MVA White Collar Defense, Investigations, and Regulatory Advice Blog

On October 2, 2024, the Securities and Exchange Commission (“SEC”) announced it had settled enforcement proceedings against Thrivent Investment Management, Inc. (“Thrivent”), a SEC dually-registered broker-dealer and investment adviser, stemming from Thrivent’s alleged failure to update a calculator tool utilized by its representatives to determine which shares in certain 529 College Savings Plans are recommended to its retail customers.

Securities regulators have long been concerned with the potential regulatory risks associated with geographically dispersed broker-dealer offices, citing the observation that the distance of these offices from compliance and supervisory personnel could make it easier for them to be involved in and conceal securities laws violations.  On-site internal inspections of those offices have been viewed as a vital component of the supervisory process in mitigating those potential risks.  SEC Staff Legal Bulletin No. 17 (March 19, 2004).  However, given recent advances in technology and changing work environments resulting from the COVID-19 pandemic, broker-dealer supervisory practices have evolved.  This evolution has not gone unnoticed by regulators such as FINRA, who has adopted a new voluntary inspections pilot program rule which will allow member firms to perform required office inspections by remote means.  FINRA member firms will have the ability to opt into this voluntary program beginning on June 1, 2024.  The discussion below covers some aspects of what FINRA member firms may expect, including potential benefits, regarding this new rule.  

* Published by Westlaw Today

FINRA has continued its efforts to expand protections for “specified adults” by amending its Rule 2165.[1] Prior to the amendments, FINRA Rule 2165 allowed FINRA member firms to place temporary holds on disbursements of funds and securities in situations involving the financial exploitation of those individuals. With the amendments (which went effective on March 17, 2022), FINRA has indicated that it has created the first uniform national standard for placing temporary holds on securities transactions in the accounts of these customers in ...

The Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) (collectively, the “Agencies”) jointly proposed a rule (the “Proposed Rule”) that would impact existing confidential reporting obligations of private equity funds and other collective investment vehicles not registered as an “investment company” (referred to as, “Private Funds”). The rule proposes changes to the Form PF, a non-public report for certain SEC-registered investment advisers to Private Funds, which get submitted to the SEC (and CFTC ...

A Bloomberg article last week suggests potentially more bad news is on the way for Coinbase Global Inc. (“Coinbase”). Coinbase is reportedly facing an investigation by the U.S. Securities and Exchange Commission (“SEC”) into whether it let customers trade digital assets that the SEC believes should have been registered as securities. Rumors of investigations by the SEC do not necessarily suggest problems for the company at the center of those rumors, but the timing of a recent SEC complaint (SEC v. Wahi) may explain why this report had such a negative effect on Coinbase’s ...

On June 8, 2022, the New York State Department of Financial Services (“NYDFS”) released industry guidance applicable to U.S. dollar-backed stablecoins issued by NYDFS-regulated entities (the “Guidance”). The Guidance focuses on NYDFS requirements relating to the redeemability of these stablecoins, the asset reserves that back them (the “Reserves”), and auditor examination and attestations regarding management’s assertions concerning the sufficiency of the Reserves.  

By way of background, a stablecoin is a type of digital asset that is intended to ...

In response to ever increasing reports of forgery and falsification of records in the digital signature space, FINRA issued Regulatory Notice 22-18. This Notice reminds FINRA members of relevant regulatory obligations, while also addressing misuse scenarios and identification methods, in order to help members mitigate risk in this area.

In the Notice, FINRA highlights that forgery occurs when an individual “signs or affixes, or causes to be signed or affixed,” the name of another person to a document without that person’s prior permission. FINRA further stated that ...

On March 17, 2022, FINRA issued Regulatory Notice 22-10 (“Notice”), which reminds FINRA member firms and their associated persons of the scope of supervisory liability for Chief Compliance Officers (“CCO”). The Notice discusses this liability in the context of FINRA Rule 3110, which among other things, requires FINRA member firms to establish and maintain a system (including written procedures) to supervise the activities of each associated person in a manner that is reasonably designed to achieve compliance with applicable securities laws, regulations, and FINRA ...

On March 30, 2022, the U.S. Securities and Exchange Commission’s (“SEC”) Division of Examinations released its exam priorities for fiscal year 2022 (the “2022 Priorities”). As in years past, these exam priorities naturally follow from SEC rulemakings, statements, risk alerts and other guidance issued in the past year, and reflect practices or topics that may pose higher risk for referral to the SEC’s Division of Enforcement.

The 2022 Priorities include broader thematic “Significant Focus Areas,” which may be applicable to both broker-dealers and registered ...

On March 21, 2022, the U.S. Securities and Exchange Commission (“SEC”) announced a proposed rule (the “Proposed Rule”) that will require registrants to make certain climate disclosures in their registration statements and periodic filings with the SEC. Chairman Gary Gensler stated that the goal of the Proposed Rule is to “provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers.” The Proposed Rule would require three main ...

After extensive retrospective review of FINRA Rule 4370, which covers member firm business continuity plan (“BCP”) requirements during times of business disruption (such as the COVID-19 Pandemic), FINRA issued its Retrospective Rule Review Report entitled “Business Continuity Planning and Lessons From the COVID-19 Pandemic.”[1]  In doing so, FINRA issued guidance and summarized stakeholder feedback on such topics as the inspection and registration of temporary/remote offices, Membership Application Program (“MAP”) compliance for those offices, and the ...