News & Events – Bates Research

The SEC Office of Compliance Inspections and Examinations ("OCIE") set out their 2020 examinations priorities in an annual report issued last week. The report reminds registered entities that all its priorities are within the SEC’s mandate to protect investors, facilitate capital formation, and maintain fair, orderly and efficient markets. The report is, in effect, a notice to the industry and chief compliance officers to address potential vulnerabilities in compliance programs and practices in order to minimize retail investor and market risks. Bates Research takes a closer look.

FINRA has announced their regulatory and examination priorities for the upcoming year. New for this year is a focus on Regulation Best Interest (Reg BI) and Form CRS (Client Relationship Summary).

Bates Group continues to track a host of issues affected by the adoption of Regulation Best Interest (“Reg BI”), the 2019 package of rules and interpretations from the SEC setting standards of conduct for broker-dealers and independent advisers. These include a variety of state responses to the federal regulation, as well as Reg BI impacts on issuers of other complex financial products sold through brokers and advisers, specifically, recommendations to consumers on transactions involving annuity products. This week, Bates Research takes a look at some of the latest developments by the Massachusetts Securities Division and the National Association of Insurance Commissioners (“NAIC”).

The SEC's Office of Compliance Inspections and Examinations has announced their exam priorities for the upcoming year. Stay tuned to the Bates News page in the upcoming weeks for our expert commentary on the SEC's 2020 objectives

A key to understanding new BSA guidance on the “legal status of commercial growth and production of hemp” can be found in provisions of the Farm Bill signed into law in December of last year. That legislation distinguished and removed hemp (though not marijuana) as a controlled substance under law, and interim rules, issued by the USDA in late October 2019, established a federal licensing approval plan that allows state departments of agriculture and tribal governments to submit plans for monitoring and regulating hemp production. Given this context, the Federal Reserve Board, the FDIC, FinCEN, the OCC and the Conference of State Bank Supervisors issued a statement clarifying BSA obligations under these new USDA interim rules. Bates Research takes a closer look.

Despite “significant headwinds,” including “adverse” holdings in Supreme Court cases and a significant disruption in Congressional funding in the beginning of the year, Co-Directors of the SEC Enforcement Division Stephanie Avakian and Steven Peikin announced that their efforts in FY 2019 have been successful. In a recently published Annual Report, the Directors described enforcement actions that held wrongdoers accountable, removed bad actors, stopped frauds and prevented losses. Bates Research looks at some key takeaways from their report.

On October 18th, 2019, more than a year after the launch of the SEC Share Class Disclosure Initiative and targeted enforcement activity, the SEC Division of Investment Management issued information clarifying conflicts of interest raised by different types of investment adviser compensation. In a new set of FAQs, SEC staff reviewed general conflicts of interest disclosure requirements and offered insight on the “material facts” that need to be disclosed concerning mutual fund share classes and an adviser’s receipt of revenue-sharing payments. Bates Research takes a closer look.

FINRA issued its annual Report on Examination Findings and Observations on October 16, 2019. Like last year’s Report, the 2019 version highlights selected firm compliance violations and provides “observations” on how firms can improve their programs and address “perceived weaknesses that elevate risk.” Bates Research takes a closer look at FINRA's 2019 priorities and additional compliance concerns raised in the Report.

On September 26, a bipartisan group of Senators introduced a bill to strengthen the authority of the Financial Crimes Enforcement Network (FinCEN) to fight money laundering. Called the ILLICIT CASH Act, the legislation would establish federal reporting requirements for beneficial ownership information. A similar bill, sponsored by Congresswoman Carolyn Maloney, titled the Corporate Transparency Act, passed a vote in the House of Representatives this week. The House also passed its version of the SAFE Banking Act to remove legal uncertainty for regulated banks and credit unions that provide banking services to cannabis businesses. These bills have the potential to significantly impact AML/BSA compliance programs. In this article, Bates Research takes a closer look at their potential impact.

In two speeches delivered in September 2019, leaders of the Financial Crimes Enforcement Network (FinCEN) laid out their thinking behind the agency’s current regulatory approach to combatting money laundering and terrorist financing. FinCEN Deputy Director Jamal El-Hindi focused on the future of the BSA and emphasized compliance for NBFIs, while FinCEN Director Kenneth Blanco described the use of financial data to fight money laundering and the abuse of personally identifiable information by bad actors. In this article, Bates Research takes a closer look at FinCEN’s message.

In its 2019 annual enforcement report, the North American Securities Administrators Association ("NASAA") highlighted statistics from its 2018 state enforcement activities. The data show that the state securities regulators secured more than $1 billion in restitution and fines as well as significant criminal penalties. The report also notes that state regulators nearly doubled enforcement actions against investment adviser firms. Here, Bates Research takes a closer look.

In a new Regulatory Notice, FINRA is asking its members a series of questions about the utility of rules and processes to curb financial exploitation of senior investors. According to FINRA, the rules under review provide a way for member firms to deal with situations where there is “a reasonable basis to believe that financial exploitation has occurred, is occurring, has been attempted or will be attempted.”

Bates Research closely follows regulatory and enforcement developments on senior financial fraud. In this article, we recap those rules and consider the questions posed by FINRA in its latest Notice.

The SEC’s adoption of the Regulation Best Interest (“Reg BI”) package in June was a defining moment in the long-running debate over the standard of care for broker-dealers and investment advisers. It triggered compliance schedules and required registered broker-dealers and advisory firms to develop internal policies and procedures in order to satisfy the new standards. The passage of Reg BI, however, did not quell the ongoing controversies over the appropriateness and adequacy of standards and investor protections. This week, Reg BI suffered another state challenge, this time in the form of a lawsuit filed against the SEC by seven State Attorneys General. Bates Research takes a closer look.

The past few months have been a particularly busy time for state financial regulators and enforcement officials. At almost every turn, the complicated and overlapping relationship between federal and state officials is being tested. A review of recent activities by the North American Securities Administrators Association (NASAA) provides several examples. In this article, Bates recaps recent NASAA developments on cryptocurrency, fraud enforcement, Regulation Best Interest (Reg BI), and supervision of complex financial products (i.e. non-traditional Exchange Traded Funds).

Last week, the New York Supreme Court upheld the “Suitability and Best Interest in Life Insurance and Annuity Transactions” regulation (a/k/a Regulation 187) in the face of legal challenges brought by several associations and insurance agent groups. In this article we take a look at what the decision means, recent developments in both the SEC and NAIC efforts to rewrite standards, and we update you on the latest in the legal battle over commission trails for brokers selling variable annuities.

The growing global cannabis market is estimated to reach $66.3 billion by 2025, up from $13.8 billion in 2018. That kind of growth is spurring congressional and state legislators to seek to normalize the market for marijuana-related businesses and speed up the resolution of federal-state legal conflicts. In this article Bates looks at some of the recent federal legislative and state developments on what appears to be real momentum toward a fully functioning and legitimate market.