Posts Categorized: Broker-Dealers

N.Y. Attorney General Alleges Unregistered Dealers Selling Crypto Securities and Commodities

In a letter to five trading platforms, N.Y. Attoney General Letitia James notified them that certain crypto-assets are securities under the N.Y. law – the Martin Act – that requires sellers of securities within or from the state to register with the state. They are securities because they “promise a rate of return to investors,… Read more »

FINRA Warns that Private Placements under Rule 506(b) Must Be with Known Investors

In a settlement with a broker-dealer on July 22, 2021, the Financial Industry Regulatory Authority, Inc. (“FINRA”) fined a broker-dealer for selling a private placement under Rule 506(b) of Reg D “without having established pre-existing, substantive relationships with the offerees prior to participating in those offerings. As a result, each of those sales constituted an… Read more »

SEC Proposes New Rules on “Finders”

On October 7, 2020, the Securities and Exchange Commission proposed rules to exempt for the first time “finders” from the need to register as broker-dealers. For a number of years, attorneys have advised that issuers could use “finders” not registered as broker-dealers to find potential investors on capital raises if the finders kept their activities very… Read more »

SEC Will Begin Examining Compliance With Reg BI After June Implemetation Date

On April 7, 2020, the Office of Compliance Inspections and Examinations (the “OCIE”) of the Securities and Exchange Commission (the “SEC”) issued a Risk Alert to tell broker-dealers that it would begin to examine them for compliance with Regulation BI (Best Interest) (“Reg BI”) after the June 30, 2020, implementation date. This effectively means that… Read more »

FINRA Proposes to Expand “Capital Acquisition Broker” Rules

On January 30, 2020, the Financial Industry Regulatory Authority (“FINRA”) proposed amendments to its “capital acquisition broker” rules (the “CAB Rules”) to broaden the coverage of the rules.  The CAB Rules were adopted in 2016 to allow a broker-dealer to comply with a lesser set of requirements if it is engaged in a limited set… Read more »

FINRA Exam Priorities For Regulation Best Interest

On January 9, 2020, the Financial Industry Regulator Authority (“FINRA”) published its 2020 Risk Monitoring and Examination Priorities Letter (the “Letter”).  The Letter made clear that the new Reg BI (also known as the “Best Interest” regulation), adopted by the Securities and Exchange Commission on June 5, 2019, would be its top priority in 2020. … Read more »

CFTC, FinCen and SEC Joint “Reminder” to Cryptocurrency World of AML Requirements

On October 11, 2019, the Commodity Futures Trading Commission (the “CFTC”), the Financial Crimes Enforcement Network (“FinCen”) of the U.S. Treasury and the Securities and Exchange Commission (the “SEC”) issued a joint statement reminding “persons engaged in activities involving digital assets of  their anti-money laundering and countering of financing of terrorism (“AML/CFT”) obligations under the… Read more »

Second Circuit Find Private Right of Action to Rescind Contracts Under Investment Company Act

The Second Circuit has created a split with the Third and Ninth Circuits by finding that Section 47(b) of the Investment Company Act provides plaintiffs an implied private right of action with regard to contracts, and the plaintiffs in that case could therefore seek rescission of the contracts in the form of junior notes.  This… Read more »

SEC Office of Compliance Inspections and Examinations (“OCIE”) Issues Alert on Cross-Trades Under Investment Advisers Act

On September 4, 2019, the OCIE issued a Risk Alert on issues identified by the staff during audits of firms of cross-trades that violate the applicable rules.  Section 206(3) of the Investment Advisers Act effectively prohibits an adviser, acting as a principal or agent, from carrying out certain cross trades that would be the result… Read more »

SEC Adopts New Broker-Dealer Rules on Standard of Behavior

On June 5, 2019, the Securities and Exchange Commission (the “SEC”) adopted new rules, including: (i) Regulation Best Interest, raising the requirement for broker-dealers recommending securities to retail clients from determining that the securities are suitable to acting in the best interests of clients, and requiring certain specified disclosure, care in carrying out transactions, written… Read more »