Bates Research

White Papers

Markets can seem frustratingly complex when you don't know where to start, and spending time gathering background material is a burden that can leave you feeling less confident about your choices. Let Bates Research take care of the background for you, so you can spend your time building value elsewhere. Our White Papers are meant to be a jumping-off point to help you understand the legal, regulatory and compliance issues at hand.


SEC’s Regulation Best Interest: Perspectives on Firm Compliance

From the moment it was proposed, Regulation Best Interest (“Reg BI”) was a lightning rod for adherents and detractors of all stripes. This two-part article is an overview of the current state of play on the impending SEC Reg BI rule: how we got here, what the rule requires and what firms need to have in place before the final compliance implementation dates.

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Article: With Regulation BI, Are FINRA Rules 2010 and 2111 Dead?

Bates is proud to share the publication of “With Regulation BI, Are FINRA Rules 2010 and 2111 Dead?” by Managing Director and Expert Consultant Hank Sanchez, Esq. The article was published in the July 2019 issue of NSCP Currents. In it, Hank examines two FINRA rules that are commonly cited in FINRA enforcement matters—FINRA Rules 2010 (Standards of Commercial Honor and Principles of Trade) and 2111 (Suitability)—and discusses whether those rules may become subsumed or nullified by Reg BI.

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Forensic Accounting in the Context of Litigation

In civil litigation where the narrative includes financial information, a forensic accountant delivers analytical clarity while providing accounting, financial and investigative expertise.  Backed by relevant client service experience and requisite credentials such as CPA, CFF, CVA and CFE, a battle-tested  forensic accountant is a vital component of a successful financial litigation team. Download this new paper from Bates Research and Forensic Accounting Director A. Christine Davis.

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Broker-Dealer Branch Office Compliance: Supervision, Inspections and Operational Considerations

Over the past two years, regulators have undertaken several initiatives to better understand a fast-changing financial marketplace, to improve agency efficiency, and to promote dialogue with those they regulate. Recent agency communications reveal that regulators are starting to pay more attention to branch office supervision and compliance. This paper discusses the responsibilities placed on the supervisors of broker-dealer branches in light of FINRA's announced examination priorities and recently updated guidance on strengthening cybersecurity controls to protect vulnerable branch information.

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Data Challenges in Wage and Hour Damages Analyses

By all indications, 2019 will bring a record-breaking increase in the number of Fair Labor Standards Act filings. Given the anticipated rise in the number of both federal and state filings, it is important to revisit some of the evidentiary challenges confronting litigants. In this paper, Bates Group Forensic Accounting Experts Christine Davis and Leonore Ralston take you through real cases to provide examples of data-related issues that emerge when analyzing wage & hour claims.

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AML Enforcement and Compliance: 2018 Year in Review and Observations for 2019

Bates Research takes a look at a year’s worth of AML enforcement and compliance actions as well as outreach efforts by regulators. As Bates Group has been reporting throughout 2018, these efforts incorporate a simple carrot and stick message: cooperate and comply or face significant penalties and serious consequences. This paper takes a closer look at that message in the context of the major regulatory enforcement actions taken against AML violations in 2018 and offers observations to consider for 2019.

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The Challenge of AML Leadership: A Conversation with Managing Director Edward Longridge

Bates Research's new white paper consists of an extended one-on-one discussion with Edward Longridge, Managing Director of Bates Group's Financial Crimes Practice, and former Chief Anti-Money Laundering (“AML”) Officer for a major global financial institution. In it, Mr. Longridge examines the pressing challenges facing Chief AML Officers in this heightened regulatory environment and offers insights from his twenty years of AML Leadership to help firms navigate the AML space. Topics covered include: initial steps to evaluate an AML program, the written record, policy and procedures, relationship building with firm leaders and regulators, and preparing for regulatory change.

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Navigating A Changing Landscape: Current Considerations When Addressing Senior Financial Fraud

Seniors and other vulnerable investors are increasingly targeted by bad actors for financial exploitation.  The growing elderly population, combined with their personal stories and the ubiquity of the reporting around this issue, has created political momentum for federal and state government action.

The result is a changing legislative and regulatory landscape that imposes significant new compliance obligations on financial firms and practitioners and significantly increases enforcement risk.

Download the white paper to learn more about that landscape and some current considerations for those who work in the litigation, regulatory and compliance and financial crimes space.

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Fixed Income Part Four - Reaching for Yield

For the past five-plus years, a historically low interest rate environment has persisted within the United States as a result of the Credit Crisis in 2008. This has left investors in the unenviable position of trying to find yield in a marketplace where yield is currently scarce.

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Fixed Income Part Three - Bond Fund Investment

A rising tide lifts all boats is an adage that is often applied to investment performance. It is particularly true in the relationship between bonds and bond mutual funds. Over the most recent period of declining interest rates, investors in both products achieved consistent income and rising principal values. But as the prospects for rising interest rates grows, it is valuable to understand some key differences between holding individual issues of bonds versus owning fractional shares of a bond mutual fund.

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Fixed Income Part Two - Understanding Credit Ratings

Credit ratings are an opinion on the ability and willingness of an issuer to meet its financial obligations on time and in full.  Ratings serve an important function in capital markets and, as such, are regulated by the Securities Exchange Commission (SEC) through the Office of Credit Ratings.  That office currently recognizes ten agencies in the U.S. as Nationally Recognized Statistical Rating Organizations (NRSROs) which assign ratings to various issuers of debt, and can include corporations, municipalities and other issuers.

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Fixed Income Part One - Fee Selection and Reverse Churning

At the beginning of 2015, the U.S. Securities and Exchange Commission (SEC) announced that fee selection and reverse churning will be examination priorities this year. Although the SEC did not expressly mention fee selection and reverse churning among its 2014 priorities, it had mentioned that an examination priority would be whether advisors fulfilled their fiduciary and contractual obligations in wrap fee accounts. Such obligations include fee selection and reverse churning.

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ERISA Part Four - ERISA - 3(16)

In this increasingly high risk regulatory environment, plan sponsors are seeking new ways in which they can delegate to others some of their ERISA fiduciary responsibilities. Included among them is authorizing a delegate to assume decision-making authority for plan administration duties.

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ERISA Part Three - Due Diligence for Service Providers

A retirement investment professional, by nature, provides particular services for the plan recipients. How does the plan sponsor select the provider of those services? What standards apply? Once hired, what happens next?

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ERISA Part Two - Choosing the Right Type of Investment Advice

Plan sponsors often need help selecting the investment options for a plan, so they may wish to engage professional assistance. Choosing what type of help may seem like a confusing task. Many TPAs bring extra value to a relationship by educating the plan sponsor about what types of guidance are available and what impact each type may have on the sponsor’s own fiduciary liability.

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ERISA Part One - 3(21) v 3(38) Investment Assistance

What is the difference between a 3(21) and a 3(38) investment fiduciary?  This question is being asked with increasing frequency, and the answer provides a host of planning opportunities for both the plan sponsor of a retirement plan and the producer providing investment services to the plan.  Despite the popularity of the question, many remain confused about the differences between these important numbers.

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High Frequency Trading - Intro Guide

High Frequency Trading (HFT) is a subset of algorithmic trading; one that relies on a large number of small orders sent into the marketplace at high speeds. A key ingredient of HFT is speed, another is access to venues.  

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Regulatory Brief - Rules for CPOs and CTAs

In light of the wave of fraud committed by pools in recent years, the National Futures Association (“NFA”) is considering moving towards a more stringent regime for commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”). On January 23, 2014, the NFA issued a Member Notice in which it sought comments on new proposed CPO and CTA capital requirements and customer protection measures.

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Private Placements

A Private Placement is a security or pooled investment fund that is not offered for sale to the general public.  While their issuance is governed under the Securities Act of 1933, these investments are not registered with the SEC like stocks, bonds or other publicly traded securities.  In order to comply with SEC and FINRA rules and notices, private placements impose unique obligations on issuers, sellers and purchasers.  This paper offers insight into those obligations.

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Regulatory Brief - ERA

In the aftermath of the Credit Crisis of 2008, Congress focused their attention on reshaping capital markets to provide the type of oversight and transparency that they hoped would help avoid similar crises in the future. The culmination of their efforts was passed as the Dodd-Frank Act. As a result of this legislation, smaller advisers and asset managers, who had previously been excluded from oversight, are now faced with new reporting requirements, among other changes.

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MLP Explained

Investors seeking income have historically relied on traditional securities, such as dividend paying common or preferred stocks; corporate, government or municipal bonds; or perhaps REITS. When desiring income with growth potential, the possible field of investments narrows to either just common stocks, or perhaps an asset allocation strategy with a mix of all of these.  If tax advantaged income with growth is desired, then all of the options are essentially eliminated, with the possible exception of tax deferred variable annuities.  However, in recent years a new option has become increasingly attractive to a number of investors, which combines the potential for income (and a record of increasing that income) with growth and tax deferral.

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REITS Explained

REITs, or Real Estate Investment Trusts, are companies that own and typically operate a portfolio of income-generating commercial real estate such as apartment buildings, hotels, office space, and retail shopping centers. 

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CDO Explained

Collateralized debt obligations (“CDOs”) were first created in the late 1980’s.  CDOs themselves are a form of asset-backed security, meaning that the value of the CDO is derived from its claim on some pool of assets.

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Libor Explained

LIBOR, which stands for London Interbank Offered Rate, is one of the most widely-used benchmarks or reference index rates for determining short-term interest rates globally.

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CDS Explained

In order to understand how credit default swaps (“CDS”) are used, it is important to understand some of the basic mechanics of swaps.

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MBS Explained

Mortgage backed securities (“MBS”) are a form of asset backed security, specifically those which use mortgages to form the underlying collateral supporting the security

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