy, Safeguarding, and Registrant Compliance

Posted on April 26th, by in Investment Advisers, OCIE, SEC, SEC Guidance. Comments Off on SEC Issues Risk Alert Regarding Reg S-P, Privacy, Safeguarding, and Registrant Compliance

The SEC’s OCIE recently issued a Risk Alert focusing on compliance issues related to Regulation S-P, the primary SEC rule governing compliance practices for privacy notices and safeguard policies for investment advisers and broker-dealers. The Risk Alert summarizes the OCIE’s findings from two-year’s worth of issues identified in deficiency letters to assist investment advisers and broker-dealers in adopting and implementing effective policies and procedures for safeguarding customer records and information pursuant to Regulation S-P.


The SEC Speaks . . . and Cooperation is Key

Posted on April 12th, by , and in SEC, SEC Guidance, Self-Reporting. Comments Off on The SEC Speaks . . . and Cooperation is Key

SEC Speaks, the SEC’s annual conference in Washington, D.C., often provides valuable insight into developments at the agency, as well as pronouncements about policy evolution and enforcement priorities. At this year’s conference, “cooperation” emerged as one of the themes that the SEC has been prioritizing over the past year – and is committed to prioritizing in the future. Indeed, the co-directors of the SEC’s Division of Enforcement remarked that, “cooperation is as important now as it has ever been,” and that the “full range” of remedies are available to entities that provide meaningful cooperation to the SEC. Interestingly, the staff emphasized that the SEC is making a concerted effort to use its press releases and orders to highlight the importance, components, and benefits of cooperation – all in an effort to promote earlier, more meaningful, and more … Read More »


District Court Holds SEC Cannot Use CEO’s Criminal Conviction to Establish Company’s Liability

Posted on April 8th, by in General. Comments Off on District Court Holds SEC Cannot Use CEO’s Criminal Conviction to Establish Company’s Liability

Recently, the Northern District of Illinois denied the SEC
summary judgment on its claims against a company charged with fraudulently
offering and failing to register securities. United
States Securities and Exchange Commission v. Webb et al. In doing so, it rejected the SEC’s argument that,
pursuant to the doctrines of collateral estoppel and respondeat superior, the company’s liability for the alleged
securities violations was established through the criminal conviction of the
company’s founder, CEO, and chairman for wire and mail fraud. The Court’s
decision emphasizes the legal necessity of establishing and giving each
defendant the opportunity to defend against the claims brought against them,
even if claims against companies and their officers for purported securities
violations seem inextricably related.

In SEC v. Webb., No. 11 C 7152 (N.D. Ill.), the SEC alleged that InfrAegis, Inc. and its founder, CEO, and chairman, Gregory Webb, violated the Securities Act of 1933 and … Read More »


The First SEC Share Class Selection Disclosure Settlements: What We Learned & What’s Next?

Posted on April 2nd, by in Enforcement, SCSD Initiative, Self-Reporting. Comments Off on The First SEC Share Class Selection Disclosure Settlements: What We Learned & What’s Next?

Jim Lundy and Ben McCulloch authored an article entitled “The First SEC Share Class Selection Disclosure Settlements: What We Learned & What’s Next?” for the Investment Adviser Association’s IAA Newsletter Compliance Corner. In the article, Jim and Ben discuss the first wave of settlements under the SEC’s SCSD Initiative as well as lessons learned. They also explore the agency’s ongoing efforts regarding the remaining participants, consequences for firms who opted not to self-report, and the Division of Enforcement’s continued scrutiny of revenue sharing arrangements, disclosures, and conflicts.

Read the full article.*

*Originally published in the IAA Newsletter, April 2019.


SEC Announces First Whistleblower Awards of 2019

Posted on March 27th, by and in Dodd-Frank, Whistleblower. Comments Off on SEC Announces First Whistleblower Awards of 2019

The SEC announced yesterday that it has awarded more than $50 million to two whistleblowers—specifically, more than $37 million to one whistleblower and more than $13 million to the other. Press Rel. No. 2019-42 These are the first awards announced in 2019, and the first awards announced in more than six months. The $37 million award now ranks as the SEC’s third largest award to date. The two largest awards ($50 million and $39 million) were announced in 2018.

The more than $37 million was awarded to a whistleblower whom the Commission found, as stated in its Order, to have voluntarily provided information that was “highly significant and critical to the success” of the underlying investigations. Indeed, the Commission’s enforcement staff opened a second investigation after meeting with the whistleblower on two separate occasions. The whistleblower continued to meet with enforcement … Read More »


SEC Releases SCSD Self-Reporting Initiative Settlements

Posted on March 12th, by and in Investment Advisers, SCSD Initiative, SEC, Self-Reporting, Settlements. Comments Off on SEC Releases SCSD Self-Reporting Initiative Settlements

On March 11, 2019, the SEC announced and released settlements against 79 self-reporting registered investment advisers (RIAs), touting $125 million being returned to investors. The actions stem from the SEC’s Share Class Selection Disclosure Initiative (SCSD Initiative). The SCSD Initiative incentivized RIAs to self-report violations resulting from undisclosed conflicts of interest, to promptly compensate investors, and to review and correct fee disclosures. Specifically regarding Rule 12b-1 fees, the SEC’s orders found that the RIAs failed to adequately disclose conflicts of interest related to the sale of higher-cost mutual fund share classes when a lower-cost share class was available.

SEC Chairman Jay Clayton commented: “I am pleased that so many investment advisers chose to participate in this initiative and, more importantly, that their clients will be reimbursed. This initiative will have immediate and lasting benefits for Main Street investors, including through improved disclosure. Also, … Read More »


CFTC Decides Not to Appeal the DRW Ruling

Posted on March 1st, by in CFTC, Civil Penalties, Enforcement, Futures, Manipulation. Comments Off on CFTC Decides Not to Appeal the DRW Ruling

In a recent announcement, the CFTC indicated it would not appeal its district court loss in CFTC v. DRW, stating, “After careful consideration of the issues, as well as discussion with agency staff and Commissioners, Chairman Giancarlo has decided the agency will not appeal the district court’s decision.”

In 2013, the CFTC filed a complaint against principal trading firm DRW Investments, LLC (“DRW”) and its principal, alleging price manipulation of a various interest rate swaps futures contract in 2011, specifically the IDEX Three-Month Interest Rate Swap Future (the “Three-Month Contract”). The CFTC alleged that DRW’s bidding practices in the Three-Month Contract created artificial daily settlement prices. The Commission based this assertion primarily upon the fact that the bids in question were higher than the corresponding rates in the contemporaneous over the counter (“OTC”) swap market. DRW argued its bids were not … Read More »


CFTC Divisions Publish Inaugural Exam Priorities

Posted on February 19th, by in Annual Letter, CFTC, Examinations, Futures, General. Comments Off on CFTC Divisions Publish Inaugural Exam Priorities

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 & Risk (DCR) announced
their 2019 examination priorities. This marks the first time that the agency
has published division
examination priorities, and Chairman Giancarolo commended CFTC
leadership and staff for their work in bringing additional transparency into
the CFTC’s agenda.

DMO Priorities

Tasked with oversight of trade execution
facilities, DMO focuses its examination priorities on  designated contract markets (DCMs) and swap
execution facilities (SEFs). DMO’s Compliance Branch conducts examinations of DCMs
to monitor their compliance with the Commodity Exchange Act and CFTC
regulations. Throughout 2018 the Compliance Branch completed a review of 11
DCM’s self-regulatory operations. Based on this review, and feedback from the
DCM staff, the division identified the following topics for in-depth
examination in 2019:

cryptocurrency surveillance practices; surveillance for disruptive trading (including
DCMs’ rules, surveillance practices, investigations, and disciplinary … Read More »






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