Compliance and Regulatory Services (CARS) Hot Topics for May 2015

May 14, 2015

This month, we are highlighting an SEC action against a chief compliance officer for approving of a portfolio manager’s personal business relationship conflict of interest, failing to disclose the conflict to the board of directors (a fiduciary obligation). The firm was also fined $12 million dollars. The portfolio manager of a large investment adviser reported that he and his family had an interest in a company that had entered into a joint relationship with a portfolio holding of one of the mutual funds he managed. Although the multi-billion dollar global investment adviser with a large compliance staff has policies and procedures in place to meet its compliance program statutory requirements under Rules 206(4)-7 and 38a-1, the firm fell down on both its monitoring efforts related to fund-imposed investment restrictions and its follow-up process for reporting conflicts of interests to its independent board of directors and appropriately addressing conflicts in the best interest of its clients.  
Our Take: We cannot stress enough the importance of maintaining rigorous compliance policies and procedures and making sure your staff complies with the fundamental reporting and other requirements of the procedures. It is difficult to understand how one of the largest SEC-registered global investment advisers, with well-seasoned compliance professionals and a large legal staff, could possibly make this mistake in judgment.  

Below, for your convenience, we've aggregated recent postings from the SEC and FINRA.

SEC News 

April 30, 2015 SEC Announces Compliance Outreach Program Seminars for Investment Adviser and Investment Company Senior Officers
April 29, 2015 SEC Proposes Rules to Require Companies to Disclose the Relationship Between Executive Pay and a Company’s Financial Performance
April 29, 2015 SEC Proposes Cross-Border Security-Based Swap Rules Regarding Activity in the U.S.
April 29, 2015 SEC Charges Santa Barbara-Based Hedge Fund Firm, Executives, and Auditor for Improper Expense Allocations
April 28, 2015 SEC Announces Award to Whistleblower in First Retaliation Case
April 22, 2015 SEC Charges Issuer for Failing to Make Public Filings
April 22, 2015 SEC Announces Million-Dollar Whistleblower Award to Compliance Officer
April 20, 2015 Fort Worth Regional Director David Woodcock to Leave SEC  
April 20, 2015 SEC Charges BlackRock Advisors With Failing to Disclose Conflict of Interest to Clients and Fund Boards
April 17, 2015 SEC Announces Agenda for May 13 Meeting of the Equity Market Structure Advisory Committee
April 16, 2015 SEC Charges 10 Individuals in Scheme to Sell Stock in Blank Check Companies Secretly Bound for Reverse Mergers
April 16, 2015 SEC Charges New York-Based Financial Advisor With Stealing $20 Million From Customers
April 15, 2015 SEC Staff and FINRA Issue Report on National Senior Investor Initiative
April 14, 2015 SEC Halts Investment Scheme Targeting Military Personnel
April 9, 2015 SEC Announces Fraud Charges Against Former Accounting Executive at Japanese Subsidiary
April 9, 2015 SEC Names Marc Wyatt as Acting Director of the Office of Compliance Inspections and Examinations
April 9, 2015 SEC Halts Microcap Scheme in South Florida
April 8, 2015 SEC Charges Oregon-Based Defense Contractor With FCPA Violations
April 8, 2015 Gregg E. Berman, Associate Director in the Division of Trading and Markets, to Leave SEC
April 7, 2015 SEC Charges L.A.-Based Pacific West Capital Group With Fraud in Sale of Life Settlement Investments
April 7, 2015 OCIE Director Andrew Bowden to Leave SEC  
April 7, 2015 SEC Obtains Asset Freeze in Ponzi Scheme Involving Loans to Professional Athletes
April 6, 2015 SEC Charges Firms and Individuals for Defrauding Investors in Cellular Licensing Scheme
April 2, 2015 SEC Charges Friends With Insider Trading on Acquisition of Cooper Tire  
April 1, 2015 SEC Charges North Carolina Executive With Fraud
April 1, 2015 SEC: Companies Cannot Stifle Whistleblowers in Confidentiality Agreements



April 30, 2015 The SEC as the Whistleblower's Advocate
April 30, 2015 Toward Healthy Companies and a Stronger Economy: Remarks to the U.S. Treasury Department’s Corporate Women in Finance Symposium  
April 21, 2015 Remarks at University of South Carolina and UNC-Charlotte 4th Annual Fixed Income Conference
April 15, 2015 Remarks at the Harvard Law School Symposium on Building the Financial System of the 21st Century: An Agenda for Europe and the United States  
April 14, 2015 The Dominance of Data and the Need for New Tools: Remarks at the SIFMA Operations Conference  
April 14, 2015 The Importance of Smart Regulation
April 14, 2015 Regulators Working Together to Serve Investors
April 10, 2015 Bank Regulators at the Gates: The Misguided Quest for Prudential Regulation of Asset Managers: Remarks at the 2015 Virginia Law and Business Review Symposium  

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April 27, 2015  FINRA Files Cease and Desist Order Against Avenir Financial Group, CEO Michael Clements, and Registered  Representative Karim Ibrahim for Fraud Against Elderly Investors
April 23, 2015 FINRA Orders RBC to Pay Fine and Restitution Totaling More Than $1.4 Million for Unsuitable Sales of Reverse Convertibles
April 20, 2015 FINRA Launches Toll-Free FINRA Securities Helpline for Seniors
April 16, 2015 FINRA Board Approves Changes to Communications With the Public Rules, Trading Activity Fee
April 15, 2015 SEC Staff and FINRA Issue Report on National Senior Investor Initiative

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FINRA Rule Filings List
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