1. On July 30, 2024, the SEC instituted administrative proceedings against Western International Securities, Inc., a registered investment adviser and broker-dealer. Western failed to enforce its policies and procedures in connection with Regulation Best Interest. Christopher Kennedy, a then-registered representative at Western employed a risky day trading strategy in the accounts of several of his customers. The trading strategy, which involved the purchase and sale of options contracts, was not in the best interest of these customers, several of whom had moderate to conservative risk profiles. This trading strategy also resulted in these customers paying excessively large commissions to Kennedy and Western and high turnover and cost-to-equity ratios in their accounts. Western was ordered to pay a civil money penalty in the amount of $140,000. https://www.sec.gov/files/litigation/admin/2024/34-100618.pdf
2. On July 29, 2024, the SEC instituted administrative proceedings against Lifemark Securities Corp., a dually registered investment adviser and broker-dealer. Lifemark failed to comply with Regulation Best Interest’s Care Obligation when a registered representative recommended a certain corporate bond known as an L Bond to retail customers without exercising reasonable diligence, care, and skill to understand the potential risks, rewards and costs associated with their recommendations. Lifemark acting through Geoffrey Wolterstorff, its registered representative, also failed to comply with Regulation Best Interest’s Care Obligation when they recommended L Bonds to a retail customer without exercising reasonable diligence, care, and skill to have a reasonable basis to believe the recommendation was in that particular customer’s best interest. Lifemark was ordered to pay disgorgement in the amount of $4,410, prejudgment interest of $705 and a civil money penalty in the amount of $85,000. Wolterstorff was ordered to pay disgorgement in the amount of $24,991, prejudgment interest of $3,430 and a civil money penalty in the amount of $15,000. https://www.sec.gov/files/litigation/admin/2024/34-100616.pdf and
4. On July 25, 2024, the SEC instituted administrative proceedings against Richard Robertson and IFP Advisors, LLC, a registered investment adviser. Robertson engaged in a cherry-picking scheme whereby he unfairly allocated purchases of securities between his personal and family accounts and his other IFP clients’ accounts. Robertson disproportionately allocated profitable trades to his personal and family accounts and disproportionately allocated unprofitable trades to his other advisory clients. IFP failed to supervise Robertson, failed to implement policies and procedures reasonably designed to prevent violations of the Advisers Act and its rules by its supervised persons, and made false and misleading statements in its Forms ADV concerning supposed safeguards it had to prevent investment adviser representatives from placing their own interests ahead of those of its advisory clients. Robertson was ordered to pay disgorgement in the amount of $592,437, prejudgment interest of $28,173 and a civil money penalty in the amount of $300,000. IFP was ordered to pay a civil money penalty in the amount of $400,000. https://www.sec.gov/files/litigation/admin/2024/34-100598.pdf
5. On July 22, 2024, the SEC announced that Richard Best, the Director of the Division of Examinations, will take leave from the agency to focus on his health. Keith Cassidy, the Division’s Deputy Director, will serve as its interim Acting Director. In addition to serving as Deputy Director, Cassidy is the National Associate Director of the Division’s Technology Controls Program (TCP) with responsibility for technology-focused examinations and overseeing the SEC’s CyberWatch program and the Cybersecurity Program Office. https://www.sec.gov/newsroom/press-releases/2024-87
6. On July 8, 2024, the SEC’s Office of Information and Regulatory Affairs released the Spring Unified Agenda of Regulatory and Deregulatory Actions. Below are the final and proposed rule stages applicable to investment advisers along with a hyperlink to additional information.
Final Rule Stage:
- Cybersecurity Risk Management: https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202404&RIN=3235-AN08
- Outsourcing: https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202404&RIN=3235-AN18
- Enhanced Disclosures about Environmental, Social, and Governance: https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202404&RIN=3235-AM96
Proposed Rule Stage:
- Customer Identification Programs (Anti-Money Laundering):
- Conflicts Associated With the Use of Predictive Data Analytics (Artificial Intelligence): https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202404&RIN=3235-AN14
- Regulation D/Form D Improvements for Private Fund Advisers: https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202404&RIN=3235-AN04
- Safeguarding Advisory Client Assets (Custody): https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202404&RIN=3235-AM32
7. On July 2, 2024, the SEC announced enhancements to its website to improve compliance with federal statutes and standards as well as the site’s functionality.
Below are hyperlinks to important topics.
- Press Releases: https://www.sec.gov/newsroom/press-releases
- Administrative Proceedings: https://www.sec.gov/enforcement-litigation/administrative-proceedings
- Litigation Releases: https://www.sec.gov/enforcement-litigation/litigation-releases
- Risk Alerts: https://www.sec.gov/compliance/risk-alerts
- Examination Priorities: https://www.sec.gov/compliance/examination-priorities
- Investment Advisers Act of 1940: https://www.govinfo.gov/content/pkg/COMPS-1878/pdf/COMPS-1878.pdf
- Rules and Regulations under the Advisers Act: https://www.ecfr.gov/current/title-17/chapter-II/part-275
- Rule Making: https://www.sec.gov/rules-regulations/rulemaking-activity
8. On July 1, 2024, the SEC, MSRB and FINRA announced the opening of registration for both in-person and virtual attendance of their Compliance Outreach Program for municipal market professionals. The event is open to the public and will take place on Wednesday, Nov. 20, and Thursday, Nov. 21, 2024. The program will provide municipal market participants an opportunity to hear from SEC, MSRB, and FINRA staff on timely regulatory and compliance matters for municipal advisors and dealers. Panel topics will include compliance pain points for municipal advisors and broker-dealers, exam and enforcement priorities, a regulatory outlook, net capital requirements, federal fiduciary duty, post-trade monitoring, and other municipal market hot topics. https://www.sec.gov/newsroom/press-releases/2024-80