February 4, 2017
In Gregory Bartko, Petitioner, v. Securities and Exchange Commission, Respondent, the United States Court of Appeals for the District of Columbia Circuit admonished the Securities and Exchange Commission that the federal regulator's imposition of a collateral bar for pre-Dodd Frank misconduct was an impermissible retroactive sanction. As a result of Bartko, the SEC is now receiving a number of petitions to vacate pre-Dodd Frank collateral bars. READ
On February 1, 2017, the Heritage Foundation published "Reforming FINRA" (Backgrounder #3181 on Economy, by David R. Burton, February 1, 2017). I can not limit the amount of praise that I can shower on this epic work. As noted in the report's introduction, Burton's thesis is that:
FINRA is a regulator of central importance to the functioning of U.S. capital markets. It is neither a true self-regulatory organization nor a government agency. It is largely unaccountable to the industry or to the public. Due process, transparency, and regulatory-review protections normally associated with regulators are not present, and its arbitration process is flawed. Reforms are necessary. FINRA itself, the SEC, and Congress should reform FINRA to improve its rule-making and arbitration process. This Heritage Foundation Backgrounder outlines alternative approaches that Congress and the regulators can take to improve FINRA, and provides specific recommended reforms.
FINRA Asks Where Was Reasonable Supervision. But Where Was FINRA?
The first line of defense on Wall Street is supposed to be the industry's compliance departments, where thousands of underpaid and overwhelmed men and women are expected to stay on top of all the rules, regulations, and policies. When those same compliance grunts actually warn their firms about the bad guys and girls who are about to bring the whole biz crashing down, some red-in-the-face, hot-head of a manager tells them that they're not being a team player. Everyone does it. I'll talk to him. Don't make a big deal out of this. We don't need those idiots from FINRA or the SEC poking around, right? You know how much he brings into the firm. If it comes down to him or you, it's him. You have to understand that there are ways things are done on the Street. Okay? We good? Glad to have had this talk. I'll let him know that it was just a misunderstanding. Make sure to erase everything from the hard drive. One other thing, do me a favor, send him an email and apologize.
Fun and games on Wall Street! In today's BrokeAndBroker.com Blog we consider a recent FINRA regulatory settlement involving allegations that a member firm didn't timely file reports and that it had a less than robust supervisory system. READ
You do "X" and, as it turns out, you really should not have. Ooops! Time to step up to the old Wall Street regulatory line and take your punishment. You own the problem. You screwed up. Now, you expect to be fairly charged, fairly fined, and fairly suspended. Sometimes you realize your expectations. Sometimes, however, a regulator sees you in its cross-hairs, figures that you're a sitting duck, and, wham, you get hit with multiple charges for the same misconduct. At times, one misstep sets off a cascade of violations: It's the domino effect. READ
As more fully set forth in previous coverage of this case by the BrokeAndBroker.com Blog, this lawsuit has its genesis in the FINRA NAC Decision (Scholander / Harris), which prompted coverage by TheBlot. In commenting on the various events and circumstances attendant to FINRA's case, TheBlot pulled no punches in expressing its opinion as to the conduct of the self-regulatory organization and a number of parties and participants involved in prosecuting and adjudicating the regulatory case. The question before the New York State Supreme Court is whether any of TheBlot's commentary went beyond the boundaries of free speech and crossed over the line into defamation.
Strictly from my perspective as a lawyer, the Google Subpoena is unsettling. If Plaintiff Brummer prevails in sustaining the viability of his Google Subpoena, the confidentiality of sourcing information of some nine email accounts will be at risk. One might wonder whether those nine accounts were each opened by nine different individuals -- and muse even further whether the purported names on the accounts will match those of the folks who actually created the email addresses. Who knows and why should that even matter? Even assuming that the nine accounts were opened by the same individual, that should not be, in and of itself, enough justification to pierce the confidentiality of such online activity. Many of us have opened and maintain more than one email account and online identities. READ
Today's BrokeAndBroker.com Blog examines a Class Action lawsuit brought on behalf of JPMorgan financial advisory clients. It's an interesting bit of litigation involving allegations that JPMorgan pressured its financial advisors to engage in what comes off as akin to a pump-and-dump of its proprietary mutual funds and investments. The lawsuit raises many troubling questions about fiduciary duties and dredges up the ongoing debate about whether checking off the Suitability box when recommending investments is enough. The problem for the Plaintiffs -- the formidable challenges -- is whether they can plead their proposed Class Action in a manner that will allow the case to proceed. READ