News & Events –

Bates Research recently conducted a Q & A session with Alex Russell, Managing Director of Securities Litigation & Regulatory Enforcement at Bates, to discuss FINRA's new 529 Share Class Initiative. Alex talks about responding by FINRA's deadline and potential pitfalls firms should avoid when preparing their response.

In our last review of developments concerning variable annuities and life insurance, Bates discussed the SEC’s issuance of a comprehensive new rule proposal intended to create a “layered disclosure approach” for regulating these products. That proposal was issued against the backdrop of an ongoing debate among state insurance regulators on revising model legislation on “Suitability in Annuity Transactions.” The National Association of Insurance Commissioners (NAIC) remains determined to create these standards and procedures for providing suitable recommendations to consumers, despite the likely impact and continuing uncertainty created by the unresolved SEC proposed Best Interest rulemaking.  

In this article, we update the most recent SEC action on variable contract disclosure as well as some important private sector activity, notably Ohio National Financial Services’ (“Ohio National”) strategic decision to pull out of the market for variable annuities.

For legislators and regulators, writing rules for crypto-related assets requires balancing the tension between innovation and entrepreneurship, and between sound markets and investor protection. Bates Research has previously described some of the definitional challenges which directly affect which agencies govern crypto assets. In this article, we review recent developments in the ongoing debate over regulating crypto, including legislative proposals, and regulatory activity by leadership at the SEC, the CFTC and FINRA.

The priorities of the congressional committees that oversee financial services are changing. The contours of that change are beginning to take shape as Democrats take control in the House of Representatives and leadership from both parties announce committee assignments. This article takes a look at the agendas of Representative Maxine Waters (D-CA), the new Chair of the House Financial Services Committee, and Senator Mike Crapo (R-Idaho), Chair of the Senate Banking Committee. Their dynamic will set the stage for potential political confrontation, possible bipartisan legislation, and certain administrative and regulatory oversight impacting the financial services industry.

In his latest annual priorities letter to members, FINRA Chief Executive Officer Robert Cook emphasized that FINRA will be monitoring firm developments “to identify risks and assess their prevalence and impact.” He noted that the 2019 letter highlights new areas of focus that will allow member firms to determine whether certain issues “are relevant to their businesses” and how they might be best addressed. In addition, Mr. Cook explicitly stated that these highlighted areas do not affect the ongoing monitoring and enforcement efforts detailed in previous priorities letters. In this article, Bates will review the highlights from FINRA’s newly released 2019 Risk Monitoring and Examination Priorities Letter. We once again list and compare the new priorities to preceding years in the attached Bates’ 2019 FINRA Chart.

FINRA has announced their regulatory and examination priorities letter for 2019.

Right before the new year, FINRA published a report on specific cybersecurity compliance concerns raised in recent broker-dealer examinations. The report provides important guidance for broker-dealers to ensure that their compliance programs adequately address particular risks. Specifically, FINRA highlights best practices among firms on (i) branch office controls; (ii) limiting phishing attacks; (iii) mitigating insider threats; (iv) testing compliance networks for security weakness; and (v) controlling risks related to mobile devices. In this article, Bates reviews these elements and what they may mean for your compliance program.

The SEC Office of Compliance Inspections and Examinations ("OCIE") will prioritize risks to retail investors in this year’s examinations. That concern is a distinguishing highlight of a new report summarizing OCIE assessments of regulatory issues, market risks and policy developments.

Additional featured priorities include continuing risks and concerns related to fee disclosures, share class, and wrap fee programs, anti-money laundering, cybersecurity, digital assets, FINRA and MSRB operations, and issues of compliance by registrants involved in critical market infrastructure. In this article, we review the new report, contrast this year’s priorities with those of the past few years in our annual Bates year-to-year SEC OCIE priorities chart, and consider some implications so that firms might better prepare and, if necessary, adjust their compliance systems accordingly.

SEC Office of Compliance Inspections and Examinations (OCIE) has announced their exam priorities for the upcoming year. You can read the press release here.

In its second annual effort to highlight areas of compliance concern, FINRA published a 2018 Report on Examination Findings. The thorough report details selected observations and findings from broker-dealer firm exams that have “potential significance, frequency and impact on investors and the markets.” The primary areas of focus in this year’s report are suitability for retail customers, private placements, abuse of the authority a client gives to a registered representative, and fixed income mark-up disclosure. This article takes a closer look at these FINRA priorities and additional FINRA findings on compliance issues raised by this year’s examinations.

Investments in robo-offerings have grown, and the application and use of algorithmic programming expanded. A new report cites data that predicts “digital advice users will increase from roughly 2 million to 17 million by 2021.” In this article, Bates Research takes a closer look at existing SEC compliance guidance on robo-advisory services and some of the enforcement concerns in this rapidly expanding marketplace.

Your relationship with your consulting or testifying expert is a critical component to your case. Mastering best practices when working with an expert will better support your case.

We recently polled several of Bates’ financial industry experts, many of whom are former general counsels, branch managers and regulators, to summarize best practices when working with consulting and testifying experts. Here's what they had to say.

Significant regulatory developments are taking place in the variable annuity and life insurance market that are intended to encourage investors to make more informed decisions about these financial products. Along with the SEC’s announcement of an extensive new rule proposal that would leverage technology and create a “layered disclosure approach” to variable annuities and life insurance contracts, the SEC Office of Investor Education (“OCIE”) issued a Bulletin that offers a basic primer on these instruments. This comes a week after state insurance regulators met to revise the NAIC “Suitability in Annuity Transactions Model Regulation.” Bates Research takes a closer look at these recent developments.

In a new report to Congress, the Federal Trade Commission (“FTC”) compiled its latest data on the widespread problem of financial fraud perpetrated against elderly consumers. The agency also highlighted 2017-2018 enforcement actions and described its outreach and education initiatives to combat senior financial abuse. This article highlights the findings in the latest FTC report.

In June, Bates reported on an SEC Draft Strategic Plan for Fiscal Years 2018 - 2022. The development of the plan is required by federal statute as a means to assess “agency performance and improvement.” The issuance of the Draft Plan was immediately followed by the submission of testimony by SEC Chair Jay Clayton before the House Committee on Financial Services. At that hearing, Chair Clayton expounded on the short draft strategy, describing in greater detail the future agenda for the agency. Now, after the required comment period, the agency’s Final Strategic Plan has been released. Chair Clayton describes the 11-page plan as a “forward-looking framework” that focuses “on the most important goals and initiatives” for fulfilling the agency’s mission. Bates Research takes a closer look.

In a few weeks, a working group of the National Association of Insurance Commissioners (NAIC) will meet again in a continuing effort to complete a revision to the organization’s Suitability in Annuity Transactions Model Regulation. The goal of the working group remains a revision of the standards and procedures for providing appropriate recommendations to consumers “that result in transactions involving annuity products.” The group's progress took a detour in July when the New York Department of Financial Services (NYDFS) issued a final regulation establishing its own “best interest” standard of care for recommendations of both annuity products and life insurance products.

Bates Research takes a look at some of the issues as they are playing out with respect to the very real New York requirements on the horizon, and the NAIC’s efforts to revise the standards on annuity products.