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The heightened Newman requirements for remote tippee liability apply not only in criminal cases but also in civil cases brought by the SEC.  On April 6, 2015, in SEC v. Payton, Judge Rakoff of the Southern District of New York ruled that the principles set forth in the criminal case, U.S. v. Newman (2d Circuit), apply equally in civil cases brought…

On June 23, 2015, the SEC censured an investment advisor and its two principals for rickety compliance policies and procedures.[1] Among other things, the SEC found that, due to systemic compliance failures, the advisor overcharged its high net worth clients for their investments in a mutual fund called the Appleseed Fund. The firm, Pekin Singer, offered…

The Los Angeles U.S. Attorney has brought charges against a former J.P. Morgan analyst and two of his friends alleging that the analyst tipped deal information he learned while at the bank to his friends. Ashish Aggarwal, 27, of San Francisco, and two longtime friends surrendered to the FBI Tuesday, after being charged with a…

In two recent cases, the SEC ordered JP Morgan Chase to pay over $270 million for what it deemed inadequate disclosures about certain conflicts of interest. When closely examined, these two cases illustrate just how detailed and granular the Commission can be when evaluating and prosecuting conflicts non-disclosure issues. The Proprietary Funds Case On December…

The SEC has sued the Rhode Island Economic Development Corporation (RIEDC) and bond underwriter Wells Fargo alleging that RIEDC and Wells Fargo misled bond investors in connection with their investments in Curt Schilling’s failed video game company, 38 Studios. RIEDC had lured 38 Studios to Rhode Island with significant incentives, including the bond deal, only…

The SEC has charged a California water district and its manager with misleading investors in connection with the district’s $77 million bond offering. Specifically, the SEC alleges that the Westlands Water District and its manager engaged in improper reserve accounting to give the appearance of higher revenues, which the manager referred to as “a little…

The SEC is increasing the number RIA inspections by the Office of Compliance Inspections and Examinations (OCIE) and has signaled an aggressive agenda for such exams. Here is a non-exhaustive list of items a Chief Compliance Officer and his or her staff may want to consider well in advance of getting a call from OCIE:

There has been much discussion around the Department of Labor’s fiduciary rule, which looks like it will take effect soon. Basically, it would make registered representatives (brokers) fiduciaries to all retirement accounts. This is a change from the current “suitability” standard, which, while important, is not the same as a best interests duty of loyalty.…

One of the SEC’s functions is to examine investment advisers to ensure compliance with federal law and SEC rules. This segment of the market has been steadily increasing over recent years. In particular, there has been a shift away from brokers towards investment advisers. Ten years ago there were approximately 9,000 investment advisers managing $28…

The long awaited and much contested DOL Rule imposing a fiduciary duty on brokers providing advice to retirement accounts is now final. Though it provides a significant runway for implementation (at least a year), the Rule is already changing business models from small brokerages right up to the biggest wirehouses. The Big Change Under current…