Category: SEC


SEC Settles Charges of Auditor Independence Violations for $8 Million

Posted on September 27th, by and in Civil Penalties, Disgorgement, Neither Admit Nor Deny, SEC, Settlements. Comments Off on SEC Settles Charges of Auditor Independence Violations for $8 Million

The SEC announced settlements with an auditing firm (the “Firm”) and one of its partners relating to violations of certain auditor independence rules involving nineteen audit engagements with fifteen SEC-registrant issuers.

More specifically, the SEC found the Firm and its partner violated the Commission’s and Public Company Accounting Oversight Board’s (“PCAOB”) auditor independence rules. The alleged conduct involved performing prohibited non-audit services, including exercising decision-making authority in the design and implementation of software relating to one of its issuer client’s financial reporting as well as engaging in management functions for the company. The partner was responsible for supervising the performance of the prohibited non-audit services. Additionally, the SEC charged additional PCAOB-rule violations for failing to notify the clients’ audit committees about the non-audit services. The SEC described these failures as “mischaracterized non-audit services” despite the services involving financial software “that … Read More »


The SEC Files Another Litigated Disclosure Case – With More Violations

Posted on September 11th, by and in Conflict of Interest, Corporate Disclosures, Disclosures, Enforcement, OCIE, SCSD Initiative, SEC. Comments Off on The SEC Files Another Litigated Disclosure Case – With More Violations

On August 29, 2019, the SEC filed a complaint against a registered investment adviser alleging failures to disclose four categories of conflicts of interest and seeking disgorgement of $10 million in undisclosed compensation. This litigated action was filed within a month of the SEC filing a litigated complaint against another firm alleging failing to disclose material conflicts of interest related to revenue sharing, despite that advisory firm having self-reported pursuant to the SEC’s Share Class Selection Disclosure Initiative (“SCSD Initiative”).

Based on these litigated actions (and despite the SCSD Initiative being over 18 months old), the SEC’s Division of Enforcement continues to focus its investigative and litigation resources on “Main Street” and to aggressively pursue registered investment advisory firms for disclosure violations involving actual or potential conflicts of interest.

In this most recent litigated action, not surprisingly, the SEC’s allegations with respect … Read More »


The Final Reg BI Package: What to Know and What’s Next

Posted on June 14th, by in Conflict of Interest, Corporate Disclosures, Enforcement, Investment Advisers, SEC. Comments Off on The Final Reg BI Package: What to Know and What’s Next

To nobody’s great surprise, on June 5, the SEC approved the “Reg BI Package,” which includes a series of new standards governing the fiduciary responsibilities of broker-dealers and investment advisers. The approved items consisted of the Regulation Best Interest – Standard of Conduct for Broker-Dealers; Form CRS Relationship Summary; Standard of Conduct for Investment Advisers; and Interpretation of “Solely Incidental,” all of which seem likely to have considerable impact on the industry going forward.


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.


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 »


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 »


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 »


Cyber-Fraud Victim or Securities Law Violator?

Posted on October 23rd, by and in Cybersecurity, SEC. Comments Off on Cyber-Fraud Victim or Securities Law Violator?

The Securities and Exchange Commission (SEC) recently released a report detailing whether or not certain companies that had fallen victim to cyber-related frauds had violated the Securities Exchange Act of 1934 by failing to have proper internal accounting controls. The nine companies investigated by the SEC fell prey to fraudulent “business email compromise” schemes, which are responsible for the highest estimated out-of-pocket losses of any cyber-related crimes in the last five years. The primary question for the SEC was whether or not the companies had failed to enact compliant internal accounting controls that may have prevented such fraud.

This alert details the SEC’s finding and advice for companies in an environment where cybersecurity is increasingly complicated and essential.

Read the full alert.




From the Blog:

The SEC’s SCSD Initiative Second Wave and the Applicability of the President’s Recent Executive Order

On September 30, 2019, the SEC ordered an additional 16 self-reporting investment advisory firms to pay nearly $10 million in disgorgement. Some have referred...

SEC: Here Is When Loss Contingencies Must Be Disclosed and Reserved

When confronted with government inquiries, public companies commonly grapple with the issue of when events have escalated to the point that they are subject...

SEC Settles Charges of Auditor Independence Violations for $8 Million

The SEC announced settlements with an auditing firm (the “Firm”) and one of its partners relating to violations of certain auditor independence rules involving...