Harry Frischer
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In a rare reversal of its own administrative law judge in the Matter of optionsXpress, the full Securities and Exchange Commission unanimously held that the SEC’s Enforcement Division had not met its burden of proof that the customer of a broker-dealer had committed securities fraud in connection with his clearing broker-dealer’s failure to deliver stock … Continue Reading
Section 546(e) of the bankruptcy code prohibits a bankruptcy trustee from avoiding “settlement payment[s]”, or payments “made in connection with a securities contract,” that are “made by or to (or for the benefit of)” qualifying financial entities, including financial institutions, stockbrokers, commodities brokers and others. In a ruling that conflicts with precedent from the Second, … Continue Reading
Will a broker-dealer be liable when a financial advisor employed by the firm solicits investments as part of a fraudulent scheme, where the firm specifically prohibited the advisor from soliciting the investment, the fraudulent investment was made away from the firm, and the investors never became customers of the firm? The Eleventh Circuit recently answered … Continue Reading
The U.S. Supreme Court’s decision yesterday in Merrill Lynch v. Manning clarified the scope of federal jurisdiction under the Exchange Act in certain important respects, but also left open critical issues that may arise in future cases. Although the Court rejected federal jurisdiction in resolving the sole issue that was before it, the Court also … Continue Reading
Last week, FINRA sought approval from the SEC for a proposed change to the FINRA arbitration rules, under which monetary awards requiring the parties to pay each other damages would be offset, so the party owing the larger award would be required to pay only the net difference. If the arbitrators do not intend monetary … Continue Reading
In Jinnaras v. Alfant, decided on May 5, 2016, the New York Court of Appeals rejected a proposed settlement of a shareholder class action, where the proposed settlement would have deprived out-of-state class members of a “cognizable property interest” by failing to provide a mechanism for class members residing outside of New York to opt … Continue Reading
The Delaware Supreme Court ruled yesterday that out-of-state corporations no longer would be subject to general personal jurisdiction in Delaware merely because they had registered to do business in Delaware. In making that ruling, the Court overruled prior state precedent, under which foreign corporations were deemed to have consented to jurisdiction in Delaware when they … Continue Reading
In an April 15, 2016 speech to the Brookings Institution, FINRA CEO Richard G. Ketchum addressed the fundamental question of whether the equity markets are sufficiently fair, flexible, and efficient to encourage the participation of retail investors. Ketchum described the substantial concerns of some investors regarding these issues and outlined recent action by FINRA to … Continue Reading
Yesterday the SEC announced its first enforcement proceeding for breach of the fiduciary duty for municipal advisors created by the 2010 Dodd-Frank Act.… Continue Reading
The recently issued Examination Priorities for 2016 reveals that the SEC’s priorities are organized around the same three thematic areas as last year: (i) retail investors, including retirement investments; (ii) market-wide risks; and (iii) the SEC’s increasing analysis of data to identify problematic activity.… Continue Reading
The recently issued 2016 Regulatory and Examination Priorities Letter discloses FINRA’s new initiatives on market integrity and firm culture and reflects a focus on firms’ supervision regarding conflicts of interest and technology. Regulatory concern over many of these issues has been previously reported in this blog here, here, here and here.… Continue Reading
The FINRA Dispute Resolution Task Force issued its final report last week, making certain recommendations designed to improve the arbitration process. More notably, however, the Task Force reported that it was unable to reach agreement on a number of more controversial issues, reflecting deep divisions among practitioners in this area.… Continue Reading
Recognizing the substantial risks inherent in many derivatives transactions, and the substantial leverage that is often imbedded in derivatives, the SEC last week announced its proposed new rules that would impose limits on the exposure to derivatives for investment companies, which include mutual funds, exchange-traded funds and closed-end funds, and create other regulatory requirements. Exposure … Continue Reading
On November 24, 2015, the CFTC announced the new proposed Regulation Automated Trading (“Reg. AT”), which contains a variety of measures designed to prevent potential market disruptions arising from algorithmic trading. Among other things, Reg. AT proposes certain pre-trade risk and order management controls, the implementation of policies and procedures governing algorithmic trading, and additional … Continue Reading
On November 19, 2015, the SEC announced a settlement with investment advisory firm Sands Brothers Asset Management, LLC for violating the Custody Rule, SEC Rule 206(4)-2, which requires that registered investment advisers who have custody of their clients’ assets put in place policies and procedures intended to safeguard those assets against loss, misuse or misappropriation. … Continue Reading
The SEC announced this week its proposal to substantially overhaul the rules regarding alternative trading systems (“ATS”), often referred to as dark pools. The proposed rules would require firms operating ATSs to make additional disclosure about business activities that may present conflicts of interest between firms and ATS subscribers, and considerable information as to how … Continue Reading
On November 2, 2015, the Director of the SEC Division of Enforcement Andrew Ceresney spoke at the “SIFMA Compliance & Legal Society New York Regional Seminar” and outlined the SEC’s enforcement priorities with respect to market structure issues. This is yet another response by regulators to the growth of algorithmic trading and alternative trading venues, … Continue Reading
On October 21, 2015, CFTC Chair Timothy Massad spoke at the “Evolving Structure of the U.S. Treasury Market” conference organized by the U.S. Department of Treasury and the Federal Reserve Bank of New York. His remarks came the day after SEC Chair Mary Jo White’s comments, which we blogged about here, and follow this summer’s … Continue Reading
On October 20, 2015, SEC Chair Mary Jo White gave the keynote address at the “Evolving Structure of the U.S. Treasury Market” conference organized by the U.S. Department of Treasury and the Federal Reserve Bank of New York. The conference and speech follow this summer’s Joint Staff Report analyzing the significant volatility that the U.S. … Continue Reading
Potentially abusive trading algorithms, such as algorithms that purportedly engage in “spoofing” or “layering” are the subject of considerable regulatory interest. However, in an interesting complaint filed on October 19, 2015, the CFTC alleged that a firm manually entering futures orders engaged in illegal spoofing that appears to have lured algorithmic traders into the market. … Continue Reading
Following the D.C. Circuit’s July 14, 2015 decision in Koch et al. v. Securities and Exchange Commission, No. 14-1134 (D.C. Cir. July 14, 2015), which held that the SEC could not retroactively punish an investment advisor for conduct that occurred prior to the enactment of the statute authorizing the punishment, the SEC announced last week … Continue Reading
Mistakes in computer coding by a high frequency trading firm that went undetected for approximately four years were responsible for approximately 12.6 million orders that violated Reg NMS, according to an Order settling an enforcement proceeding with Latour Trading LLC, announced by the SEC on September 30. These noncompliant orders involved more than $4.6 billion … Continue Reading
On Thursday, the SEC announced charges against several senior executives of Penson Financial Services Inc., once the second-largest clearing broker-dealer in the country, and its parent corporation, Penson Worldwide, Inc., again highlighting the regulatory risks associated with supervisory responsibilities.… Continue Reading
Reflecting increased regulatory willingness to discipline principals and supervisors, FINRA recently announced that it had imposed an industry bar on the former president of a defunct broker-dealer, along with five registered representatives who likewise were barred in all capacities. FINRA also barred two former principals from continuing to act in a principal capacity and imposed … Continue Reading
SEC Overrules Its Own Administrative Law Judge to Clear Customer of Fraud Charges
By Harry Frischer and Philip Arnold on Posted in Broker-Dealer, SEC Enforcement, Securities Regulatory
In Conflict With Other Circuits, Seventh Circuit Rules That Certain Transfers Involving Financial Institution Intermediaries Not Immune From Recovery By Bankruptcy Trustee
By Harry Frischer and James Anderson on Posted in Financial Services, White Collar
Eleventh Circuit Clarifies Broker-Dealer’s Liability For Employee’s Fraud
By Harry Frischer and Massiel Pedreira on Posted in Broker-Dealer, Securities Litigation
Supreme Court’s Manning Decision Leaves Questions Unanswered
By Harry Frischer on Posted in Securities Law, Securities Litigation, Securities Regulatory
FINRA Proposes Arbitration Rule Change to Permit Offset of Awards
By Harry Frischer on Posted in Broker-Dealer
NY Court Of Appeals Rejects No-Opt Out Class Action Settlement In Shareholder Litigation
By Harry Frischer on Posted in Class Settlement, Mergers & Acquisitions, Securities Litigation
No General Jurisdiction Over Out-of-State Firms Registering to Do Business in Delaware
By Harry Frischer and Russell Kostelak on Posted in Broker-Dealer, Financial Services, Securities Litigation
Ketchum Clarifies How FINRA Will Assess a Firm’s Culture of Compliance
By Harry Frischer on Posted in Financial Services
First SEC Case Against Municipal Advisor Under New Fiduciary Duty
By Celia Cohen and Harry Frischer on Posted in Financial Services
SEC’s 2016 Examination Priorities Focus on Retail Investors, Market Wide Risk and Use of Data Analytics
By Brian Friedman, Harry Frischer and Tracey Silver on Posted in Financial Services, Securities Regulatory
FINRA’s 2016 Examination Priorities Identifies New Initiatives on Market Integrity and Firm Culture and Further Concern on Supervision and Controls
By Brian Friedman, Harry Frischer and James Unger on Posted in Financial Services
FINRA Arbitration Task Force Fails To Reach Consensus On Many Major Issues
By Brian Friedman, Harry Frischer and Massiel Pedreira on Posted in Financial Services, Securities Law, Securities Litigation, Securities Regulatory
SEC Proposal Would Limit Investment In Derivatives By Investment Companies
By Brian Friedman and Harry Frischer on Posted in Securities Regulatory
CFTC Proposes New Regulations For Algorithmic Trading
By Brian Friedman, Harry Frischer and Philip Arnold on Posted in Financial Services
SEC Once Again Sanctions The CCO of An Investment Advisory Firm
By Harry Frischer and Philip Arnold on Posted in Financial Services, SEC Enforcement
SEC Proposes Rules To Enhance Transparency And Oversight Of Alternative Trading Systems
By Brian Friedman and Harry Frischer on Posted in SEC Enforcement, Securities Law, Securities Regulatory
SEC Director of the Division of Enforcement Discusses Market Structure Enforcement
By Brian Friedman and Harry Frischer on Posted in Financial Services
CFTC Chair Discusses the CFTC’s Response to Algorithmic Trading
By Brian Friedman and Harry Frischer on Posted in Financial Services
SEC Chair Calls for Reexamination of Treasury Market Regulations in Light of High Speed Electronic Trading
By Brian Friedman, Boris Zeldin, Harry Frischer and Stacey P. Eilbaum on Posted in Securities Law, Securities Regulatory
CFTC Accuses Firm Manually Entering Orders Of Spoofing Scheme That Fooled Algorithmic Traders
By Brian Friedman, Boris Zeldin, Harry Frischer and Stacey P. Eilbaum on Posted in Financial Services
SEC Accepts DC Circuit’s Decision Vacating Retroactive Punishment
By Harry Frischer, Lindsey Olson and Rachel Wolkinson on Posted in Securities Law
Coding Errors Lead To SEC Sanctions for High-Frequency Trading Firm
By Brian Friedman and Harry Frischer on Posted in Financial Services, SEC Enforcement, Securities Law
SEC Sanctions Senior Executives Of Failed Clearing Broker
By Harry Frischer and James Unger on Posted in SEC Enforcement
FINRA Bars Former President Of Broker-Dealer Along With Former Registered Representatives
By Harry Frischer and James Unger on Posted in Financial Services, Securities Regulatory
