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SEC Investor Bulletin: Trading Suspensions

Posted by William Byrnes on October 13, 2014


SECThe SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to help educate investors about the SEC’s rules and regulations related to trading suspensions.  The federal securities laws generally allow the SEC to suspend trading in any stock for up to ten business days.  This bulletin answers some of the typical questions we receive from investors about trading suspensions.  A list of companies whose stock is currently subject to an SEC trading suspension, or which previously has been subject to an SEC trading suspension, may be found here.

Why would the SEC suspend trading in a stock?

The SEC may suspend trading in a stock when the Commission is of the opinion that a suspension is required to protect investors and the public interest.  Circumstances that might lead the Commission to suspend trading include:

  • A lack of current, accurate, or adequate information about the company, for example, when a company is not current in its filings of periodic reports;
  • Questions about the accuracy of publicly available information, including in company press releases and reports, about the company’s current operational status, financial condition, or business transactions;
  • Questions about trading in the stock, including trading by insiders, potential market manipulation, and the ability to clear and settle transactions in the stock.

Why couldn’t the SEC forewarn investors that it was about to suspend trading in a stock?

The SEC cannot announce that it’s working on a suspension.  We conduct this work confidentially to maintain the effectiveness of any related investigation we may be conducting.  Confidentiality also protects a company and its shareholders if the SEC ultimately decides not to issue a trading suspension.  The SEC is mindful of the seriousness of suspensions, and carefully considers whether it is in the public interest and for the protection of investors to order a trading suspension.

What happens when the ten business day suspension period ends?

The SEC will not comment publicly on the status of a company when the ten-day suspension period ends because the company may still have serious legal problems.  For instance, the SEC may continue to investigate a company to determine whether it has defrauded investors.  The public would not know if the SEC is continuing its investigation unless the SEC publicly announces an enforcement action against the company.

Furthermore, when an SEC trading suspension ends, a broker-dealer generally may not solicit investors to buy or sell the previously-suspended over-the-counter (“OTC”) stock until certain requirements are met.  Before soliciting quotations or resuming quotations in an OTC stock that has been subject to a trading suspension, a broker-dealer must file a Form 211 with the Financial Industry Regulatory Authority (“FINRA”) representing that it has satisfied all applicable requirements, including those of Rule 15c2-11 and FINRA Rule 6432.

Among other things, Rule 15c2-11 requires broker-dealers to review and maintain certain documents and information about the company, including in certain cases:

  1. the company’s state of organization, business line, and names of certain control affiliates;
  2. the title and class of the securities outstanding; and
  3. the company’s most recent balance sheet and its profit and loss and retained earnings statement.

No broker-dealer may solicit or recommend that an investor buy an OTC stock that has been subject to a trading suspension unless and until FINRA has approved a Form 211 relating to the stock.  If there are continuing regulatory concerns about the company, its disclosures, or other factors, such as a pending regulatory investigation, a Form 211 application may not be approved.

However, limited or “unsolicited” trading can occur in an OTC stock that has been subject to a trading suspension after the suspension ends but before a Form 211 is approved.  This may allow investors to trade the stock when a broker or adviser has not solicited or recommended such a transaction.  Even though such trading is allowed, it can be very risky for investors without current and reliable information about the company.

Will trading automatically resume after ten days?

It depends on the market where the stock trades.  Different rules apply in different markets.

For stocks that quote in the OTC market (which includes stocks quoted on the Bulletin Board and OTC Link (f/k/a Pink Sheets)), quoting doesnot automatically resume when a ten-day suspension ends.  Before OTC stock quoting can resume after a suspension period, SEC regulations require a broker-dealer to review specific information about the company in accordance with Exchange Act Rule 15c2-11 and FINRA Rule 6432.  If a broker-dealer does not have confidence that a company’s financial statements are reasonably current and accurate in all material respects, especially in light of the questions that may have been raised by the SEC suspension action, then a broker-dealer may not publish a quote for the company’s stock.  The OTC markets function through dealer systems where only broker-dealers may quote and facilitate trading in OTC stocks.

In contrast to stocks that trade in the OTC market, stocks that trade on an exchange resume trading as soon as an SEC suspension ends.

If the suspended stock resumes trading, why is it trading at a much lower price?

The trading suspension may raise serious questions and cast doubts about the company in the minds of investors.  While some investors may be willing to buy the company’s stock, they will do so only at significantly lower prices.

Take precautions following an SEC trading suspension: check for reliable information.

Investors should be very cautious in considering an investment in a stock following a trading suspension.  At the very least, investors should assure themselves that they have current and reliable information about a company before investing.

  • Research the Company: Always research a company before buying its stock, especially following a trading suspension.  Consider the company’s finances, organization, and business prospects.  This type of information often is included in filings that a company makes with the SEC.
  • Review the Company’s SEC Filings: This information is free and can be found on the Commission’s EDGAR filing system.  Some companies are not required to file reports with the SEC.  These are known as “non-reporting” companies.  Investors should be aware of the risks of trading the stock of such companies, as there may not be current and accurate information that would allow investors to make an informed investment decision.
  • Be Skeptical: Investors should always ask why someone provides them a “hot” tip. Investors should also do their own research and be aware that information from online blogs, social networking sites, and even a company’s own website  may be inaccurate and sometimes intentionally misleading:

If current, reliable information about a company and its stock is not available, investors should consider seriously whether this may be a good investment.

Why would the SEC suspend trading of a stock when it knows that such action will hurt current shareholders?

The SEC suspends trading in a security when it is of the opinion that the suspension is required in the public interest and to protect investors.  Because a suspension often causes a dramatic decline in the price of the security, the SEC suspends trading only when it believes that the public may be making investment decisions based on a lack of information, or false or misleading information.  A suspension may prevent potential investors from being victimized by a fraud.

How can investors find out if the stock will trade again after a suspension?

Investors can contact the broker-dealer who sold you the stock or a broker-dealer who quoted the stock before the suspension. Ask the broker-dealer if it intends to resume publishing a quote in the company’s stock.

If there is no market to sell my security, what can investors do with their shares?

If there is no market to trade the shares, they may be worthless.  Investors may want to contact their financial or tax advisers to determine how to treat such a loss on their tax returns.

What can investors do if the company acted wrongfully and they have lost money?

If investors want to get their money back, they will need to consider taking legal action on their own.  The SEC cannot act as their lawyer.  Investors must pursue all of their legal remedies themselves or with the assistance of legal counsel they engage themselves.  For more information about how to protect your legal rights, including finding a lawyer who specializes in securities law, read our flyer, How the SEC Handles Your Complaint or Inquiry.

To learn how to file an arbitration action against a broker-dealer, investors can contact the Director of Arbitration at FINRA.  FINRA also offers mediation as an option before going to arbitration.

Where can investors get information about trading suspensions?

Investors can find a list of companies whose stocks have been suspended by the SEC since October 1995 on our website.

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Mark Cuban joins critics of SEC’s ‘broken windows’ policy

Posted by William Byrnes on September 15, 2014


International Financial Law Prof Blog.

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SEC Adopts Credit Rating Agency Reform Rules

Posted by William Byrnes on August 28, 2014


International Financial Law Prof Blog:

The Securities and Exchange Commission Wednesday, August 27 adopted new requirements for credit rating agencies to enhance governance, protect against conflicts of interest, and increase transparency to improve the quality of credit ratings and increase credit rating agency accountability.  The new rules and amendments, which implement 14 rulemaking requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act, apply to credit rating agencies registered with the Commission as nationally recognized statistical rating organizations (NRSROs). …. 

International Financial Law Prof Blog

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DC Appeals rules Stanford’s defrauded investors and not protected by the Securities Investor Protection Corporation (SIPC)

Posted by William Byrnes on July 19, 2014


A three judge U.S. Court of Appeals for the District of Columbia panel unanimously upholding the District Court decision that Stanford International Bank CD Investors do not meet the definition of “customer” under the Securities Investor Protection Act (SIPA).  Thus, the Securities Investor Protection Corporation (SIPC) will not cover the losses of Stanford investors, up to the maximum statutory amount of $500,000 for securities.

What is the SIPC?

SIPC was created under the Securities Investor Protection Act as a non-profit membership corporation. SIPC oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial trouble, and customer assets are missing.

In a liquidation under the Securities Investor Protection Act, SIPC and the court-appointed Trustee work to return customers’ securities and cash as quickly as possible. Within limits, SIPC expedites the return of missing customer property by protecting each customer up to $500,000 for securities and cash (including a $250,000 limit for cash only).

Although created under a federal law, SIPC is not an agency or establishment of the United States Government, and it has no authority to investigate or regulate its member broker-dealers.

SECWhat is the SEC suing the SIPC?

The Securities Investor Protection Act of 1970, 15 U.S.C. § 78ggg SEC functions states that:

(b) Enforcement of actions

In the event of the refusal of SIPC to commit its funds or otherwise to act for the protection of customers of any member of SIPC, the Commission may apply to the district court of the United States in which the principal office of SIPC is located for an order requiring SIPC to discharge its obligations under this chapter and for such other relief as the court may deem appropriate to carry out the purposes of this chapter.

 

What are the facts?

7,000 investors, on the advice of an SEC registered broker dealer Stanford Group Company (Houston, Texas) (“SGC”) that was a member of the SIPC, invested in certificates of deposit (CDs) issued by an Antigua based Stanford International Bank LLC (“SIBL”), not a member of the SIPC.

The CDs are debt assets that promised a fixed rate of return.  The SIBL CD disclosure statements stated that the products are not covered by the investor protection or securities insurance laws of any jurisdiction such as the U.S. Securities Investor Protection Insurance [sic] Corporation.

What is the central issue? 

The central issue in this appeal is whether investors who purchased SIBL CDs at the suggestion of SGC employees qualify as SGC “customers” under the SIPA, that SIPC may be ordered to cover their losses up to the statutory maximum.

What did the SIPC argue to exclude its protection?

In SIPC’s view, the CD investors were not SGC “customers” within the meaning of the Act, a precondition to liquidation of SGC.  SIPC explained that the Act “protects the ‘custody’ function that brokerage firms perform for customers.”  Here, SIPC concluded, the circumstances fell outside the Act’s custody function because SGC itself never held investors’ cash or securities in connection with their purchase of the CDs. Rather, “cash for the purpose of purchasing CDs . . . was sent to SIBL, which is precisely what the customer intended.”  As for the “physical CDs,” they presumably “were issued to, and delivered to” the investors, and SGC did not “maintain[] possession or control of the CDs.” (citation removed)

Why did the SEC seek to extend SIPC protection?

SEC reached the opposite conclusion.  In June 2011, the Commission issued a formal analysis stating that investors who had purchased SIBL CDs at the urging of SGC employees qualified as SGC “customers” under the Act. Citing evidence that Stanford had “structured the various entities in his financial empire . . . for the principal, if not sole,
purpose of carrying out a single fraudulent Ponzi scheme,” the Commission determined that the “separate existence” of SIBL and SGC “should be disregarded.” (citation removed) ….

The Commission grounds its argument for disregarding the corporate separateness of SIBL and SGC in the doctrine of “substantive consolidation,” an equitable doctrine typically applied in bankruptcy proceedings. “In general, substantive consolidation results in the combination of the assets of [two] debtors into a single pool from which the claims of creditors of both debtors are satisfied ratably.” 2 Collier on Bankruptcy ¶ 105.09[3], at 105-110–11…. Courts have employed a “variety” of tests when assessing whether to grant substantive consolidation. (citation removed) ….

The doctrine of substantive consolidation has been applied in SIPA liquidations. In New Times I, for instance, the bankruptcy court substantively consolidated a SIPC-member
broker undergoing liquidation with a related, non-broker entity.  The assets of the related entity were brought into the SIPC member’s liquidation estate, enlarging the available pool for customer recovery. Investors with cash on deposit with the non-broker entity were treated as “customers” in the liquidation, even though the member broker itself never held those investors’ funds.  (citation removed) ….

Who is a customer under the SIPA?

§78lll Definitions (B) Included Persons

The term ‘customer’ includes-

(i) any person who has deposited cash with the debtor for the purpose of purchasing securities;

(ii) any person who has a claim against the debtor for cash, securities, futures contracts, or options on futures contracts received, acquired, or held in a portfolio margining account carried as a securities account pursuant to a portfolio margining program approved by the Commission; and

(iii) any person who has a claim against the debtor arising out of sales or conversions of such securities.

(C) Excluded Persons

The term ‘customer’ does not include any person, to the extent that-

(i) the claim of such person arises out of transactions with a foreign subsidiary of a member of SIPC; or

(ii) such person has a claim for cash or securities which by contract, agreement, or understanding, or by operation of law, is part of the capital of the debtor, or is subordinated to the claims of any or all creditors of the debtor, notwithstanding that some ground exists for declaring such contract, agreement, or understanding void or voidable in a suit between the claimant and the debtor.

What analysis did the District Court lend to the term customer?

In SEC v. Sec. Investor Prot. Corp., 872 F. Supp. 2d 1 (D.D.C. 2012) Judge Robert Wilkins analyzed this definition of customer by looking to leading treatises.

1024px-D.C._Court_of_Appeals_-_view_from_John_Marshall_ParkAs summarized by one leading treatise, the SIPA statute “attempts to protect customer interests in securities and cash left with broker-dealers….” Loss & Seligman, Securities Regulation ¶ 8.B.5.a, p. 3290 (3rd ed.2003) (citing legislative history) (emphasis added). Another prominent treatise states that “SIPA is designed to protect securities investors against losses stemming from the failure of an insolvent or otherwise failed broker-dealer to properly perform its role as the custodian of customer cash and securities.” 1–12 Collier on Bankruptcy, P. 12.01 (16th ed.) (emphasis added). The usage of the phrase “left with” in the first description and of the term “custodian” in the second description is notable—both usages are in accordance with the plain meaning of statutory term “deposit,” which is “to place esp. for safekeeping or as a pledge” or “[to] giv[e] money or other property to another who promises to preserve it or to use it and return it in kind.” (citation omitted)

Accordingly, it is well settled that “the critical aspect of the ‘customer’ definition is the entrustment of cash or securities to the broker-dealer for the purposes of trading securities.” The “customer” definition has therefore been described as “embodying a common-sense concept: An investor is entitled to compensation from the SIPC only if he has entrusted cash or securities to a broker-dealer who becomes insolvent; if an investor has not so entrusted cash or securities, he is not a customer and therefore not entitled to recover from the SIPC trust fund.” To prove entrustment, the claimant must prove that the SIPC member actually possessed the claimant’s funds or securities. (citation omitted)

What did the Appeals Court’s rule?

When a brokerage firm faces insolvency, the cash and securities it holds for its customers can become ensnared in bankruptcy liquidation proceedings or otherwise be put at risk. Congress established the Securities Investor Protection Corporation (SIPC) to protect investors’ assets held on deposit by financially distressed brokerage firms. SIPC can initiate its own liquidation proceedings with the aim of securing the return of customers’ property held by the brokerage. SIPC, however, possesses authority to undertake those protective measures only with respect to member brokerage firms. Its authority does not extend to non-member institutions.

US-CourtOfAppeals-DCCircuit-SealIn this case, the Securities and Exchange Commission seeks a court order compelling SIPC to liquidate a member broker dealer, Stanford Group Company (SGC). SGC played an integral role in a multibillion-dollar financial fraud carried out through a web of companies. SGC’s financial advisors counseled investors to purchase certificates of deposit from an Antiguan bank that was part of the same corporate family. The Antiguan bank’s CDs eventually became worthless. The massive Stanford fraud spawned a variety of legal actions in a number of arenas, the bulk of which are not at issue here. This case involves the authority of a specific entity—SIPC—to take measures within its own statutorily bounded sphere.  As to that issue, because the Antiguan bank, unlike SGC, was not a SIPC member, SIPC had no ability to initiate measures directly against the bank to protect the property of investors who purchased the bank’s CDs.

The question in this case is whether SIPC can instead be ordered to proceed against SGC—rather than the Antiguan bank—to protect the CD investors’ property. It is common ground that SIPC can be compelled to do so only if those investors qualify as “customers” of SGC within the meaning of the governing statute. SIPC concluded that they do not, and the district court agreed.  The court reasoned that the investors obtained the Antiguan bank’s CDs by depositing funds with the bank itself, not with SGC, and they thus cannot be considered customers of the latter. We agree that the CD investors do not qualify as customers of SGC under the operative statutory definition. We therefore affirm the denial of the application to order SIPC to liquidate SGC.

What was the Appeals Court analysis for the term ‘Customer”?

To come within the fold of SIPA’s protections, an investor thus ordinarily must demonstrate both that the broker “actually . . . received, acquired or held the claimant’s property, and that the transaction giving rise to the claim . . . contain[ed] the indicia of a fiduciary relationship” between the investor and the broker. 1 Collier on Bankruptcy ¶ 12.12[2], at 12-50.  An investor’s “customer” status is evaluated on an asset-by-asset basis and may change over time.

Here, insofar as the analysis focuses on the entity that in fact held custody over the property of the SIBL CD investors, the investors fail to qualify as “customers” of SGC under the statutory definition. That is because SGC never “received, acquired, or held” the investors’ cash or securities. With regard to the investors’ cash, it is undisputed that investors at no time deposited funds with SGC to purchase the SIBL CDs. The funds instead went to SIBL. (citation omitted)

What about the SEC’s Argument for group consolidation?

Even if we were to consolidate, however, SIBL CD investors would not be “customers” of a SIPC-member entity under the statutory definition.  The Act specifically excludes from “customer” status “any person, to the extent that . . . such person has a claim for cash or securities which by contract, agreement, or understanding, or by operation of law, is part of the capital of the debtor.” We, like other courts, understand that provision to establish that “a claimant cannot qualify for customer status under SIPA to the extent that he or she is a lender rather than an investor.” As the Eleventh Circuit has explained, “[c]ash that is simply lent to the brokerage cannot form the basis of a SIPA customer claim because the statute’s definition of ‘customer’ excludes individuals whose claims are for ‘cash . . . which . . . is part of the capital of the debtor.’” (citation omitted)

Here, investors who purchased SIBL CDs lent funds to SIBL that became part of SIBL’s capital: Those investors gave cash to SIBL in exchange for a promise to be repaid with a fixed rate of return.  The investors invested “in,” not “through,” SIBL.  … Under a consolidated view, investors who purchased SIBL CDs lent money to the consolidated SIBL/SGC entity, forming a “creditor-debtor arrangement.” The CD proceeds thus became part of the consolidated entity’s “capital,” triggering the statutory exclusion from “customer” status for lenders. (citation omitted)

Relevant Sources and Documents

SECURITIES AND EXCHANGE COMMISSION (SEC) v. SECURITIES INVESTOR PROTECTION CORPORATION (SIPC), No. 12-5286 (July 18, 2014 D.C. Court of Appeals)  The  decision is available here SEC v SPIC (Stanford Fraud) DC Appeals 7-18-2014

SIPC has a website regarding the Stanford case here.  SIPC’s statement about the Appeals Court decision is here.

 

 

 

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Ernst & Young pays $4 million for lobbying, violating auditor independence

Posted by William Byrnes on July 18, 2014


OSECn July 14, 2014 the Securities and Exchange Commission (SEC) filed a public administrative and cease-and-desist proceedings against Ernst & Young (E&Y) for E&Y’s violation of audit independence conduct regarding legislative lobbying on behalf of its audit clients.

E&Y has agreed to pay disgorgement of $1,240,000, together with prejudgment interest thereon of $351,925.98, and a civil money penalty of $2,480,000, for a total of $4,071,925.98 and it has agreed to cease & desist the activity.  See http://www.sec.gov/litigation/admin/2014/34-72602.pdf

The SEC public administrative and cease-and-desist proceedings against E&Y arose out of certain legislative advisory services provided by Washington Council EY (“WCEY”), which has been part of EY since 2000. Prior to 2009, certain conduct related to WCEY’s provision of legislative advisory services violated the independence rules with respect to two of EY’s SEC-registrant audit clients.

WCEY sent letters urging passage of bills to congressional staff on behalf of one of its clients.  These bills were important to this client’s business interests.  WCEY also asked congressional staff to insert into a bill a provision favorable to this client.

For another audit client, WCEY attempted to persuade congressional offices to withdraw their support for legislation detrimental to that client’s business interests. In addition, WCEY worked closely with congressional staff in drafting an alternative bill more favorable for the client.   WCEY also marked up a draft of the alternative bill, inserting specific language written by the client and sent the mark-up to congressional staff.

Despite providing the services described herein, E&Y repeatedly represented that it was “independent” in audit reports issued the clients’ financial statements.

By doing so, E&Y violated Rule 2-02(b)(1) of Regulation S-X and caused the clients to violate Section 13(a) of the Exchange Act and Rule 13a-1.  E&Y’s conduct also constituted improper professional conduct pursuant to Section 4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice.

 

 

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SEC comments muddy the waters in fiduciary standard debate

Posted by William Byrnes on July 29, 2013


The debate over the fiduciary standard that will become applicable to many financial professionals may be coming to a head as the looming deadline for comments on SEC proposals has motivated some advisors to express disapproval over a perceived weakening of the potential standard. Because a heightened fiduciary standard could increase advisors’ compliance costs, while simultaneously increasing consumer confidence in the quality of their advice, it is critical that advisors know the rules of the game.

Recent indications that the SEC may deviate from its previously expressed intent to expand the traditional standard applicable to investment advisors, however, represent a curveball for advisors who are not currently subject to a strict fiduciary standard; the outcome once again seems up for grabs.

Today’s bifurcated approach to fiduciary regulation

read the full analysis at LifeHealthPro – http://www.lifehealthpro.com/2013/07/01/sec-comments-muddy-the-waters-in-fiduciary-standar

 

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Better Late than Never: SEC Implements the Switch

Posted by William Byrnes on January 10, 2012


As anticipated, the SEC will delay implementation of the RIA transition. On June 22, the SEC approved rules that will transition thousands of advisors from SEC to state regulation, but the new rules won’t be effective until June 28, 2012, almost a year later than initially expected.

Under the regulatory structure in place before the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, investment advisors with $25 million or more in assets under management (AUM) were regulated by the SEC, and those with less than $25 million in AUM were regulated by the states. Dodd-Frank changed the registration threshold so that advisors with between $25 and $100 million in AUM—so-called “midsize advisors”—will be required to withdraw their registration from the SEC and register with state regulators.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the planned switch and in Advisor’s Journal, see Disarray at the SEC is Complicating the “Switch” (CC 11-83), Hedge Funds Must Now Register with the SEC under the New Wall Street Reform Act (CC 10-45) & Dodd-Frank Wall Street Reform and Consumer Protection Act (CC 10-35).

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SEC Warns Investors about Principal Protected Notes

Posted by William Byrnes on November 3, 2011


In a low-interest rate world, high-yield investments offering principal protection are enticing to investors. But the complexity of some high-end investment products has the Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission’s (SEC) warning investors to look before they leap.

In an alert titled Structured Notes with Principal Protection: Note the Terms of Your Investment, the regulators warn investors that these structured products may not be what they seem. Although they are marketed under a variety of names with a “principal protection” component—e.g. “absolute return” and “minimum return”—the true extent of their safety is never obvious . Investors need to read the fine print to decide whether they are suitable for their investing needs and risk tolerance.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

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SEC Softening its Stance on Private Placements

Posted by William Byrnes on September 26, 2011


The Obama Administration’s 2012 federal budget proposal has revived two budget proposals that recent scandals have directed a slew of regulatory attention on private placement. Considering examinations of private placements recently being characterized by a FINRA executive as a “major, major initiative, it would seem strange for the Securities and Exchange Commission (“SEC”) to consider relaxing rules for marketing private placements.

Nevertheless, that’s exactly what SEC Chairman Mary Schapiro told members of Congress the agency is planning.

Speaking before the U.S. House of Representatives Committee on Oversight and Government Reform, Shapiro said that the SEC is going to “take a fresh look” at rules relating to private placements and other securities offerings, both public and private. Specifically, she said that the agency will reconsider the private placement public marketing ban and the 500-investor threshold that categorizes a company as “public.”

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of private placements in Advisor’s Journal, see Private Placements Becoming Much Riskier for Firms (CC 11-78) and Private Placements Becoming Much Riskier for Firms (CC 11-78).

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SEC’s Plain English Requirement Equals Expensive Client Disclosures

Posted by William Byrnes on August 29, 2010


As of January 1, 2011, the Securities and Exchange Commission will require advisers to make plain-English disclosures to their clients, laying out the adviser’s business practices, conflicts of interest, and the background of the firm and its personnel.  The requirement is designed to drag information out of the fine print on client disclosures and present it in easily understandable language. Although innocuous sounding on its face, the requirement will carry a significant cost in time and resources.

Today’s analysis by our Experts Robert Bloink and William Byrnes is located at AdvisorFX Journal SEC’s Plain English Requirement Equals Expensive Client Disclosures

For previous commentary, see AdvisorFX Journal What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act

After reading the analysis, we invite your questions and comments about indexed annuities by posting them below, or by calling the Panel of Experts.

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