Category: SEC Guidance


SEC Names Co-Directors of Enforcement

Posted on June 12th, by and in Enforcement, General, SEC Guidance. Comments Off on SEC Names Co-Directors of Enforcement

Last week, the Securities and Exchange Commission (SEC) announced that Acting Enforcement Director Stephanie Avakian and former federal prosecutor Steven Peikin had been named Co-Directors of the Division of Enforcement. In making the announcement, SEC Chairman Jay Clayton advised:

There is no place for bad actors in our capital markets, particularly those that prey on investors and undermine confidence in our economy. Stephanie and Steve will aggressively police our capital markets and enforce our nation’s securities laws as Co-Directors of the Division of Enforcement. They have each demonstrated market knowledge, impeccable character, and commitment to public service, and I am confident their combined talents and experience will enable them to effectively lead the Division going forward.

Prior to being named Acting Director in December 2016, Ms. Avakian served as Enforcement’s Deputy Director since June 2014. Mr. Peikin joins the SEC … Read More »


Compliance and Legal Officer Guidelines to Prevent Non-Line Supervisory Liability

Posted on April 7th, by and in Compliance Rule, Guidance, SEC Guidance. Comments Off on Compliance and Legal Officer Guidelines to Prevent Non-Line Supervisory Liability

Chicago partner Jim Lundy and associate Carrie DeLange, members of Drinker Biddle’s SEC & Regulatory Enforcement Team, authored “Compliance and Legal Officer Guidelines to Prevent Non-Line Supervisory Liability” for the National Society of Compliance Professionals’ (NSCP) professional journal, Currents, March 2017 edition.

The article provides guidance and recommendations to compliance officers and in-house attorneys with investment management and broker-dealer firms regarding the legal background and recommended practices to avoid supervisory liability with respect to the violative conduct of business personnel. Specifically, the article examines the applicable statutes and rules, the controversial “Gutfreund Standard,” and the SEC’s more recent guidance from a Division of Trading and Markets “FAQ” and speeches. Jim and Carrie build on this information to provide recommendations for investment management and broker-dealer compliance and in-house personnel to manage satisfying their compliance obligations while dealing with the potentially problematic conduct … Read More »


Ninth Circuit: You Don’t Need to Report Securities Violations to the SEC to Be Protected by the Dodd-Frank Anti-Retaliation Provision

Posted on March 10th, by and in Dodd-Frank, SEC Guidance, Whistleblower. Comments Off on Ninth Circuit: You Don’t Need to Report Securities Violations to the SEC to Be Protected by the Dodd-Frank Anti-Retaliation Provision

On March 8, 2017, a divided panel of the United States Court of Appeals for the Ninth Circuit held that the anti-retaliation provision of the Dodd-Frank Act protects individuals who make purely internal disclosures of alleged securities violations. The decision, Somers v. Digital Realty Trust, Inc., No. 15-17352 (9th Cir. March 8, 2017), aligns the Ninth Circuit with the Second Circuit, which reached the same result in Berman v. Neo@ogilvy, LLC, 801 F.3d 145 (2d Cir. 2015). These opinions stand in stark contrast to the position of the Fifth Circuit, which concluded in Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013), that in order to enjoy the protection of the anti-retaliation provision an individual must report the alleged securities violation to the SEC. While the Ninth Circuit’s decision is the latest entry in this evolving circuit … Read More »


OCIE Highlights the Top 5 Compliance Topics from Examinations of Investment Advisers

Posted on February 10th, by and in Compliance Rule, Custody Rule, Ethics Rule, Form ADV, Investment Advisers, OCIE, Office of Compliance Inspections and Examinations, SEC Guidance. Comments Off on OCIE Highlights the Top 5 Compliance Topics from Examinations of Investment Advisers

On February 7, 2017, the Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert discussing the five most frequent compliance topics identified in OCIE examinations of investment advisors. The Alert was compiled based on deficiency letters from over 1,000 investment adviser examinations completed during the past two years. The top five topics are: (1) the Compliance Rule; (2) Regulatory Filings; (3) the Custody Rule; (4) the Code of Ethics Rule; and (5) the Books and Records Rule.

The Compliance Rule

The Compliance Rule requires: (1) written and policies and procedures reasonably designed to prevent violations of the Advisers Act; (2) annual review of the policies and their implementation; and (3) a chief compliance officer who monitors the policies and procedures.  Examples of common Compliance Rule problems included:

Advisers did not follow their compliance policies and procedures;
Annual reviews were not performed or … Read More »


The SEC Announces Its 2017 Examination Priorities

Posted on January 23rd, by in Examinations, OCIE, Office of Compliance Inspections and Examinations, SEC Guidance. Comments Off on The SEC Announces Its 2017 Examination Priorities

On January 12, 2017, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) announced its examination priorities for 2017. This year’s priorities are focused around three topics: (1) retail investors, (2) senior investors and retirement investments, and (3) market-wide risks. These priorities affect investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, private fund advisers, national securities exchanges, and municipal advisers.

Protecting retail investors remains a primary concern of OCIE. So it’s no surprise that its detailed areas of focus continue to include: risks related to electronic investment advice (i.e. “robo-advising”), “wrap fee” programs where investors are charged a single fee for bundled advisory and brokerage services, and “Never-Before Examined Investment Advisers,” an initiative started in 2014. OCIE will also continue to focus on its Exchange-Traded Funds (ETFs).

To protect senior investors, OCIE will continue its ReTIRE initiative with focuses on investment … Read More »


Third Circuit Defined “Investment Adviser” In Sentencing Appeal

Posted on August 18th, by and in Investment Advisers, SEC Guidance, Sentencing. Comments Off on Third Circuit Defined “Investment Adviser” In Sentencing Appeal

Everett C. Miller pleaded guilty to securities fraud after he sold more than $41 million in phony, unregistered promissory notes in his firm, Carr Miller Capital, LLC, that falsely promised high returns with no risk. As part of his plea, Miller and the government stipulated to what they considered to be an appropriate offense level under the United States Sentencing Guidelines (the “Guidelines”). At sentencing, however, the district court applied the four-level investment adviser enhancement provided for by the Guidelines for securities laws violations perpetrated by “investment advisers,” as that term is defined by the Investment Advisers Act of 1940, 15 U.S.C. § 80b-2(a)(11). See U.S.S.G. § 2B1.1(b)(19)(A)(iii). Due to the enhancement, Miller received a 120-month sentence.

On appeal, Miller challenged, among other things, the application of the investment adviser enhancement, arguing that he was not an “investment adviser” under the … Read More »


SEC Tweaks In-House Court Rules

Posted on July 14th, by in SEC Guidance. Comments Off on SEC Tweaks In-House Court Rules

While not directly acknowledging the criticism its in-house courts have received over the past year, the Securities and Exchange Commission (“SEC”) yesterday adopted final amendments to the rules of practice governing its administrative proceedings that were  initially proposed in September 2015. Among other things, these amendments:

Extend the potential length of the prehearing period from the current four months to a maximum of 10 months for the cases designated for the longest timelines;
Allow parties in the cases designated for the longest timelines the right to notice three depositions per side in single-respondent cases and five depositions per side in multi-respondent cases, and to request an additional two depositions;
Clarify the types of dispositive motions that may be filed at various stages of proceedings and the applicable procedures and legal standards for the motions; and
Make additional clarifying and conforming changes to other rules, … Read More »


Second Circuit to Supreme Court on Whistleblowers: Your Turn

Posted on September 14th, by in Dodd-Frank, SEC Guidance, Whistleblower. Comments Off on Second Circuit to Supreme Court on Whistleblowers: Your Turn

The U.S. Court of Appeals to the Second Circuit’s recent decision holding that Dodd-Frank’s “whistleblower” anti-retaliation protections apply to employees who are dismissed after reporting alleged violations internally but before alerting the Securities and Exchange Commission (the “Commission”) creates a Circuit spilt and sets up a potential statutory-interpretation showdown in the U.S. Supreme Court. Berman v. Neo@Ogilvie LLC & WPP Group USA, Inc., slip op. at 2 (2d Cir. Sept. 10, 2015).

The Second Circuit’s decision focuses on the conflict between Dodd-Frank’s definition of “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws of the Commission,” 15 U.S.C. § 78u-6(a)(6) (emphasis added), and the retaliation protection provision of the same statute which through incorporation of the Sarbanes-Oxley Act provides a cause of action to a “whistleblower” terminated after reporting alleged violations to … Read More »


Dodd-Frank 180-Day “Deadline” For SEC to Take Action Not Really a Deadline After All

Posted on July 15th, by in Administrative Proceedings, SEC Guidance. Comments Off on Dodd-Frank 180-Day “Deadline” For SEC to Take Action Not Really a Deadline After All

A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit recently ruled that Section 4E of the Securities Exchange Act of 1934, 15 U.S.C. § 78d-5(a)(1) – which provides that “[n]ot later than 180 days after the date on which [Securities and Exchange Commission (“SEC”)] staff provide a written Wells notification to any person, the [SEC] staff shall either file an action against such person or provide notice to the Director of the Division of Enforcement of its intent not to file an action” – did not bar an administrative action against an individual (Ernest V. Montford, Sr.) and his investment advisory firm (Montford Associates) commenced 187 days after such notification.   Montford & Co. v. SEC, No. 14-1126, slip op. at 2 (D.C. Cir. July 10, 2015).

The appeal stemmed from $860,000 in penalties and disgorgement that the … Read More »


SEC Opens New Funding Options with Regulation A+

Posted on June 19th, by , and in Exempt Offerings, SEC Guidance. Comments Off on SEC Opens New Funding Options with Regulation A+

Regulation A+ goes into effect June 19, 2015, allowing funding of companies by non-accredited investors. Smaller companies can offer and sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure, and reporting requirements. See Amendments for Small and Additional Issues Exemptions under the Securities Act.

The regulations allow two tiers of potential offerings. Tier 1 allows security offerings of up to $20 million in a 12-month period. Tier 2 allows security offerings of up to $50 million in a 12-month period but also requires audited financial statements, annual, semi-annual, and current-event reports, and a limitation on the amount of securities non-accredited investors can purchase of no more than 10% of the greater of the investor’s annual income or net worth. Tier 1 limits offers to not more than $6 million by selling security holders that are … Read More »




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