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Regulatory Investigations and Enforcement Actions

Thursday, October 5, 2017

New York City Limits Salary History Inquiries

Can a NYC employer ask about  salary history during the hiring process?

When it comes to hiring, one of the biggest challenges for many employers is negotiating a salary. In this regard, it is customary for employers, employment agencies and agents to inquire about a job applicant’s salary history. However, many advocates of pay equality believe this practice puts women and people of color at a disadvantage and automatically steers them into lower salary levels.  To address this, New York City enacted legislation, which becomes effective on October 31, 2017, prohibiting NYC employers and others from inquiring about a job candidate’s salary history.
Read more . . .


Friday, December 30, 2016

SEC Questions Wells Fargo’s Loan Accounting Practices


How can my business defend against a SEC investigation?

Scrutiny into megabank Wells Fargo continues as the U.S. Securities and Exchange Commission joined several other agencies in investigating Wells Fargo’s accounting for its $20 billion troubled loan portfolio.  In a letter dating back to September, but just recently made public, the Securities and Exchange Commission (SEC) asked the bank to explain how Wells Fargo reached its valuation of the portfolio, which was mainly acquired through the bank’s purchase of Wachovia. 

Wells Fargo purchased Wachovia for $13.
Read more . . .


Monday, November 28, 2016

Supreme Court Weighs False Claim Act Seal Provisions


What are the seal provisions in a qui tam complaint?

The U.S. Supreme Court is weighing the conditions under which a federal court should dismiss lawsuits brought by whistleblowers who violate the law's non-disclosure requirements. In short, a qui tam complaint must be filed and remain under seal for sixty days. During this period, the government investigates the allegations and decides whether to intervene while the plaintiff is barred from publicly disclosing the suit.


Read more . . .


Monday, November 28, 2016

FINRA Fines Oppenheimer $3.4 Million


What violations did investment bank Oppenheimer commit?

Recently, investment bank Oppenheimer & Co. Inc. agreed to pay $3.4 million in penalties imposed by the Financial Industry Regulatory Authority (FINRA) for several reporting violations.  FINRA fined the massive corporation $1.
Read more . . .


Tuesday, October 18, 2016

Re-Evaluating Dodd-Frank Wall Street Reform and Consumer Protection Act


Has Dodd-Frank Accomplished What It Was Supposed To?

The Dodd-Frank Act, passed in response to the 2008 financial crisis, is a federal law that places regulation of the financial industry under government control. Now, however, 6 years after its passage, many questions remain concerning whether the Dodd-Frank Act made the country's economy stronger and more protected.

As federal and state regulations are evaluated and altered, managing securities, commodities and other financial services becomes more complex. This is where it is crucial to have the services of an


Read more . . .


Wednesday, September 21, 2016

S.E.C. Issues $53 Million Fine Against Apollo Global Management


Why was Apollo Global charged with securities law violations?

The Securities and Exchange Commission (S.E.C.) recently lobbed a roughly $53 million fine against private equity firm Apollo Global Management for several securities law violations.  Apollo has agreed to settle the case, resolving accusations that the firm misled investors.


Read more . . .


Tuesday, August 9, 2016

FINRA Fines Cetera $75,000 For Failure to Meet Notice Requirements


What customer account record requirements must broker/dealers comply with under current securities law?

FINRA recently fined Cetera Investment Services $75,000 for allegedly failing to notify clients of changes to their account records, as required by current securities law.  Between October 2008 and November 2013, close to 60,000 notifications about changes to client account records, including the names, addresses, and investment objectives of accounts, were not sent to the appropriate customers. 

Under current securities law, investment firms must create and maintain an account record for each customer and notify them of any changes.  Apparently, Cetera received some complaints in 2008 from former customers who said they were still receiving notices.  Cetera used a computer code to stop the notices from going out to former customers, but it inadvertently prevented some current customers from receiving necessary notices as well.


Read more . . .


Thursday, June 16, 2016

Supreme Court Rules that State Securities Fraud Case Can Proceed


Why did the Supreme Court allow Merrill Lynch v Manning to remain in state court?

Recently, the Supreme Court ruled unanimously that the Merrill Lynch v Manning case can remain in state court. For several decades corporations have been trying to reduce their liabilities by moving their state actions to federal courts, and, in a great many cases, have been successful, both in the courts and in Congress. In this particular case, however, the Court turned against the corporation and sided with the investors.

The case involved a precipitous drop in price in 2006-07 of the Escala Group (now Spectrum Group International), a group of companies specializing in collectibles, including stamps. The plaintiffs accused Merrill Lynch and other financial institutions of being responsible for the price plunge through naked short sales of their stock.


Read more . . .


Monday, May 16, 2016

MetLife Fined $25 Million by FINRA


Are Variable Rate Annuities a good investment?

MetLife has agreed to pay $25 million to settle charges with the Financial Industry Regulatory Authority (Finra) for misleading thousands of customers over variable rate annuity investments. The fine is said to be the second largest fine Finra has ever levied.

While the MetLife said in a statement that it had cooperated with the Finra investigation, the company neither admitted or denied any wrongdoing as part of the settlement - this is customary in settlements between regulators and financial firms and is designed to prevent the potential of additional civil, or criminal, legal actions.

What are Variable Rate Annuities?

Variable annuities offer tax advantages to risk-averse and older investors who are looking to invest in stock and bond funds. These investors can get lifetime payments of a guaranteed-minimum amount regardless of how the underlying funds perform.


Read more . . .


Thursday, April 2, 2015

FINRA Has a New Background Investigation Rule

What are the new FINRA requirements for background checks?

The Securities and Exchange Commission recently approved FINRA's new Rule 3110(e) regarding background checks of registered persons and verification of information in Form U4; it will replace NASD Rule 3010(e) and take effect on July 1, 2015.

According to Rule 3110(e), an applicant's good character, business reputation, qualifications and experience must be ascertained by investigation before a member submits a Form U4 to register that applicant; this is substantially the same as existing requirements in Rule 3010.  As made clear by a recent FINRA Acceptance, Waiver and Consent, firms currently must conduct a pre-hire investigation beyond the information contained in the CRD.

The new Rule further requires members to adopt written procedures for the investigation and verification of the accuracy and completeness of information contained in an applicant's Form U4. At a minimum, these written procedures must provide for a national search of reasonably available public records. Members must verify that the information in the Form U4 is correct within 30 days of filing the Form U4 (although verification before filing is encouraged).  These requirements might very well lead to increased costs for members, as they find the need to devote more time and resources to background checks or retain outside services to complete them.

We believe most firms will opt to use either major credit reporting agencies to obtain credit reports (in states where permitted) that contain information as to bankruptcies, judgments and liens or specialized providers that search various data bases. (Firms may rely on the fingerprint results to comply with the requirement to conduct a public search of criminal records.)

There will be a Late Disclosure Fee imposed if a disclosure event should have been reported on the Form U4 when it was originally filed, regardless of whether the 30-day verification process window has expired.

In addition, FINRA’s temporary program to refund Late Disclosure Fees assessed for late filing of responses about unsatisfied judgments or liens in limited circumstances was extended to December 1, 2015 from July 31, 2015.

The law firm of Lehman & Eilen LLP has advised numerous clients on securities regulatory matters for more than 20 years, and its senior lawyers each have more than 30 years of experience. Our attorneys provide broker-dealers with comprehensive representation on regulatory and compliance matters. Our services include helping firms with drafting written supervisory procedures and advising on Forms U4 and U5 and other employee-related matters. Contact us today at (516) 222-0888 to learn how our knowledge can be put to work for you.






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