Adam Weber

The Financial Industry Regulatory Authority has more enforcement cases related to Regulation Best Interest “in the pipeline,” as the disciplinary actions “have been increasing,” Bill St. Louis, head of FINRA enforcement, said in a recent blog post. ThinkAdvisor #RegulationBestInterest #RegBI #FINRA #Compliance #Regulation #FinancialServices #AuditTrail #SecuritiesCompliance

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The SEC Commissioner Hester Peirce (https://lnkd.in/e9aaEJMK) was one of the first to comment on the Financial Data Transparency Act (“FDTA”) proposal that would see the FIGI replace CUSIP as the standard market identifier. (prior post here: https://lnkd.in/eiAyWDHK). She's supportive of the paper, but doesn't fully endorse its recommendations. Read it here: https://lnkd.in/eBDAyyJD. She warns about the risk of mangling the implementation, and questions the benefits of interoperability, weighed against the costs. I have argued that the opportunity cost of not fixing CUSIP is a "tax on innovation" and is probably immeasurable. She also calls out the risk of such identifiers (the #LEI included) being managed by a third party. She poses a key question: "Is the proposing release correct that the FIGI does and the CUSIP does not meet the FDTA’s criteria for designation as a joint standard? If CUSIP does not now meet the criteria, what changes would enable it to do so?". The #FDTA paper clearly spells out why it favored #FIGI - "[CUSIP is] proprietary and not available under an open license in the United States". How we got here: a failure of governance: The SEC's mandate is to oversee the structure and smooth operation of the market - and should already have intervened as many of us have urged them to. Frankly we wouldn't be in this mess had the American Bankers Association fully embraced its responsibility as a custodian - instead it allowed the rampant commercialization of the standard, leading to a massively inflated valuation that FactSet could justify based on the prevailing business model. Now we are in a pickle. The Commissioner talks about how "Hardwiring a technology into a rule runs the risk of preserving that requirement far after that technology’s expiration date". My view - it is highly unlikely that a security identifier will ever become unnecessary - but it needs to evolve. What we need is an identifier that the whole market agrees to use and is open - we have neither. My prediction - someone will do the math on the cost to switch to the FIGI, and that it will be significant and take years. This will lead to 3 options: 1. FIGI prevails. Big costs and a long implementation period. The CUSIP will die. 2. The CUSIP and the FIGI will BOTH be required. An interop (lookup) table will need to openly to enable systems to seamlessly switch between the 2. 3. CUSIP is overhauled - either by the courts, the SEC, or by the current custodians of the standard. Likely the cheapest option - but costly to those that currently run the service. What do you think?

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On June 5, 2024, the U.S. Court of Appeals for the Fifth Circuit unanimously vacated a rule the Securities and Exchange Commission (SEC) enacted in August 2023 that was intended to protect investors who invest in certain private funds (e.g., hedge funds, private equity funds, and venture capital funds advised by registered or exempt reporting advisers) (Private Funds) and prevent fraud by the investment advisers to Private Funds. 📖 Read more in this Financial Services Observer blog written by Rich Cutshall, Matt Bromberg, Ryan Helmrich, Cynthia Marian, and Melissa Peach, Esq.: https://buff.ly/3VuJuLf. #GTBlogs #PrivateFunds #FinancialServices #SEC

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2025 SEC Exam Prioritize The SEC has released their 2025 fiscal year examination prioritizes. Below are the SEC’s focused areas for investment advisers. 1.    Adherence to Fiduciary Standards of Conduct – is the adviser showing their duty to care for and loyalty to its clients, disclosing and mitigating conflicts of interest 2.    Effectiveness of Advisers’ Compliance Programs – has the registered investment adviser adopted written policies and procedures, designated a Chief Compliance Officer (CCO), performs at least annually a review of those policies and procedures, appropriateness and accuracy of fee calculations and disclosure of fee-related conflicts 3.    Examinations of Advisers to Private Funds – Private fund exposure to interest rate fluctuation and market volatility, accuracy and allocations of private fund fees and expenses, compliance with recently adopted SEC private fund rules, such as amendments to Form PF 4.    Never Examined Advisers, Recently Registered Advisers, and Advisers Not Recently Examined 5.    Cybersecurity – are policies and procedures in place to prevent uninterrupted mission-critical services 6.    Regulation S-ID and S-P – are policies in place to safeguard investor and customer records, oversight of third-party vendors 7.    Crypto Assets – examination of the crypto related offering, sale, recommendation, advice, trading, and other activities #investmentadvisers #hedgefund #privateequity https://lnkd.in/eXJ23hRx

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The next advisory in our Financial Capability Month series is all about trusted contacts.  Your financial firm may request that you give them the name and contact information of a “trusted contact.” While it is not mandatory that you do so, state securities regulators, the Securities and Exchange Commission, and FINRA encourage you to consider providing the name of someone you trust as a contact on your accounts. To read our full advisory, click here: https://lnkd.in/eRchJ57f #FinancialCapabilityMonth

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LinkedIn Post: --- 🚨 [Industry Alert] New Allegations in Financial Services 🚨 A concerning issue has emerged within the financial services community as Robert Palatella, a financial advisor at Wells Fargo Clearing Services, LLC, faces serious allegations. Filed on March 19, 2024, a customer dispute remains unresolved, claiming that in 2021 Mr. Palatella made investment recommendations that did not align with the client's experience and risk tolerance. This incident serves as an important reminder of the critical need for transparency and suitability in financial advising. It emphasizes the responsibilities financial professionals carry in aligning their strategies with clients' profiles and objectives. Let's have a responsible discussion on how to promote and ensure best practices in financial advising, to maintain trust and integrity in the services we provide. Ensuring client-centric strategies are more critical now than ever. For more details, check out the original article on [Investment Fraud Lawyers](https://lnkd.in/enKmFySn). #Finance #Compliance #FinancialServices #Investment #RiskManagement --- Note: The above LinkedIn post is written with caution and respect for the ongoing legal process. No definitive conclusions are drawn regarding the guilt or innocence of the individual involved, as legal proceedings are pending. https://lnkd.in/enKmFySn

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Last year, the SEC released final rules under the Advisers Act, focused on private fund disclosures and sponsor practices. The final rules were designed to protect investors in private funds and prevent fraud by investment advisers. Shortly following their adoption, the final rules were challenged by six associations representing private fund managers. Recently the United States Court of Appeals for the Fifth Circuit vacated the final rules based on the determination that the SEC did not have authority to formulate the final rules in the first place. Read the full details and its impact our bulletin: https://bit.ly/3RwRWHH #privateequity #transactions #investments #fundformation #privatefund #capitalmarkets #banking #financialinstitutions #regulatory #advisory Batya Nadler | Max Shakin | Andrew Beck

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It is no secret that FINRA has long viewed variable annuity (VA) exchanges with a side-eye. It's issued multiple notices to members (e.g., NTM 10-05) and adopted specific rules requiring specific, burdensome requirements for Broker-Dealers selling VAs (e.g., FINRA Rule 2330). FINRA issued an AWC against BBVA illustrating this last week. After reciting its often-stated position that "VAs are complex investments" for which "FINRA requires that firms provided more comprehensive and targeted protection to investors," FINRA faulted BBVA because it "had no report, alert, or other system or review that surveilled for representatives' VA exchange rates." For this, BBVA was fined $150,000. Notably absent was any allegation that any customer was harmed. https://lnkd.in/geFCzmhq

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Major financial firm has been fined $1.5 million by FINRA for inadequate supervision, leading to avoidable fees in client transactions. This penalty underscores compliance deficiencies that could have been avoided with stronger adherence to Reg BI standards for client protection and transparency. Read more here: https://lnkd.in/e5nCXhdw. At Softek Compliance, we can help your firm with updating policies and procedures to align with Reg BI requirements and provide training for reps. View our services here: https://lnkd.in/eQUvAYc7. #RegBI #FINRA #SoftekCompliance

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As mentioned in our post this past weekend, ISLA Americas is closely monitoring the progress of FINRA’s Partial Amendment No. 1 to the proposed SLATE (Securities Lending and Transparency Engine) rules, which were published in the Federal Register today. https://lnkd.in/gEYFWjwn This amendment reflects significant progress in addressing feedback from ISLA and other industry stakeholders regarding the implementation of SEC Rule 10c-1a. Key Highlights from the Amendment: **Simplified Reporting: Removal of unnecessary modifiers and indicators, such as exclusive arrangements, unsettled loans, and rate adjustments. **Extended Deadlines: Reporting deadlines moved to 11:59 PM ET, with a new cut-off for loans at 7:00 PM ET. **De Minimis Threshold: Aggregate data reporting applies only to securities with 10 or more distinct loans reported on the prior business day. Rebate Rates and Benchmarks: Flexibility to report either a rate/fee or the negotiated spread and benchmark. **SLATE Security List: FINRA to provide a list of reportable securities while maintaining flexibility for participants. ISLA Americas appreciates the responsiveness to operational burdens and data privacy concerns raised in comment letters. The revised approach to aggregate reporting and the removal of certain modifiers address many of the industry’s key concerns. Next Steps: Comments on the amendment are due December 6, 2024, 15 days from today’s publication. ISLA Americas will work with members and counsel to evaluate the amendment to respond to the partial amendment. We encourage members to share feedback or specific concerns that may warrant further advocacy. Stay tuned for updates. For further information, please follow this link to the ISLA Americas and KPMG US Whitepaper on 10C-1a https://lnkd.in/eu_ugTNt #SecuritiesLending #ISLAAmericas Fran Garritt International Securities Lending Association (ISLA) #FINRA #SLATE #10c1a #Regulation

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"We can't let innovation outpace responsibility." The SEC's 2025 Exam Priorities and FINRA AI Guidance highlight the importance of AI governance. Is your firm prepared? Our latest e-book can help. Written by compliance and AI experts, it provides best practices for establishing an AI governance program for your firm. #GenerativeAI #RegulatoryCompliance #RegTech #Smarsh

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Remember sufficient vs necessary? Significant dissents on Piper Sandler $2M settlement from Commissioners Pham and Mersinger on the lack of evidence supporting the settlement.   What to learn: 🎺 Settlement may avert costs associated with more legal work and discovery. $2M may have been a good penalty to avoid more work here and potential increased exposure. 🎺Use of unapproved devices doesn’t necessarily violate CFTC recordkeeping requirements, but is likely sufficient to indicate a potential issue. 🎺 Use of unapproved devices against firm policy will (in the least) result in a failure to supervise charge. Don’t have a policy and ignore it. 🎺Senior-level use of unapproved devices likely leads to the perception that it’s ok to do. This is the second-such order to indicate senior-level tone. 🎺The dissenting Commissioners argue that there is no evidence that Piper Sandler failed to preserve transactional records and, thus, the CFTC had no jurisdiction to bring an enforcement action.    CFTC Order: https://lnkd.in/ejY3w52Y Commissioner Pham Dissent: https://lnkd.in/eRDEWzU4 Commissioner Mersinger Dissent: https://lnkd.in/eNDtugft Trace Schmeltz

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It’s been over six years since the implementation of the FINRA and Municipal Securities Rulemaking Board mark-up disclosure rule, yet many firms continue to struggle with #compliance. Contact us to learn how Effi’s Trade Oversight module can help you shore up your processes for the next evolution of the audit. https://lnkd.in/guVm6wMY

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The SEC has released its 2025 Examination Priorities Report, highlighting key areas of focus for examinations in the upcoming year, which is broken down by Lowenstein's Scott Moss, Michael Scales, and Cagla Yetis in the latest Investment Management client alert. The Report emphasizes adherence to fiduciary standards, the effectiveness of compliance programs, and other topics applicable to investment advisers. Read the full alert: https://bit.ly/3O86QSE #SEC #InvestmentAdvisers #Compliance #FiduciaryDuties #FinancialRegulation

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Financial regulators were focused on enforcement actions in Q3, notes Saifr's Head of Compliance, Allison Lagosh. 🔎 The SEC brought charges against nine RIAs for violating the Marketing Rule concerning disclosures and unsubstantiated statements. 📲 FINRA conducted a sweep of over 1,000 social media posts and found 70% of them were non-compliant in some substantive way. 👤 The SEC charged a popular gambling site with selectively disclosing material, nonpublic information to investors who interacted with the company CEO’s social media accounts. These actions serve as a wake-up call to firms, driving home the importance of having reasonable supervisory systems in place to help ensure communications are reviewed, captured, and meeting applicable content standards. 🔗 Read more: https://hubs.li/Q02TSPhF0 #FinancialServices #Compliance #BuiltInLabs

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Yet another national employer has been slapped with a suit alleging a fiduciary breach in its use of plan forfeitures. The target this time is Bank of America—which now joins firms like Tetra Tech, Honeywell, Thermo Fisher Scientific 401(k) Retirement Plan, The Clorox Company, Intel Corporation, Qualcomm, Intuit and HP—in the crosshairs of participant-plaintiffs represented by Hayes Pawlenko LLP, a South Pasadena, CA-based firm that positions themselves as an employment litigation firm “representing employees in disputes with their employers.” The suit (Becerra v. Bank of Am. Corp., C.D. Cal., No. 5:24-cv-01697, 8/9/24) alleges—as do the others[i]—that “as part of a wrongful pattern and practice, Defendants have wrongfully and consistently used forfeited nonvested plan assets for its own benefit, to reduce future employer contributions, rather than for the benefit of Plan participants.” Moreover, the suit claims that “by choosing to use forfeited Plan assets to benefit itself and not the Plan or the Plan’s participants, Defendants have placed its own interests above the interests of the Plan and its participants.” In what seems to be a relatively new angle presented here, Nevin Adams writing in the National Association of Plan Advisors provides additional details here: https://lnkd.in/g-uVf_3J #fiduciary #fiduciaryduty #plansponsors #litigation

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Navigating the SEC’s 2022 Regulatory Changes: Tailored Shareholder Reports The SEC's October 2022 regulatory changes have transformed shareholder reports, mandating the use of Inline XBRL for Mutual Funds and ETFs to ensure clarity and comprehensive information for investors. Our latest blog delves into these changes and the evolution of Tailored Shareholder Reports (TSRs). At DataTracks, we specialize in helping you navigate these new requirements. Discover how our expertise ensures compliance, transparency, and cost-efficiency. Read the full blog to understand the implications of these regulatory changes https://lnkd.in/gesf_M-R Contact Email: [email protected] Website: www.datatracks.com/us #SEC #ShareholderReports #XBRL #DataTracks #RegulatoryCompliance #FinancialReporting

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