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A unit of TD Bank, a US subsidiary of Canada’s Toronto-Dominion Bank, has agreed to pay a $125,000 fine to resolve allegations that it failed to record the required review of 3.1 million emails.

FINRA requires that all securities-related correspondence between registered representatives and the public receive supervisory review, pursuant to Rule 3010:

“Each member shall develop written procedures that are appropriate to its business, size, structure, and customers for the review of incoming and outgoing written (i.e., non-electronic) and electronic correspondence with the public relating to its investment banking or securities business, including procedures to review incoming, written correspondence directed to registered representatives and related to the member’s investment banking or securities business to properly identify and handle customer complaints and to ensure that customer funds and securities are handled in accordance with firm procedures.”

During the “SEC Speaks” Conference 2017, Acting U.S. Securities and Exchange Commission Chair Michael Piwowar amply discussed the plight of the “forgotten investor.” Citing the work of sociologist William Graham Sumner, who spoke of The Forgotten Man, “the victim of the reformer, social speculator, and philanthropist,” Piwowar questioned disclosure requirements, high corporate penalties and accreditation rules, which, he believes, have had a negative impact on lower-income  investors.

“Imagine,” Piwowar said in his speech, “that we lived in a utopian world in which perfect disclosure of all material information about every company simply existed as a natural feature of the market landscape. Securities markets would be perfectly efficient… Investors would have just what they need… to make perfectly informed investment decisions.”

The Acting SEC Chair focused on the problems of disclosure, stating that the “forgotten investor” seldom has all the relevant information in hand in order to make those decisions. He compared lower-income investors to Graham Sumner’s “Forgotten Man,” who “works, he votes… he always pays… All the burdens fall on him, or on her.”


New FINRA Rule 2165 (Financial Exploitation of Specified Adults) and Amendments to FINRA Rule 4512 (Customer Account Information)

America’s population is rapidly aging. The number of US residents over the age of 65 is expected to double over the next 30 years. Today, seniors, specifically baby boomers, control 50% of all existing investable assets across the country.

This portion of the US population has a combined net worth of over $30 trillion. According to a 2016 survey by Public Policy, about one in five Americans over the age of 65 have “been taken advantage of financially in terms of an inappropriate investment, unreasonably high fees for financial services, or outright fraud.”

The U.S. Securities and Exchange Commission is considering whether it will bring enforcement actions against Atlanta’s $205 billion-asset SunTrust Banks. SunTrust Investment Services, the bank’s broker-dealer arm, allegedly purchased pricey mutual funds on behalf of customers when more affordable alternatives were readily available.

The SEC has made a “preliminary determination to recommend that the SEC bring an enforcement action against [SunTrust].” If these were to materialize, the financial institution could face hefty penalties and extensive losses in connection with its investment business.

Additionally, its fast-track privileges for the issuing of securities might be revoked for three years.

It may come as no surprise that doing business in China holds a high risk of Foreign Corrupt Practices Act (FCPA) violations. However, the record-setting numbers of FCPA enforcement actions seen in 2016 placed Mexico in a close second.

With increases in multi-jurisdictional anti-corruption enforcement, the FCPA Pilot Program and a number of new Mexican statutes signed into law, those doing business in Latin America may want to take note.

After six years of relatively consistent (and somewhat low) FCPA enforcement numbers, the Department of Justice (DOJ) and Securities Exchange Commission (SEC) have made 2016 a precedent setting year. A combined total of 53 actions – more than double those of the last four years – brought over $2 billion in U.S. corporate fines and billions more in fines by foreign regulators. While 22 of the of 53 FCPA enforcement actions prosecuted in 2016 involved FCPA violations in China, Mexico followed close behind with nearly 17% of the enforcement actions last year.

Credit Suisse Securities U.S.A. LLC has agreed to pay $16.5 million to resolve Financial Industry Regulatory Authority (FINRA) allegations that the firm violated anti-money laundering (AML) program regulations, supervision requirements and other policies, FINRA reported Monday.

Specifically, FINRA found that Credit Suisse’s U.S. division relied solely on registered representatives to report suspicious trading, who then failed to escalate or investigate high-risk activity. In addition, the firm inadequately implemented its automated surveillance system, opted not to use available suspicious activity identification scenarios and failed to investigate suspicious activities that it did detect.

Considering the significant $16.5 million fine and FINRA’s increased focus on AML violations, broker-dealers should take this opportunity to re-examine their own AML programs for potential deficiencies.

As the Financial Industry Regulatory Authority (FINRA) continues to crack down on broker-dealers with anti-money laundering program (AML)-related deficiencies, broker-dealers and AML compliance officers (AMLCOs) should take note of the most common AML program compliance deficiencies mentioned in recent FINRA enforcement actions. These top six areas of deficiency are the most likely focus areas of FINRA enforcement going into 2017.

1. Ignoring Risks of Low-Priced Securities

The greatest number of FINRA AML-related enforcement actions in the past year revolved around failures to prevent and detect violations involving large volume sales of low-priced securities. FINRA sanctioned firms for failing to supervise new registered representatives bringing in penny stock business and failing to document and/or investigate high-risk activities involving lump penny stock deposits followed by rapid liquidation and proceeds distribution.

The Financial Industry Regulatory Authority (FINRA) has fined Merrill Lynch, Pierce, Fenner & Smith Inc. $6.25 million for inadequately supervising its customers’ use of leverage in their Merrill brokerage accounts. The firm has also agreed to pay approximately $780,000 in restitution to 22 customers whose portfolios were over concentrated and highly leveraged in high-risk Puerto Rican securities, FINRA announced Wednesday.

FINRA’s recent sanctions involve Merrill Lynch’s handling of customer “loan management accounts” (LMAs), lines of credit that allow customers to borrow money from affiliated banks using their brokerage account securities as collateral.

FINRA claims that, between January 2010 and November 2014, Merrill Lynch “lacked adequate supervisory systems and procedures regarding its customers’ use of proceeds” from these LMAs.

VALIC Financial Advisors Inc. has agreed to pay $1.75 million to resolve Financial Industry Regulatory Authority (FINRA) allegations that the firm failed to implement reasonable systems to address and review conflicts of interest created by its compensation policy, FINRA reported Monday.

The Houston-based subsidiary of American International Group Inc. allegedly paid its representatives financial incentives to encourage clients to transfer their assets into VALIC’s in-house products and denied compensation to representatives who urged customers toward non-VALIC products.

VALIC Compensation Policy Yields 610% Sales Growth

Securities law violations are a major focus of regulatory compliance programs across the industry. Yet not all organizations realize the threat cybersecurity breaches pose to company viability. A new breed of corporate whistleblower is cropping up among marketplace professionals – the cybersecurity whistleblower.

Compliance professionals and executives should familiarize themselves with potential violations and implement a functional internal reporting program before a trusted insider detects and chooses to report misconduct.

SEC Cybersecurity Whistleblowers Pose a Unique Threat

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