News & Events – Bates Research

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.

After analyzing data collected in Suspicious Activity Reports, FinCEN issued an update to a 2016 Advisory alerting financial institutions on how best to combat criminal schemes that compromise business email accounts. The problem of criminals targeting business fund transfers is not small. So-called “Business Email Compromise” scammers possibly stole billions of dollars from companies and individuals in 2018, more than in prior years, according to a new FinCEN Financial Trend Analysis of the SARs data. In this article, Bates considers the informed guidance in FinCEN’s new 2019 Advisory to financial institutions, as well as some of the salient conclusions drawn from the trend analysis report.

Bates Group is alerting counsel that we are seeing an uptick in option-related cases where firms offered their clients strategies to increase the yield in their investment portfolio, often involving options trading in order to earn premium income to enhance a portfolio’s regular returns. Bates staff and experts have provided both consulting and testimony services in matters involving options trading within a client account.

On June 25th, the U.S. House of Representatives weighed in and voted for an amendment to a bill with the intent of prohibiting the SEC from “implementing, administering, enforcing, or publicizing” the final rules and interpretations of Reg BI. The amendment is not likely to pass the Senate, and as this week’s formal publication of Reg BI in the Federal Register makes clear, the dates for implementation and compliance are set, even as the debate over the new rule package continues. In this article, we review SEC Chair Clayton’s endorsement of the regulation, and his point-by-point rebuttal of the criticism that it has received since agency adoption.

This month, a bipartisan group of Senate Banking Committee members introduced legislation to address current gaps inhibiting the fight against illicit financing of criminal activity (CFT). This follows the House Financial Services Committee's adoption of an aggressive legislative agenda aimed at modernizing and closing loopholes in the AML/CFT framework. Of key interest to both the Senate and the House is the expansion of the use of “beneficial ownership information” of the type now collected under the Customer Due Diligence rules that went into effect last year. In this article, Bates reviews the developing congressional legislative efforts to detect and deter financial crime.

The SEC's recent adoption of Reg BI has not stopped the states from pursuing their own higher standards. Last week, Massachusetts became the latest state to propose a uniform fiduciary standard for broker-dealers and advisers when dealing with its residents. A group of trade associations have also expressed concerns regarding New Jersey's proposal to apply uniform fiduciary standards to broker-dealers and investment advisers for recommendations and advice they may give to New Jersey investors. Bates Research takes a closer look at the Massachusetts proposal and the broader federal/state power struggle.

On the day the SEC approved a set of regulatory proposals affecting the obligations that broker-dealers and investment advisers owe retail investors, Commissioner Hester Peirce issued a “plea” to critics to “take a fair look at what it says before you proclaim it a success or failure.” In this article, Bates reviews the core elements of the rules and related guidance, and some of the early reactions.

The state of play in cryptocurrency regulation continues to reflect legitimate tensions between promoting innovation and entrepreneurship and maintaining sound markets and investor protection. In this article, we review recent developments including new guidance and a recent advisory issued by FinCEN, anticipated guidelines from the Financial Action Task Force and the latest developments at the SEC.

As Bates reported last October, the North American Securities Administrators Association (NASAA) proposed a new model rule for consideration by state regulators that would require state-registered investment advisers to adopt new policies and procedures in order to safeguard client information. NASAA has announced that its members voted to adopt the model rule package “which now is available for individual jurisdictions throughout the United States to implement through regulation.” This significant announcement may have serious enforcement implications. In this article, Bates Research takes a closer look at what you need to know.

The SEC Office of Investor Advocate (OIA) has prepared a valuable overview report on the SEC’s efforts to protect seniors from financial exploitation. The 25-page paper highlights the agency’s examination, enforcement and regulatory policy, in addition to its education and outreach activities. Bates follows regulatory and enforcement developments on senior financial exploitation issues closely. In this article, we review key observations from this latest OIA report which hones in, specifically, on the SEC’s approach to combating senior financial fraud.

Over the last month, FINRA issued guidance on anti-money laundering compliance and customer communications concerning departing registered representatives. FINRA also proposed a rule adding obligations to firms with a significant history of misconduct. In this article we take a closer look at these moves and the stepped-up expectations that flow from them.

Continuing in its efforts to prioritize the protection of retail investors, the SEC’s Office of Compliance Inspections and Examination (OCIE) has issued a new Risk Alert highlighting privacy and information security issues raised during examinations of registered investment advisers and broker-dealers. In this article, Bates Research takes a closer look at the new Alert and the OCIE’s emphasis on improving firms' compliance in safeguarding their clients' personal information.

On April 15th, the New Jersey State Bureau of Securities proposed applying uniform fiduciary standards to broker-dealers and investment advisers. Promoted by Governor Phil Murphy (pictured), the proposed rule would deem any breach of fiduciary duty owed to a customer under the proposed regulation a “dishonest and unethical practice.” In this article, Bates describes the state's proposal and considers some of the implications and reaction to New Jersey's move.

Longstanding opposition to mandatory arbitration is finding renewed momentum as federal legislators introduce bills to limit or even eliminate the binding provisions in consumer, employment and financial contracts. In this article, Bates Research looks at the new legislation targeting mandatory arbitration agreements, some reactions by industry groups and recent developments on the broader subject, including yesterday’s U.S. Supreme Court arbitration decision and continued pressure on FINRA.