News & Events – Bates Research

Bates Group is alerting counsel that we are seeing cases filed where firms sold private funds issued by GPB Capital Holdings LLC. It is alleged that firms selling these funds were negligent and failed to perform adequate due diligence when approving these funds for sale, misrepresented and omitted material information when recommending and/or selling these funds to their clients, had conflicting interests in selling the GPB Capital Funds, negligently supervised the sale of these funds and breached the fiduciary duty owed to their clients. 

The Treasury Department’s Office of Comptroller of the Currency (OCC) issued an Annual Report to Congress highlighting the past year’s BSA and AML efforts and setting out strategic priorities and policy initiatives for the new year. The Comptroller says he wants to reduce the burden of BSA and AML compliance, while protecting the financial system. Bates Research takes a closer look at the OCC report and other recent AML-related developments.

In his cover note accompanying FINRA’s annual Risk Monitoring and Examination Priorities letter, FINRA President and CEO Robert Cook reminded members of significant enhancements to the examination program going forward. Bates Research has analysis, commentary and highlights of FINRA’s continuing and emerging concerns, along with our 2020 FINRA chart, which keeps track of articulated priorities from year to year.

Understand what Reg BI requires now — and what more you must implement before the final deadline. Download our new white paper: "SEC’s Regulation Best Interest Perspectives on Firm Compliance."

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.