Contact Bates Today
Bates Group is with you every step of the way. Contact us today for more information on how our End-to-End Solutions can help your firm.
Bates Group is with you every step of the way. Contact us today for more information on how our End-to-End Solutions can help your firm.
This is a test alert message at the top of the Bates website - Action Link
Join Bates and Innova Learning as we present the SEC’s New Marketing Rule in a fun and interactive Mad Men-themed animated format. In our NASAA-approved course (administered on the Prometric platform), we walk you through the new Marketing Rule, pose questions to help you determine whether your advertising and marketing fall under the new rule or not, and provide examples of communications under the new rule. Upon completion, we will report the credit to FINRA, NASAA’s approved vendor for program tracking.
Click the image below to enroll in this course today for an introductory price of just $75 (credit card required). A second course on advertising performance will be released shortly.
Investment Advisory Representatives (IARs) registered in certain states are now required to take 12 hours of ongoing continuing education classes from an approved vendor to maintain their advisory registrations. The 12 hours of required CE consists of 6 credits related to Products and Practices and another 6 credits related to Ethics and Professional Responsibility.
As of January 2023, the following states have implemented an IAR CE Requirement: Arkansas, Colorado, Kentucky, Maryland, Michigan, Mississippi, Oklahoma, Oregon, South Carolina, Vermont, Washington, and Wisconsin.
Bates Group works with Innova Learning to provide our clients with regulatory, compliance and other related training. Innova Learning is an established corporate education provider specializing in high level online courses created to engage employees in their learning requirements. Innova provides necessary training on topics ranging from regulatory/compliance to safety to diversity/harassment to company imaging to virtually any topic that a firm needs for their employees, using state-of-the art creative processes to produce learning that is anything but boring and dull.
According to the Financial Crimes Enforcement Network (“FinCEN”), dealers in jewels, precious metals, or precious stones are defined as “financial institutions” under the Bank Secrecy Act (BSA). To better protect those who deal in jewels, precious metals, and precious stones from potential abuse by criminals and terrorists, section 352 of the USA PATRIOT ACT requires dealers in precious metals, stones or jewels to establish anti-money laundering programs. The characteristics of jewels, precious metals, and precious stones that make them valuable also make them potentially vulnerable to those seeking to launder money, so it is important that dealers have strong protections in place for them and their clients.
Bates assists dealers and firms in developing and strengthening their BSA/AML/OFAC programs to manage compliance risks and promote best practices for the industry.
Banks turn to Bates for a variety of services, including for ongoing or interim Compliance Program and Compliance Officer support, Anti-Money Laundering, independent reviews, bank account facilitation for MSBs and NBFIs, team compliance training, and more. Visit our Services page to learn more.
Advisers that claim an exemption from registration, typically private fund or venture capital advisers (“private fund advisers”) must still report certain information to regulatory authorities (the SEC and/or State) and comply with applicable regulations. Generally, the exemption is available to private fund advisers that have assets under management below $150 million.
Bates will aid in the drafting and submission of all required documents to report Exempt Reporting Adviser (“ERA”) firm. Bates takes a holistic approach to the registration process by first working with your firm to design, create and implement the ERA’s compliance obligations prior to completing your report process. The SEC (as well as state regulators) will expect that, upon approval, your firm is meeting all the regulatory requirements.
Private Funds qualify for one or more exemptions from the Investment Company Act of 1940, but they still must meet certain regulatory and compliance requirements.
Independent Reviews are a key part of any organization's compliance program, providing essential oversight and helping to ensure that compliance policies and procedures are being followed. They provide an objective, unbiased assessment of an organization's compliance with laws and regulations and can help identify areas where improvements are needed.
Bates provides independent Compliance and AML reviews for Registered Investment Adviser, Broker-Dealer, and hybrid firms, as well as Private Fund and Hedge Fund clients. We also serve established and start-up companies in the areas of banking, fintech (financial technology), virtual asset and cryptocurrency firms, traditional Money Services Businesses (MSBs), and Non-Banking Financial Institutions (NBFIs).
BSA/AML Independent Reviews - as required by FinCen under the Bank Secrecy Act to ensure that your organization's Anti-Money Laundering program is effective and in compliance.
Consumer Compliance Independent Reviews - to assess the quality of your compliance risk management systems, including its internal controls and policies related to its consumer products and services, including Regulation E.
New York Department of Financial Services (NYDFS) Rule 504 Independent Reviews - conducted as a “gap analysis” or as full annual NY 504 Review or Model & System Validation Testing (required by applicable licensees).
Broker Dealer and Registered Investment Advisor Reviews - per FINRA and SEC Rules
FINRA Rule 3310 requires that Broker-Dealers (“BDs”) conduct independent Anti-Money Laundering (“AML”) program testing on a calendar year basis or more frequently if circumstances warrant. The independent testing must be conducted by a person with working knowledge of applicable requirements under the Bank Secrecy Act and its implementing regulations. Our consultants are CAMS, CRCM, and CFRM certified, and some are former regulators who have specific insight into the review process and BSA/AML requirements.
Bates' independent AML review is designed to meet the requirements of FINRA Rule 3310, the Bank Secrecy Act, and the USA PATRIOT Act. Our assessment of the adequacy and effectiveness of the AML Program will include a review of the following:
Upon completion of the review, a written report will be provided that details Bates’ observations and recommendations for improvement, where applicable.
Partner with Bates Compliance to ensure that your compliance program is running smoothly and operating efficiently. Whether you represent a single-member firm or an entire compliance department, partnering with Bates provides you with peace of mind that all the regulatory filings are up-to-date and that your compliance program will meet and exceed regulatory scrutiny.
Let Bates Compliance use its vast experience and knowledge of what similar firms are doing with regard to meeting firm-specific regulations relating to Business Continuity and Succession Planning. Much like the financial plans you create and manage for your clients, Bates can work with you to identify weaknesses in existing plans and suggest best practices to improve both the effectiveness and execution of those plans.
Bates Compliance's team of experienced compliance professionals provide comprehensive offerings for Registered Investment Adviser, Broker-Dealer, and hybrid firms, as well as Private Fund and Hedge Fund clients, assisting them with compliance, risk mitigation, AML, supervision, and internal control functions. We also offer Compliance solutions and consulting services to established and start-up companies in the areas of banking, fintech (financial technology), virtual asset and cryptocurrency firms, traditional Money Services Businesses (MSBs), and Non-Banking Financial Institutions (NBFIs).
All Registered Investment Advisers (“RIA”) are required to have a compliance program that addresses certain regulatory requirements; written policies and procedures, designated chief compliance officer, annual program review, as well as other elements. The effective administration of a RIAs compliance program is challenging.
Bates Compliance’s Annual Compliance Program Support provides the following core services:
Bates also provides additional tailored services to be added to the core services depending on a RIAs needs, such as:
This service assists the RIA with the administration of their compliance program. The core annual support services are designed to help address the main elements of a compliance program. It does not include the performance or testing of any specific compliance policy or procedure tasks. Clients have the option of adding in those activities which would be identified and scoped separately as a service.
Registered Investment Advisers (“RIA”) may desire a third party or an Independent Compliance Consultant (ICC) to help remediate a compliance violation or program deficiency. These reviews may be the result of an internal audit finding, in anticipation of a regulatory action, or in response to a regulatory proceeding. Due to the nature of an independent compliance consultant review, they may be performed through a firm’s outside counsel and/or as prescribed by a regulator.
Many Bates consultants and experts are former regulators and are very familiar with regulator expectations.
Bates will, depending on the specifics of the circumstance or regulatory order, conduct this review consisting of the following stages:
This service is generally in response to a specific program weakness, deficiency, or violation. For ICC’s involving regulatory orders, they typically include an initial review with a follow up review a year later. An ICC performed under a regulatory order results in a review report with remediation recommendations that is provided to both the RIA and the regulator. For non-regulatory ICC’s, the review and report is typically coordinated through the firm’s outside counsel.
Bates may involve other practice areas (such as our Data Analyses and Analytics) as well as our Bates subject matter expert affiliates to provide particular experience to the review service.
All Registered Investment Advisers (“RIAs”) are subject to examination by their regulatory authority (state securities division and/or the SEC). This Mock Regulatory Exam service provides firms the opportunity to experience a dry run of the examination experience. The examination follows a routine regulatory exam process with periodic evaluation points to help RIAs assess their preparedness.
Bates Compliance will, generally, conduct this mock exam under the following stages:
This is a preparatory service for RIAs wanting to test their readiness for a regulatory examination. Clients have the option of adding on an analysis of business activities or the adequacy or testing of policies, procedures, or practices contracted as separate services.
Broker-Dealers (“BDs”) must conduct a review of its Office of Supervisory Jurisdictions (“OSJs”) and non-OSJ branches that supervise non-branch locations at least annually. All non-supervising branch offices must be inspected at least every three years. All non-branch offices must be inspected periodically depending on the nature and complexity of the branch’s business, volume of business, and number of associated persons assigned to the branch.
Bates branch inspections includes verification of policies and procedures related but not limited to:
An inspection report will be produced that summarizes the findings and provides recommendations, if applicable. If a firm is utilizing an audit platform (e.g., RegEd AuditTrax), Bates will use the firm platform.
Bates Compliance may involve other practice areas as well as our subject matter expert affiliates to provide particular experience to this service.
Compliance programs will at times need resource assistance or added expertise. Whether it is a change in compliance program personnel, changes in the business, or application of regulatory requirements, your program may need temporary assistance.
Bates provides “As-Needed” compliance program support on a project or hourly basis for various program needs such as, but not limited to:
This is a temporary service to support a periodic need for assistance with compliance program administration. Each service includes a statement of work and is engaged as a project with an estimated beginning and end date. Bates consultants and our subject matter expert affiliates can provide experience in the many areas of regulatory compliance.
For traditional financial institutions and most Money Services Businesses (MSBs), compliance with the anti-money laundering (AML) requirements under the Bank Secrecy Act (BSA) is an unavoidable component of conducting your operations. All financial institutions and any business conducting financial transactions are required to meet the Office of Foreign Assets Control (OFAC) compliance obligations. It is essential to have a well-developed BSA/AML/OFAC compliance program in place that manages compliance risks and promotes best practices for your industry.
Firms should use their policies, procedures, Compliance and Code of Ethics Manuals as the cornerstone of a robust and effective Compliance Program. Having comprehensive policies that are specific to the firm and its operations is vitally important. Many firms purchase generic, one-size fits all policy manuals that create more harm than good. Bates Compliance customizes its Compliance Manuals and Code of Ethics to fit the culture, business, operations and capabilities of your firm.
To have items listed in your manuals that don’t correspond to your firm is one of the findings in so many examinations. When you work with Bates Compliance, we take the time to understand your firm, how your firm operates and create a customized set of procedures that will both represent truly how your firm operates, but also guide your firm in how the process should be followed. Through a series of document reviews and extensive communication with the departments, your Bates Compliance consultant will be able to both capture as well as articulate the true processes of the firm.
Regulatory registration is determined by several factors depending on a firm’s business model, assets under management, location of firm and clients, and type of investment offering. Before doing business or providing investment advice and receiving compensation, it is critical that a firm operate with the appropriate registration.
Bates provides the following registration services:
Advisers that claim an exemption from registration, typically private fund or venture capital advisers (“private fund advisers”) must still report certain information to regulatory authorities (the SEC and/or State) and comply with applicable regulations. Generally, the exemption is available to private fund advisers that have assets under management below $150 million.
Bates will aid in the drafting and submission of all required documents to report Exempt Reporting Adviser (“ERA”) firm. Bates takes a holistic approach to the registration process by first working with your firm to design, create and implement the ERA’s compliance obligations prior to completing your report process. The SEC (as well as state regulators) will expect that, upon approval, your firm is meeting all the regulatory requirements.
The ERA will receive upon completion a host of various documents that include, but are not limited to:
In addition, the client will be able to leverage the knowledge of the Bate’s consultant to explain the exempt reporting adviser obligations.
Once approved by the SEC, we recommend speaking a Bates consultant to inquire about additional services Bates can offer to help the ERA maintain compliance with various ongoing obligations. This can include, but it not limited to, assistance with your Annual Updating Amendment (“AUA”), your Form D filing requirements, other state specific requirements, modifications to offering documents and marketing materials, special considerations for ERISA investors, and annual bad actor certifications.
Bates will aid in the drafting and submission of all required documents to register a Registered Investment Advisors (“RIA”) firm. Bates takes a holistic approach to the registration process by first working with the firm to design, create and implement the RIA’s compliance program prior to completing its registration. The SEC (as well as state regulators) will expect that, upon approval, the firm is meeting all the regulatory requirements from that point forward.
The RIA will receive upon completion a host of various documents that include, but are not limited to:
In addition, the client will be able to leverage the knowledge of the Bate’s consultant to explain the content and implementation of all required documents.
Once approved by the SEC, we recommend speaking with a Bates consultant to inquire about additional services Bates can offer to help the RIA maintain compliance with various ongoing obligations. This can include, but it not limited to, assistance with Annual Updating Amendment (“AUA”), Annual Review (i.e. 206(4)-7 Review), 13F Filings, or compliance document updates.
Bates will assist a Registered Investment Advisors (“RIA”) with transition filings from State to SEC registration. Rule requires State registered RIAs transition to SEC jurisdiction based upon a number of “triggers”. Most commonly, this happens when firms hit $100M in regulatory assets undermanagement.
Bates with review and/or draft various required documents for adherence to SEC rule(s) that include, but are not limited to:
Once approved by the SEC, Bates will also assist with the formal withdrawal from State registration. In addition, the client will be able to leverage the knowledge of the consultant to explain the content and implementation of all required documents.
Please note that once RIA is newly transitioned to the SEC, the RIA will likely undergo their first SEC Examination within 12-18 months from the approval date. This is a good time to talk to a Bates consultant about the additional requirements your RIA will be required to meet. Some requirements, such as the required Annual Review of compliance Policies and Procedures under Rule 206(4)-7, are all services provided by Bates Compliance.
The Exchange Act requires that any broker-dealer effecting securities transactions by means of interstate commerce be registered. Broker dealers are subject to regulation by the SEC, FINRA and any other Self-Regulatory Organization (“SRO”) in addition to the states where they do business. Unless a registration exemption is available, state laws require registration of any broker dealer doing business from or with residents of their state and the representatives doing business within the state.
Bates will aid in the drafting and submission of all required documents to register as a broker dealer (“BD”). Bates takes a holistic approach to the registration process by first working with your firm to design, create and implement the BD’s supervisory program prior to completing registration. FINRA will expect the firm is meeting all the regulatory requirements upon approval.
The BD will receive upon completion a host of various documents that include, but are not limited to:
Bates may involve other practice areas as well as our subject matter expert affiliates to provide particular experience to this service.
All Registered Investment Advisers ("RIA") are required to file their Annual Updating Amendment (“AUA”) within 90 days after their fiscal year end.
Bates will assist in the following ways:
This service assists the RIA with all required updates to various filing documents. It does not include new registrations in additional jurisdictions, IAR registration, or writing new regulatory disclosure content for an RIA. These would be separate services.
Registered investment advisers with investment discretion of over $100 million or more of equity securities that trade on an exchange (Section 13(f) securities) must report those holdings quarterly by filing a Form 13F. The Official List of Section 13(f) Securities shows the securities that firms must report on Form 13F. The list is published quarterly. It is available for free by going to https://www.sec.gov/divisions/investment/13flists.htm.
Bates will prepare and submit the Client’s Form 13F including:
This service assists the RIA with identifying, uploading, and submitting reporting data. It does not include evaluating a RIA’s holdings.
All Broker/Dealers, as required by FINRA Rule 3120, are required to review & test annually, their system of supervisory procedures and internal controls. This is a review to ensure the adequacy and effectiveness of the compliance controls and to provide a summary of the test results and significant identified exceptions. The review will also consider rule changes, as well as recently regulatory developments.
This, generally, includes an evaluation of the following:
Bates will supplement the documents reviewed with interviews with key personnel to ensure that the written report accurately reflects firm practices. Upon completion of the review, Bates will create a written report for management that includes the required CEO certification.
If you are starting a money services business (MSB), you need to take even more careful steps than other types of businesses. This is because there are many regulations and requirements that apply to MSBs that do not apply to other companies.
When it comes to your company’s financial accounts, you might assume that you can simply walk into a bank and open up the accounts that you need and obtain financing. However, banks have to be extremely careful in this legal landscape, as they must take proper precautions against the risk of money laundering and other illegal financial activities using their accounts.
At Bates, our team can make introductions between your MSB and banks. We can ensure that your company has the right anti-money laundering policies in place to demonstrate to banks that you take compliance very seriously. We also assist in completing all paperwork in compliance with “Know Your Client” requirements and ensure that you present all necessary supporting documentation. This can help guarantee that you will have the banking support your business needs.
Let the Bates team keep you in compliance with our Expert Compliance Training programs, tailored for money services businesses and non-banking financial institutions. Staying up-to-date with regulations is essential in protecting your organization and vital in maintaining your customers’ and clients’ trust. Our e-learning courses are specially designed to teach the basics of anti-money laundering (AML), the Bank Secrecy Act (BSA), consumer compliance, and the role of the Office of Foreign Assets Control (OFAC) to help your organization stay on top of industry compliance regulations. Additionally, we offer a course specifically designed to cover your organization’s Board of Directors’ role and executives’ oversight of your AML compliance program and culture of compliance.
When we developed the idea of providing organizations with the training they need to stay compliant, we knew users would need all-encompassing programs. We wanted to provide users with the best compliance training to teach them the necessary information to fully understand the rules, laws, and regulations essential to financial institutions, money services businesses (MSBs), and other organizations within the financial industry. To do this, we crafted a series of interactive learning programs designed with learners in mind. These courses are robust and comprehensive, offering users:
We are proud to offer a series of comprehensive compliance training programs designed to ensure your employees understand the importance of compliance and their crucial role in protecting clients’ information. While the rules and regulations surrounding compliance are ever-changing, having a strong foundation of knowledge surrounding the topic is essential in adapting to the dynamic compliance landscape.
Each compliance course is led by Subject Matter Experts with experience in the field and is comprised of interactive learning modules that require users to partake in readings, quiz questions, and click-to-reveal information sections. Once you have completed each section of the course, you will be awarded a certificate to demonstrate your completion.
The Regulatory & Internal Investigations team has assisted firms in reviewing for inaccuracies in advisory fees charged. This includes a review for calculation accuracy to the client agreement, comparing the fees charged in a given period to the expected fees, after matching the calculation basis and other factors to align with the firm’s practices. In many instances, Bates specifically reviewed for accuracy to the tiered fee schedule in place, after accounting for householding where applicable. The Bates review was able to quickly identify discrepancies so they could be addressed, particularly where fees were double billed or where refunds of unearned fees were not made at account termination inadvertently. Comprehensive Bates data was also used to streamline fee billing practices, and as a reference to help the firm better align its fee practices for reduced complexity across client agreements.
Bates has assisted clients in reviewing account activity for potential underutilization. Bates analyzes the firm’s trading activity to create trade counts by period (monthly/quarterly to match the advisory fee calculation basis) to check against the firm specified compliance windows. The length, frequency, and periodicity of the applicable trading compliance window in place at the firm during the time period at issue is used for this quantitative review. For example, a three-month window, applied four times a year (not rolling), during which an account cannot be out of compliance in any two adjacent windows. The minimum acceptable amount of trading activity within each compliance window is also tailored to match the firm’s standards.
After completing the trading activity review and quantifying compliance within each period based on the firm’s specifications, Bates then calculates remediation for accounts identified as out of compliance for an unacceptable amount of time according to the compliance window criteria. The fee payment data—merged into the analysis environment with the trade blotter data—can also be used to conduct more granular reviews; for instance, identifying accounts meeting the trading minimum within the compliance window via sales with proceeds that almost exactly match the fee amount for that period (i.e., the trading was needed to cover the withdrawal of fees).
Additional reviews for account specific explanatory factors, such as client instructions, meeting notes, investment strategy, etc. are then conducted in order to remove any accounts which had contextualizing information explaining the trading activity level.
Bates has assisted in the investigation of registered representatives related to that individual’s book of business, focusing on product specific activity (A-share activity, annuities, preferreds, non-traded REITs, etc.), as well as turnover, commissions as a percentage of AUM, and other metrics. The Bates team provided a thorough review of the activity in question throughout the individual’s book of business, identifying problematic trades and assessing potential remediation for impacted clients. Call logs, surveillance alerts, and CRM notes were also reviewed, in addition to the quantitative factors, to form a complete picture of the activity. Various alternatives were presented to key stakeholders as to remediation for different aspects of client harm, after which the Bates team worked with in-house personnel to affect repayment, and outside counsel on the required regulatory reporting after the individuals were terminated. Bates provided further assistance in follow on litigation after the terminations and regulatory inquiry were made public, analyzing various claims (such as unauthorized trading) brought by claimants and providing detailed profit & loss evaluations for accounts and specific trades at issue.
Bates has assisted clients in evaluating trading costs incurred during various historical periods within their wrap fee programs, where trading cost disclosures were alleged to be insufficient in regard to step out trading that occurred. Bates was asked to assist in determining which managers had incurred trading costs by trading away and the extent to which those costs had been disclosed. The wrap fee charged in association with that trading activity was also evaluated and calculated where necessary. In coordination with inside and outside counsel, Bates participated in discussions with the regulator that ultimately defined an acceptable threshold for the occurrence of step out trading, as well as a rolling window in which to evaluate whether the percentage of step out trading met that threshold. These thresholds assisted in reducing the population at issue and allowed the client to frame the issue more effectively with the regulator, along with additional analysis completed by Bates into those managers that; disclosed costs, did not disclose costs, or disclosed zero cost. Demonstratives for use with the regulator were provided detailing the number of trades and accounts that had incurred additional trading costs within different time horizons, and across both equity and fixed income trading, and with and without disclosure. Step out costs incurred by account were also calculated, and assistance was provided by Bates to improve the disclosures made by managers to the client in regards to step out trading and step out trading costs.
The Regulatory & Internal Investigations team has assisted more than 70 firms in responding to a variety of share class selection-related issues. These include the SEC’s Share Class Selection Disclosure Initiative, wherein Bates assisted firms in analyzing their mutual fund trading activity, identifying instances in which a share class of the same fund with a lower 12b-1 fee was available to that investor at that time, and quantifying the 12b-1 fee differential for the purposes of repayment.
Similarly, Bates has conducted the same type of expense analysis in relation to conflicts of interest arising from revenue sharing, in which the firm or its advisors were allegedly incentivized to select No Transaction Fee (NTF) share classes due to the presence of additional revenue sharing payments where a lower cost class of the same fund was available to trade on a Transaction Fee (TF) basis. In those investigations the differential in expense ratios between the two share classes is used to estimate harm to the investor, potentially in addition to the revenue sharing amounts disgorged (quantified by Bates).
Bates has also assisted clients in responding to additional issues arising from NTF/TF share class analyses, such as the avoidance of transaction fees which would have been born by the firm or the advisor had an NTF class not been chosen. Dedicated analyses of cash sweep options have also been completed, with investor impact estimated via expense ratio or yield differentials.
In all these matters, Bates carefully reviewed impacted accounts for other explanatory factors and removed from the analysis any accounts or trades which did not represent a conflict. These factors include the nature of the client agreement, assets held below the line, rebates which had already been paid in some fashion, minimum investment waivers which were requested and denied, etc.
As a result of its extensive work in this space, Bates has developed a high degree of familiarity with clearing firm data necessary for such analyses from NFS, Pershing, Schwab, and others. Bates has also developed and maintains proprietary databases of historical mutual fund fee information, which is leveraged in analyzing both lower cost share class availability and in quantifying potential harm.
Bates has also assisted numerous firms in relation to FINRA’s 529 Plan Share Class Initiative, wherein Bates took in the sponsor provided mutual fund activity, and then used beneficiary date of birth to calculate a breakeven point at which a C-share became more expensive than an A-share of the same fund. Bates then quantified the impact to the investor from that point through the end of the holding period, based on the expense ratio differential between the two classes, leveraging our databases of historical mutual fund information. Explanatory factors similar to those mentioned above were also analyzed, in addition to specific analyses around systematic or automatic investment programs. Analyses related to rollovers not made at NAV were also completed.
For all the matters above, and as required, Bates also calculated prejudgment interest, and assisted in compiling the information necessary to make repayment to investors, including via coordination with 3rd party payment processing firms.
Bates Group’s team works closely with cities, counties, regional 9-1-1 dispatch centers and their attorneys to help resolve public employer-employee and union wage and hour matters.
We have helped public employers throughout California evaluate whether or not their compensation practices are compliant with the Fair Labor Standards Act (“FLSA”) and/or provisions of employee contracts, so they can have sufficient information to respond to employee grievances/complaints, prepare for labor negotiations, or prepare for litigation. We work closely with outside counsel or public agency attorneys to examine and analyze timekeeping and payroll records to assist public agencies:
Bates provides expert consulting and testifying services involving the calculation of potential unpaid wages and penalties related to overtime, meal and rest break violations, travel time, off-the-clock time, minimum wage violations, and expense reimbursement. We have assisted attorneys in every stage of the litigation process related to wage and hour disputes for those arising under the California Labor Code, Fair Labor Standards Act, and PAGA.
Staff from FINRA and the SEC have recently reinforced the necessity of firms to stay current on their Supervisory responsibilities, including reviews of both Registered Rep/Financial Advisor and Client activities.
Managing Director, Business Development and Strategy
Federal and state regulations are strict regarding all types of monetary transmissions, and you must first obtain the proper license and authority before you can work in these types of businesses. At Bates Group, we assist clients in obtaining their money transmitter licenses (MTL), as well as with compliance following licensure and the start of operations.
Every state has its own definition of what constitutes a “money transmitter,” which means it can be difficult to know whether you need a license for your company’s operations. For example, some states exempt digital currency operations from needing a license, while other states do not. We can evaluate your situation and advise whether we believe you need a license for your particular business model.
Generally speaking, any party that completes transactions over $1,000 in a day can qualify as a money transmitter if the transactions include:
Once you determine that you need an MTL, you must meet specific requirements, which can vary significantly from state to state. Some common requirements in most states may include:
Applications also can require a substantial amount of supporting documentation. This can include a detailed business plan that details the financial health and intended operations of the business, financial statements and records for shareholders and directors, and your background check information. In addition, you will need to present your anti-money laundering (AML) policies and procedures that are in line with the requirements enforced by the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Department of Treasury.
In addition to license acquisition, we can also complete all required aspects of the license maintenance process including, but not limited to:
If you are seeking assistance with your BSA/AML Independent Reviews, look no further than Bates Group LLC. Our consultants are CAMS, CRCM, and CFRM certified, and some are former regulators who have specific insight into the review process and BSA/AML requirements. We advise Money Services Businesses on all types of compliance issues, and we are ready to assist you.
A thorough Independent Review should seek out risks of noncompliance involving BSA/AML issues, as well as possible issues with the Office of Foreign Assets Control (OFAC) requirements. Our reviewers are highly trained in risk assessment when examining processes, policies, and procedures in light of BSA/AML requirements.
We have handled many complex Independent Reviews, advising Money Services Businesses regarding possible compliance issues. We understand the various regulatory requirements that apply to different companies, and we can ensure that you meet the requirements for your specific operations.
The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) enforces the various requirements under the law for Money Services Businesses (MSBs). One requirement under the Bank Secrecy Act (BSA) is that each business in this industry must have clear anti-money laundering (AML) policies and programs in place. These programs must include Independent Reviews that take place to test the AML programs for BSA compliance. The frequency and scope of such reviews must be in line with the risk of the particular financial services offered by the business.
These reviews are necessary to ensure that companies are operating in accordance with the BSA and that their AML policies are effective in minimizing money laundering risks. The designated Compliance Officer of the company may not conduct the review, nor can anyone who reports to the Compliance Officer. Many Money Services Businesses (MSBs) hire third-party professional reviewers and consultants to conduct these Independent Reviews to best prevent any compliance problems with FinCEN.
For traditional financial institutions and most Money Services Businesses (MSBs), compliance with the anti-money laundering (AML) requirements under the Bank Secrecy Act (BSA) is an unavoidable component of conducting your operations. All financial institutions and any business conducting financial transactions are required to meet the Office of Foreign Assets Control (OFAC) compliance obligations. It is essential to have a well-developed BSA/AML/OFAC compliance program in place that manages compliance risks and promotes best practices for your industry.
Designing and implementing a comprehensive and effective BSA/AML/OFAC compliance program is no simple task. Programs will vary based on each specific company, though the following are major components of nearly every compliance program.
Each company has a different risk profile, so there is no one-size-fits-all approach to compliance programs. FinCEN expects each institution to tailor its program specifically to its operations, and our specialists can assess your risks based on your location, customers, and services, and then develop a compliance program based on each individual risk profile.
Each program should have clear policies and procedures for every role in the business and each type of transaction. Policies should clearly communicate internal responsibilities, systems, and best practices.
A key part of AML compliance is conducting Independent Reviews to test your program for risk or compliance issues. Review frequency and scope will vary based on your operations, and we can advise on necessary reviews as well as conduct the reviews.
Everyone in your company who participates in the BSA/AML/OFAC compliance program should understand relevant parts of the program and their responsibilities. Training should be conducted on a regular basis to maintain a culture of compliance.
When FinCEN (the U.S. Treasury Department’s Financial Crimes Enforcement Network) changes its guidance on BSA/AML compliance, it can be challenging to manage a program in full compliance with changing rules, as well as managing OFAC economic sanctions obligations and any applicable state regulations. At Bates, our specialists understand and identify all requirements for different types of financial businesses. Many of our consulting experts have CAMS, CAMS-Audit, CFRM, and CRCM certifications, and some are former AML regulators who understand exactly what government officials are looking for.
The regulatory landscape is always changing, and it is important to regularly assess the effectiveness of your BSA/AML compliance program in light of updated laws and standards. Our BSA/AML consultants can conduct a gap analysis to identify potential risk areas. We can then work with your company to update and enhance your anti-money laundering program accordingly.
Banks and MSBs across the country must strictly comply with federal and state laws, especially Bank Secrecy Act and other anti-money laundering regulations. It can take a significant amount of time and knowledge to design and implement policies and training programs that keep your business on track with BSA/AML compliance. However, cutting corners can only lead to possible violations and costly penalties.
If your organization needs assistance with ongoing compliance, you should not hesitate to learn about our professional BSA/AML consulting services. Bates offers ongoing advisory services to a wide range of financial institutions and MSBs -- Contact us to learn about our range of services.
Bates works closely with counsel and their clients to provide expert testimony, forensic accounting and analytics support in matrimonial and divorce matters, including:
Compliance with consumer protection laws and regulations is essential to every bank, lender, or MSB. Your company must have a comprehensive and effective compliance program in place to avoid penalties, fraud, losses to customers, and other types of liability.
Every financial company should have a compliance risk-management program that is specifically designed for the company based on size, relative risk, and operational details. There are different components to these programs, such as:
It is important to have the assistance of consumer protection compliance specialists when designing, implementing, testing, and updating your programs.
When consumers trust financial institutions and money services businesses with their information, accounts, or financing, they are taking a risk. To protect consumers from the risks of harm, there are many federal consumer protection laws that apply to these types of companies.
Compliance with consumer protection laws and regulations is essential to every bank, lender, or MSB. Your company must have a comprehensive and effective compliance program in place to avoid penalties, fraud, losses to customers, and other types of liability. It is important to seek assistance from compliance experts who can help your business with consumer protection reviews.
The federal government takes consumer protection very seriously. These protections are enforced by different federal agencies, including the Consumer Financial Protection Bureau (CFPB), as well as state agencies.
Every financial company should have a compliance risk-management program that is specifically designed for the company based on size, relative risk, and operational details. There are different components to these programs, such as:
The rise of virtual asset transactions on a global scale has led to many compliance and risk-assessment questions, especially when it comes to money laundering risks. Financial services businesses that delve into the industry face many regulatory challenges, and it is important that they take all necessary steps to manage risk and stay in line with anti-money laundering (AML) regulations.
Bates advises financial institutions and other companies working in the unpredictable and fast-growing sector of virtual assets. We work with traders, platforms, ATM operators, hedge funds, exchanges, and crypto-cannabis companies, among others. Working in such an innovative industry requires innovative solutions and approaches to AML compliance and risk management. We are here to help.
Our consultants and experts make it as simple as possible to design and implement AML-compliant policies that are up-to-date regarding virtual asset requirements. We also help your team understand these policies, learn how to identify noncompliance issues and growing risk, and much more. We know that the industry is unpredictable and ever-changing, and we are here to help your business stay relevant and current in the virtual assets and crypto services market.
Our team of consultants has Certified Anti-Money Laundering Specialist (CAMS) and CAMS-Audit certifications, and this advanced training allows us to help all types of companies develop and implement anti-money laundering (AML) compliance programs to ensure regulatory compliance with the Bank Secrecy Act (BSA) and other requirements. Our expertise in financial compliance allows us to customize AML policies to suit your specific cryptocurrency operations while staying in line with state and federal AML obligations. If your company needs to develop AML programs specific to crypto transactions, please do not hesitate to contact us directly.
A critical part of BSA compliance is thorough AML training for all your employees. Our specialists can help develop a training program centered around your specific AML policies, and we can advise and inform your team regarding their specific AML expectations and changing compliance requirements, both externally and internally.
Another key part of BSA/AML compliance is conducting regular reviews and audits of your AML policies and identifying potential risks. We regularly conduct Independent Reviews based on the needs of specific companies, helping them to stay fully compliant with AML obligations and improve their internal AML programs.
While there’s no specific guidance on whether non-fungible tokens (NFTs) constitute a virtual currency or other regulated activity, regulators and legislators are scrutinizing virtual currency and digital closely now. Most NFTs involve art or intellectual property. In 2021, FinCEN specifically issued a notice concerning AML, the Arts & Antiquities Market and illicit activity under the AML Act. (Source: FinCEN Notice on Antiquities and Art (FIN-2021-NTC2)
It is therefore prudent to have an anti-money laundering (AML) compliance program in place. Bates can create a best-in-class AML compliance program which will meet best practices, regulator and financial partner expectations, tailored specifically to your business model.
If you’re launching a new NFT-related business, you will need to undergo a risk assessment to accurately understand your exposure to potential financial crime, given your customer demographics, geographic locations, and products and services offered. Bates will design and implement controls to detect and prevent fraud, money laundering, and other forms of illegal activity.
Bates offers consulting services, program development, audits and reviews, training, and more when it comes to AML compliance for businesses handling cryptocurrency transactions. We handle BSA/AML issues and can adapt our services as your company expands. To learn more about our services, please Contact Us directly for a consultation.
Bates Group is uniquely positioned to assist Debtors, Creditors, and Committees in analyzing and valuing the various components of a business within a distressed environment. Our team brings a range of experience to each engagement and includes experts with a broad range of technical expertise including former SEC and industry regulators, former senior in‐house legal and compliance officers, CFA® charterholders, Certified Fraud Examiners (CFEs), and Certified Public Accountants (CPAs) with decades of experience assisting our clients.
Bates Group experts have undertaken engagements as broad as advising clients on the financial impact of every aspect of a case, and as narrow as testifying on a single valuation issue. Covering the full spectrum of distressed business, our quantitative analysis and qualitative case strategy and expert testimony have been tested and accepted in numerous dispute resolution forums.
Our industry leading experts have consulted and provided reports and testimony regarding standard of care, property, liability, surplus lines, as well as personal lines of insurance.
Many of our cases have involved allegations that revolve around standard of care issues, where we can offer particularly specialized help. Our experts can assist in responding to claims that allege bad faith and/or deceptive trade practices, as well as cases that require an opinion concerning an agent’s errors and omissions claims.
Bates experts have close ties with wholesale surplus line agents, which has allowed us to develop an extensive understanding of industry standards in managing general agents and the nuances of structuring coverage using non-standard policy forms.
We can also provide our clients with valuable insights related to personal lines of insurance including: personal auto insurance, homeowners insurance as well as personal umbrella insurance.
Bates Group LLC brings our firm wide experience with litigation testimony and consulting experts and combines that with a deep understanding of the nuances and unique complexity of the life insurance field through our life insurance practice area. Our experts, with years of industry experience, consult, advise and testify on matters concerning life insurance products, practices and standards for brokers, agents and registered representatives.
Over the years, the array of life insurance options has expanded to give consumers the benefit of a diversity of choice. Bates Group’s consultants and experts provide testimony regarding variable, universal, permanent, and term life insurance. We also provide guidance on stranger originated life insurance (STOLI), corporate owned life insurance (COLI), bank owned life insurance (BOLI), life settlements, as well as in the broader field of life insurance underwriting, including the issuance process.
When an estate initiated litigation against an insurance agency involving universal life insurance policies that had lapsed, Bates was engaged to calculate the hypothetical premiums that would have been required to keep the policies in force. We provided a potential damages calculation which included hypothetical insurance premiums and death benefits discounted to present value. Our expert was also able to consult on the suitability and sales practices involved with the sale and maintenance of the universal life insurance products.
A recent life settlement project included actuarial analyses of selected policies where the sellers were unable to find buyers in the secondary market. Our expert provided testimony regarding the policies as well the broad economic decline that generated a perfect economic storm in the second half of 2008 and the implications of those events for the life settlement industry.
The Bates team includes insurance, tax and damages experts who assist counsel in defending welfare benefit programs including 419(e) plans. Our experts have consulted with counsel to explain how the insurance products work, discuss IRS tax implications and to calculate the economic benefit of these types of plans.
We have performed a large number of asset and sector allocations/analyses for variable annuity and variable life contracts. These analyses were useful in defending against suitability (concentration) claims and comparing to model portfolio allocations.
Bates has analyzed thousands of Annuity/Life Insurance contracts to determine gains or losses associated with Fixed/Variable/Indexed Annuities as well as Term/Whole Life/Universal Life/Variable Life Insurance products. For variable products, our analyses can identify subaccount performance as well as the overall contract’s performance.
Bates Group’s experts have provided valuable insights on all aspects of annuities on both a consulting and testimony basis.
Our experienced team provides services, guidance and/or testimony on the inclusion of annuity products in investor portfolios, including choosing the right annuity for a client's needs, and are very familiar with all the selections that need to be made when purchasing fixed, variable and equity indexed annuities.
In addition to calculating the annuity profit/(loss) and other performance metrics, Bates has deep experience in analyzing, and creating exhibits addressing living and death benefit provisions in annuity contracts, including: Guaranteed Minimum Accumulation Benefit (GMAB), Guaranteed Minimum Withdrawal Benefit (GMWB), Guaranteed Minimum Income Benefit (GMIB) and enhanced death benefits. Displaying the intrinsic value of these benefits at select points in time in comparison to ending/accumulated value has been very effective in cases where contracts were surrendered during the recent financial crisis, and the value of these additional features need to be considered in evaluating the surrender or exchange.
For some contracts that have been surrendered or exchanged at a low point in the market, Bates has prepared “what if” scenarios projecting the hypothetical living/death/portfolio values from a historical date to a future date to capture the appreciation that would have occurred if the contracts had been maintained.
Bates experts have provided opinions on the suitability of annuity switches. These cases include retail litigation as well as regulatory matters and range from an individual 1035 exchange to regulatory matters involving hundreds of exchanges.
If necessary to specific case issues, we also have the capability to incorporate actual or hypothetical withdrawals into our analyses and to identify the tax implications involved with different hypothetical scenarios. In supporting our clients we have also pioneered a present value analysis of living benefits that incorporates life expectancy considerations.
We have prepared, and testified to, numerous schedules including Guaranteed Minimum Accumulation Benefit (GMAB), Guaranteed Minimum Withdrawal Benefit (GMWB), and Guaranteed Minimum Income Benefit (GMIB). Displaying the intrinsic value of these benefits at select points in time in comparison to ending/accumulated values was very effective in cases where contracts were surrendered during the financial crisis. For some contracts that have been surrendered or exchanged at a low point in the market cycle, Bates prepared “what if” scenarios projecting the hypothetical living/death/portfolio values from a historical date to a future date to capture the appreciation that would have occurred if the positions had been held. Where appropriate, we have the capabilities to incorporate actual or hypothetical withdrawals and to also identify the tax implications involved. We have also provided present value analyses of living benefits incorporating life expectancy.
To assist counsel in comparing the value of annuity contracts under various scenarios, Bates has prepared analyses that compare cash surrender values, annuitization values and annuity distributions of actual or hypothetical income streams at multiple points in time. Our analyses can utilize life expectancy tables or model expected growth using Monte Carlo simulation with the results discounted into current dollars to assess damages, or provide damage alternatives. Comparison of actual or hypothetical contract performance can also be evaluated against alternative investment products or portfolios.
In addition to evaluating annuity switches in regulatory matters, Bates has reviewed dozens of switches involved in retail litigation. Our “Net Cost to Exchange” model has been very helpful for our clients and arbitration panels to better understand the quantitative and qualitative components of these exchanges including contract performance, bonus recapture, surrender charges and contract features.
We have successfully itemized and compared fees within various insurance products to other investment alternatives. One comparison included variable annuity subaccounts and evaluated the cost of ownership to hypothetical investments in alternative class A and class C open-end mutual fund shares. Our analyses included a detailed breakout of annual fees, rider fees, sales charges and operating expenses to calculate the total cost of ownership.
Our insurance regulatory and litigation team works side-by-side with multi-national and regional insurance companies, financial services firms and their in-house and outside counsel. We have served as investigators on behalf of clients, running their internal U.S. and international fact-finding efforts, so that management and counsel are in command of the facts in order to make the best-informed decisions while engaged in disputes, litigation, or regulatory inquiries and actions. Our role in both internal and regulatory investigations and litigation is that of a partner to our clients and their counsel, bringing our technical, industry, fact-finding, analysis and managerial expertise to address the issues.
Our insurance experts have frequently been retained to consult or testify regarding suitability and sales practices of life insurance and annuity products. Accordingly, Bates is uniquely qualified to assist our clients in navigating the evolving regulatory requirements regarding the standard of care.
Bates Group was retained to assist an insurance carrier during a FINRA investigation alleging the carrier’s misrepresentations, suitability violations, and supervision in connection with sales and replacements of variable annuities. We analyzed thousands of pages of contract applications and internal documents pertaining to over 500 variable annuity exchanges to compile a database of annuity transactions. Data validation techniques were used to check the consistency and accuracy of the dataset. Once validated, the database was used to generate summary reports and schedules detailing our findings related to the alleged misrepresentations and omissions, which allowed counsel to rebut allegations and negotiate a more favorable result. During the investigative process, Bates’ experts also consulted on the suitability and supervision of the annuity transactions.
As state regulators investigated an association’s deficient pre-need trust which held hundreds of variable life insurance policies, we were asked by counsel representing a financial services firm to analyze tens of thousands of pages of documents and perform a profit/(loss) analysis for each contract within the trust. Bates also constructed thousands of hypothetical scenarios comparing actual contract performance to various benchmarks to assess potential damage scenarios. Additionally, we analyzed millions of transactions within the client’s mainframe database and accounting system to provide counsel with insight and guidance regarding damages during the resolution process.
With over 30 years of industry experience and advanced quantitative capabilities, Bates Group is well positioned to support all aspects of employment related litigation, due diligence, internal investigations and employment compliance-related support.
Bates’ substantive employment experts are proven industry professionals with experience in sales practice, supervision, employment investigations, regulatory reporting, recruitment, contract negotiation, bonus plans, compensation agreements, and the onboarding and termination processes at both broker dealer firms and RIA firms.
Our experts also provide damages and compensation analyses, including past and future earnings models, what-if scenarios and tax consequences. We have significant experience in assisting counsel with claimants’ damages models, the impact of underlying assumptions, and the application of market/industry considerations, including promissory notes, protocol departures, non-protocol departures, etc.
Our compliance team supports financial institutions with due diligence reviews, gap and risk assessments of personnel, and enhanced supervision.
When a litigation or enforcement proceeding is commenced by or against our clients, they call upon our industry leading data analytics team to help them efficiently collect, collate, and analyze the data at issue. Our services in this space are scalable, transparent and utilize technology to drive efforts squarely directed at providing the client with information relevant to assessing their position.
Whether we are engaged to provide early case assessments, preliminary P/(L) analyses, full litigation-based analyses, more complex product and market-based analyses or economic damages, our competitive advantage lies in the methodology we adopt to manage the project.
Working with our clients to understand data sources and data content, we start with an agreed upon scope and an associated estimate.Communication with the client throughout the process is constant; thereby avoiding surprises and keeping the client aware of any change in approach or estimate at the earliest possible stage.
Visit our Data Analyses & Analytics Practice for more Quantitative Data Services
Bates Group’s consultants and testifying experts have diverse backgrounds resulting in a wide variety of expertise. With all that diversity, they have one thing in common—they are all outstanding practitioners in their fields.
Our nationwide roster of over 175 quantitative and substantive consultants and experts span 250+ unique areas of expertise. They support clients and their counsel in retail, institutional and complex securities and other financial services matters. They consult and testify in SEC and other regulatory matters; in FINRA, NFA, AAA, and JAMS and other arbitration forums; in state and federal court proceedings; and in insurance and actuarial matters.
We divide our consulting testifying experts into two areas, quantitative and substantive, though there are several testifying experts who can provide testimony in both areas, should the case call for it. Quantitative experts provide testimony related to our account, valuation, and other related analyses, while our substantive experts provide testimony in relation to myriad other issues.
Our experts’ unique histories cover all aspects of the financial industry, from industry practices to specific products. We pride ourselves on providing the highest level of expertise, and you can see that commitment reflected in the quality of our individual consultants and experts, who typically have 15+ years of industry experience within their field, followed by years of experience testifying as expert witnesses in numerous forums.
We are proud to have established long-term relationships with our clients as a result of the strength of our experts—there is no higher compliment to us than a request asking to use the same expert again on another matter.
We invite you to explore our expert offerings by visiting our Expert Search page.
Please call us at 503-670-7772 if it happens that you do not find a consultant or expert that meets your specific needs. Our goal is to help connect you to the right individual, either from one of our internal experts or through our broader network of contacts.
Bates’ expertise spans the full gamut of retail investment products and strategies -- from individual securities to structured products, from equity hedging strategies to complex options and margin positions, selling away, insider trading and more. We can play an integral role in helping counsel understand the nature, and assess the validity, of allegations, and present the results of that assessment in a format which counsel can easily interpret and explain.
Our accomplished team of former SEC and industry regulators, former senior in‐house legal and compliance officers, former brokers, advisors and managers, Chartered Financial Analysts (CFAs), Certified Fraud Examiners (CFEs), and Certified Public Accountants (CPAs) has decades of experience and is proficient at assisting clients with the case issues at all stages of the legal process: providing early case assessments, preparing P/(L) analyses, preparing damage analyses and “what if” scenarios, providing expert consultation in mock arbitrations or in mediation & settlement discussions, and expert witness testimony if the need arises.
Find a Retail Securities Expert
Sales Practice
Employment Related Disputes
Data Analysis
Operation of Trusts
Trading Related Issues
Due Diligence
In late 2020, the SEC finalized significant changes to rules and forms governing advertising and cash solicitations under the Investment Advisers Act (“IAA”). On December 22, 2020, the Commission issued the new final rule, which replaces both the prior Advertising Rule and Cash Solicitation Rule with a single, broad, “modernized” marketing rule. The new rule also amends investment adviser registration Form ADV and the books and records rule to reflect the related changes.
The deadline for mandatory compliance is November 4, 2022. The SEC stated that advisers may choose to comply with the new rule, but only “in its entirety,” at any time after the May 4, 2021 effective date SEC staff has reminded advisers that during this transition they should be reviewing, revising, and preparing to implement compliance procedures and policies to prevent potential violations of the new rule.
Bates Compliance has formed a team to address investment adviser concern and support efforts to conform oversight, recordkeeping and disclosure requirements under the new rule. Our compliance team includes senior compliance staff and former regulators with expertise in the development of policies, procedures, supervisory and compliance processes, and best practices to enhance compliance and supervisory systems. We have also produced additional resources to help clients and firms understand and navigate implementation of the new rule.
Join Bates and Innova Learning as we present the SEC’s New Marketing Rule in a fun and interactive Mad Men-themed animated format. In our NASAA-approved course (administered on the Prometric platform), we walk you through the new Marketing Rule, pose questions to help you determine whether your advertising and marketing fall under the new rule or not, and provide examples of communications under the new rule.
Alert - 04/06/23 - SEC Exams Division Issues Risk Alert for Newly Registered Advisers on Compliance Deficiencies and Guidance to Address
Article - 02/21/23 - SEC 2023 Exam Priorities Comparison Chart and Summary
Alert - 10/04/22 - With Nov. 4 Deadline Approaching, SEC Announces New Marketing Rule Exam Initiatives and Areas of Review
Article - 08/02/22 - The SEC Marketing Rule - What You Need to Know
Article - 12/21/21 - The SEC’s New Marketing Rule - Webinar Takeaways
On-Demand Webinar - 09/09/21 - Deconstructing the SEC’s New Marketing (and Solicitor) Rule
Alert - 04/05/21 - Update on New SEC Marketing Rule: It’s All or Nothing
Article - 01/08/21 - SEC Rewrites Rules on Investment Adviser Marketing
For more information on how Bates can support your firm's compliance efforts, please contact us or reach out to a member of our team:
Market Manipulation is a mainstay of annual regulator priority lists. Bates frequently assists our clients in internal investigations as well as in investigating allegations brought by U.S. authorities (SEC, CFTC, DOJ), self-regulatory organizations (including FINRA and exchanges), international agencies, and private parties.
We also have substantial experience with matters involving a variety of alleged market manipulation schemes, including (but not limited to) wash trading, match trading, front running, painting the tape, banging the close, and pumping & dumping of thinly traded securities. Most recently, we have been engaged to handle issues arising in high-frequency trading, such as spoofing and layering, as well as in the context of foreign exchange markets.
Bates experts and staff bring high-level expertise when conducting detailed evaluations of the trading at issue, comparing the activity identified to (i) the pattern of trading for the security as a whole and (ii) the historical trading of the alleged manipulator(s). Trading which may otherwise look suspicious may, in fact, be perfectly legitimate behavior after contextualizing the activity. Bates experts can provide invaluable guidance regarding trading strategies, risk management principals, and/or hedging strategies that may also explain the pattern of activity identified, alongside big-data-driven analyses and qualitative reviews of emails, phone calls, and messages conducted by Bates staff.
Bates assisted a client in proactively investigating an issue identified by their internal controls. Our staff and experts completed a comprehensive review of trading activity over a multi-year period for an equity security traded on both U.S. and International exchanges. Bates collected and modeled detailed order book information to evaluate the following characteristics related to the market microstructure of trading in the security across both exchanges:
These same characteristics were evaluated for shifts in market dynamics over time and in comparison to trading on the same exchanges in peer company securities while also noting differences/similarities in trading across the two exchanges. The price impact of potentially noneconomic trading was established, and a formal report was submitted, as well as several reports rebutting the findings of the regulator, culminating in testimony by a Bates expert before the regulator.
Bates experts were called upon to evaluate the conduct of a team of traders within a large global financial institution for a variety of issues, including trading ahead of client orders, inappropriate trade mark up, indications of market manipulation or attempted manipulation, and round-trip trading—in the latter two areas we also considered the behavior and involvement of traders from other major financial institutions. The analysis required a detailed investigation of daily trading, spreads, and quotations on major currencies and currency derivatives, as well as interviews and communication reviews of the alleged involved parties. The report prepared by Bates identified significant failures in the institution’s internal supervisory and control processes and was relied upon in subsequent litigation.
In a recent investigation, Bates was asked to assess the trading of an individual who had accumulated an ownership interest in multiple penny stocks as payment for consulting services rendered. This individual was then alleged to have used both his accumulated ownership and access to company insider information to conduct a classic “pump & dump” of the stock. Bates performed a detailed quantitative assessment of his trading using both publicly available data and Blue Sheets, as well as a qualitative assessment to establish interrelationships between parties via phone records, text message exchanges, and emails. Bates provided detailed timelines of trading activity that included news events, volume, intraday pricing, short interest, and other relevant characteristics. We prepared interactive models showing the relationships between parties, their trading behavior versus the rest of the market, and other demonstratives. We then estimated potential damages following a modified share price inflation methodology. As a result of the work Bates performed, additional potential market manipulators were identified.
On a criminal pump & dump matter, Bates performed the full range of analyses listed above in addition to preparing demonstratives specifically concerning wash or matched trading. During the course of performing our analysis, Bates was informed that several of the alleged manipulators pled not guilty on the basis that they were unaware that the manipulation was taking place. Bates assessed their trading records, Blue Sheet data, and communication records to establish that, at a minimum, they had knowingly participated in wash or matched trading during the manipulated period.
The Regulatory & Internal Investigations team has significant experience in conducting reviews related to insider trading, in both civil and criminal proceedings. These reviews generally follow a two-step approach, beginning with a quantitative focus and concluding with a qualitative focus.
Beginning with the trading activity, Bates will first identify trades which allowed an investor to achieve outsized gains or to avoid outsized losses. The securities reviewed can be selected through prior research conducted by the regulator or counsel, or they can be determined by statistical analysis.Typically, Bates will begin by identifying trading days in the at-issue securities which experienced statistically significant abnormal price returns. Once identified, those days are then compared to the individual (or individuals) trading. Additional statistical analysis can then be used to identify the likelihood of a particular trade being made in “perfect timing” before a market movement, which is then expanded to cover the likelihood of a single individual (or individuals) trading with “perfect timing” for the totality of “perfect” trades.
This analysis is further informed by the at-issue individuals’ prior trading; how often have they traded similar securities (by industry or other factors) in the past, how often do they trade options (for example), what have their historic returns been on trades of the same type? This information helps contextualize the trading at issue, at which point qualitative information such as emails, phone records, text messages, significant news releases, etc. are incorporated into the analysis to provide additional context. As a final step, Bates can also assist in estimating the implied gain achieved (or loss avoided) that was derived from the insider trading activity.
We are now living in a virtual hearing and mediation environment. To achieve arbitration, litigation and mediation success, firms and their counsel will need to embrace this new medium.
Bates Group supports and prepares counsel and firms for virtual legal proceedings. Our Virtual Hearing and Mediation Support services help your in-house and outside counsel master this new environment while gaining confidence and the competitive advantage you seek.
Bates Virtual services include:
Andrew Daniel,
Director, Securities Litigation
adaniel@batesgroup.com
The COVID-19 pandemic has had a far-reaching impact on businesses across the country and throughout the world, putting strain and pressure on the insurance industry more than ever before. Bates Group’s industry-leading insurance, forensic accounting and economic damages experts stand ready to assist Insurers and agents in the many challenges they face as result of the pandemic, including pre-litigation claims reviews and multi-faceted support should a matter proceed to litigation. Our insurance litigation team works side-by-side with regional and multinational insurance companies, reinsurance firms, underwriters and their in-house and outside counsel.
Bates Group’s Insurance and Commercial damages experts have experience handling claims across the following types of insurance coverage:
Bates Groups’ insurance experts are well versed with insurance industry customs, practices, and standards, standard of care, coverage analysis, and claims practices. We consult on or testify to the follow aspects of coverage litigation claims:
Bates Group’s team of forensic accounting and damages experts with CPA, Chartered Accountant, Certified in Financial Forensics, Certified Fraud Examiner and Certified Valuation Analyst designations have experience reviewing, critiquing and adjusting claimed losses for reserve setting, undertaking actuarial analyses for setting loss reserves, and providing pretrial consulting or expert witness testimony.
Our experts are experienced at providing analyses of lost business income or profits, lost wages, and out-of-pocket losses analysis across, but not limited to, the following areas:
Bates Group has decades of experience designing and managing large-scale eDiscovery and managed document review projects for all types of litigation and investigations. Retaining Bates Group enables organizations to leverage the advantages of highly experienced discovery specialists and technology-enabled e-discovery review solutions, allowing counsel to focus their time and effort on the high-value tasks you were hired to perform.
Andrew Daniel, Director, Securities Litigation Expert and Consultant - adaniel@batesgroup.com
Greg Faucher, Managing Consultant, Insurance and Actuarial Practice Leader - gafucher@batesgroup.com
In a non-litigation setting, we apply our significant forensic accounting and financial forensic consulting experience to:
Our team possesses the professional credentials and adheres to strict industry standards that require exercise of due professional care, supervision, objectivity, and integrity in our work. Our credentials include: Certified Public Accountant (CPA) in several states, Certified in Financial Forensics (CFF), Certified Fraud Examiner (CFE), Certified Valuation Analyst, and Chartered Global Management Accountant. Our hands-on experience in forensic accounting, financial statement auditing, business valuation, taxation, financial reporting, and regulatory compliance informs our testimony and bolsters our frontline experience to interpret complex financial information and communicate our findings clearly and objectively.
Skilled in financial reporting, financial statement auditing, and forensic accounting, the Bates team applies the relevant professional standards to:
We assist clients in many aspects of legal disputes, including:
We calculate the value of economic harm associated with various types of commercial and civil lawsuits and then testify in depositions or at trials. Economic harm is often measured through a determination of lost profits or lost earnings. Issues we have been engaged to handle include:
Through our wage and hour practice, we support businesses, government agencies, individuals, and counsels in:
SEC Regulation Best Interest (Reg BI) compliance is an expansive regulatory challenge that impacts the fundamental business structure of financial services organizations as it creates new regulatory and compliance risks. The development of core Reg BI compliance and supervisory components will help firms address the burden of compliance departments in the broker-dealer industry.
Reg BI went into effect June 30, 2020 and sets new conduct standards for broker-dealers. To ensure Reg BI compliance, broker-dealers must adhere to a package of rules and interpretive guidance directing them to act in the “best interest” of their clients. The package also includes new compliance requirements and guidance for both broker-dealers and investment advisers concerning the new obligations owed to retail investors.
FINRA and SEC Increase Focus on Reg BI Compliance – What You Need to Know – 02-10-23
The forensic accounting and economic damages team at Bates Group provides accounting, financial, and valuation expertise while at the same time effectively and objectively communicating the findings to the client throughout the duration of a project.
Whether serving as consulting experts or testifying experts, we support law firms, businesses, and government agencies by deciphering, interpreting, and explaining relevant accounting and financial data—including qualitative characteristics—to produce reliable and useful outcomes. In collaboration with Bates Group's Big Data Services, we process large data sets to collect, identify, and filter the relevant data required to execute a meaningful analysis consistent with the project’s objectives.
Bates Group is the national leader in providing vulnerable and senior investor expertise, expert testimony, and analytical techniques to help financial services firms manage risk, minimize regulatory scrutiny, and prevent fraud and reputational harm.
Bates Investor Risk Assessment (BIRA) is a unique new program now available for broker-dealers and registered investment advisers. It represents a breakthrough in helping firms protect their most vulnerable clients, while meeting regulatory expectations.
BIRA assists in safeguarding seniors, retirees, minors, and those with diminished capacity. It enables firms to proactively identify high-risk accounts, so they can take preventive measures in a timely manner.
Protecting vulnerable investors is a priority for many firms and regulators. Our exclusive new risk assessment program employs a systematic analytical approach created to address growing risks for these individuals.
BIRA centers around a rigorous evaluation phase, wherein Bates experts use specialized analytics to identify key risk indicators, some of which may lie buried in firm data. It uses these signals to highlight individual at-risk investors, or high-risk areas, for review. In a subsequent implementation phase, our team can then provide recommendations to help keep firms and their clients from potential exposure and harm.
In the evaluation phase, the Bates Compliance and AML/Financial Crimes teams will evaluate the firm in a process that includes interviewing selected firm employees, thoroughly analyzing procedures and systems, and assessing data points that can be used as key risk indicators.
The implementation phase comprises elements including developing customized models to integrate multiple data types; identifying higher-risk accounts and activities; and addressing issues of governance, escalation protocols, process flows, and
reporting.
Arbitrator Evaluator™ from Bates Group is the smart way to identify and select the best arbitrators for your case.
Learn more about our Arbitrator Evaluatorâ„¢
Bates provides a wide range of AML Compliance services for our bank, brokerage, and non-bank financial institution clients.
Whether as a result of an enforcement action or as a self-initiated project, Bates works with financial institutions to evaluate, redesign and implement part or all of an AML program. Our experienced consultants can advise financial institutions on current industry standards and best practices in AML and Financial Crimes in the following areas: program governance, policies and procedures, BSA/AML/OFAC risk and gap assessments, audits, KYC and customer risk scoring, and systems integration and implementation
Financial Institutions are required to conduct independent audits of their AML programs. In order to achieve complete independence and also to benchmark a financial institution’s AML program against industry best practices, it is important to use a third-party consulting firm for your annual audit. Bates has experienced AML auditors who can help AML departments in this critical area.
Bates provides assistance to financial institutions in the clearance of backlogs or to conduct lookbacks in the following areas: customer due diligence (CDD) reviews, enhanced due diligence (EDD) reviews, name screening alerts, OFAC alerts, 314(a) alerts, transaction monitoring alerts, case investigations and suspicious activity reports (SAR), trade surveillance alerts, and fraud alerts.
It is critical to evaluate the AML risk that each customer represents to the financial institution. Bates can evaluate your current risk scoring model and advise how to enhance your customer risk scoring. Alternatively, we can design new risk scoring models that are tailored to your AML program.
Whether due to regulatory intervention or as a self-initiated project, Bates can assess and evaluate your AML Compliance program to check whether it meets industry best practices. It is important to periodically conduct gap assessments in order to keep up with current industry AML standards and best practices. Our consultants have considerable experience, knowledge of industry standards and expertise in all areas of AML Compliance, and are well-equipped to complete a gap assessment for your firm.
The cornerstone of a strong BSA/AML Compliance program is the implementation of comprehensive policies and procedures that enable financial institutions to determine their clients’ risk for money laundering, financial crime and or terrorist financing activities. The Bates team of experts and consultants have many years of experience working in regulatory environments as inside and outside counsel and as Compliance professionals for some of the world’s largest financial institutions. These experts and consultants can help implement, review and test each client’s Customer Identification Program (CIP) and Know Your Customer (KYC) program including policies and procedures, KYC customer risk scoring models, Customer Due Diligence (CDD), Enhanced Due Diligence (EDD) and Beneficial Ownership requirements as required by the FinCEN Customer Due Diligence Rule.
Bates has successfully assisted a number of financial institutions in connection with AML regulatory-related inquiries and responses. Our success in helping our clients is due in large part to the experience and insight of our CAMS-certified consultants and AML project managers, many having previously worked for regulatory agencies and also have been members of AML teams working on behalf of some of the largest financial institutions in the United States. Their collective and unique insights, coupled with their industry knowledge and regulatory know-how, help our clients meet regulatory expectations and resolve AML deficiencies in the face of regulatory scrutiny.
An integral component of a robust BSA/AML Compliance program is the completion of an annual BSA/AML/OFAC risk assessment. Financial institutions should conduct tailored enterprise-wide risk assessments to evaluate the inherent risk of the various businesses at their firm against their control environment. Once residual risks are identified it is important for AML Compliance departments to enhance their AML programs to address the risk. Bates has experienced consultants who specialize in risk assessments from the smallest to the largest and most complex financial institutions.
For traditional financial institutions and most Money Services Businesses (MSBs), compliance with the anti-money laundering (AML) requirements under the Bank Secrecy Act (BSA) is an unavoidable component of conducting your operations. All financial institutions and any business conducting financial transactions are required to meet the Office of Foreign Assets Control (OFAC) compliance obligations. It is essential to have a well-developed BSA/AML/OFAC compliance program in place that manages compliance risks and promotes best practices for your industry.
Bates Group's end-to-end solutions assist financial services firms, broker-dealers (BDs) and investment advisers (IAs) — and their counsel — throughout the lifecycle of their legal matters. As part of the Bates team of over 175 substantive and quantitative consultants and testifying experts, our nationally recognized Bates Compliance experts are uniquely positioned to provide FINRA expert witness and SEC expert witness testimony, as well as in state and federal court.
In fact, many of our experts bring decades of background and expertise in compliance regulations, practices, and issues to their depositions and the witness stand from their previous professional experience in senior positions at Federal and State regulatory agencies and non-governmental organizations.
Our end-to-end approach to client partnership includes initial consultations, analyzing the facts and data in each matter, recommending a course of action, and, if necessary, testifying as a FINRA expert witness, an SEC expert witness, or at depositions and hearings.
In addition to providing FINRA expert witness and SEC expert witness testimony, Bates Compliance experts routinely assist financial service firms with other legal or compliance matters with FINRA and the SEC — as well as NFA, AAA, and JAMS, and other arbitration forums; and in state and federal court proceedings.
Our Compliance experts are ready to assist you and your counsel to address your legal issues through to a full and final resolution.
Visit our Expert Search page to find a Bates Compliance FINRA expert witness, SEC expert witness, or other testifying expert.
Bates Group’s Energy, Oil & Gas professionals have worked with financial services companies and their legal counsel to provide market, product and operational expertise in regulatory investigations involving energy-related issues, as well as in litigation settings.
Bates Group has been retained by financial services firms on numerous cases involving investments in Energy-related stocks and MLPs to provide a number of analyses to address suitability, such as hypothetical comparisons, analyst recommendations, risk assessment, and various portfolio and sector allocation analyses. Bates is able to provide consulting and expert testimony for Energy, Oil & Gas disputes involving:
Additionally, we are able to draw on our extensive Energy, Oil & Gas expertise to assist clients on investment banking issues related to energy transactions, analyze large amounts of data and critically assess allegations associated with enforcement action proceedings, as well as consulting with clients on internal compliance procedures and findings.
Business decision making at all levels within an organization is becoming increasingly data driven. 90% of electronic data in existence today was created within the last two years, and the amount of new data generated in a single day is staggering. The era of data creation is over; the task at hand is the ability to turn that data into actionable information.
Bates Group provides cutting-edge analytic services in support of data analysis, synthetization, and presentation. We are driven by data analytics, and have been since our founding. Our strengths lie in our ability to identify relevant data, clean and standardize the needed fields, analyze the data available, and distill the salient information present within the data into easy-to-understand takeaways.
Our practitioners are well seasoned in analyzing both structured and unstructured data sets, and are very familiar with current best practices in the field of data science.
In today’s data-driven world, the ability to manage and analyze large, complex sets of data is critical to the success of litigation matters and internal and regulatory investigations. Bates Group is highly experienced in providing consulting services involving large and complex datasets, some containing billions of records.
Utilizing state-of-the-art technology, we have developed an efficient and cost-effective approach to assist in navigating the discovery process, performing data diagnostics, and conducting statistical and empirical analysis. Through our engagements, we have collected and aggregated data from multiple sources within our clients’ businesses, and, in doing so, have gained the experience to help minimize the efforts required from our clients’ data personnel and to ensure data integrity throughout the process.
Bates Group is also equipped with proprietary software to provide an efficient in-house solution for potential data entry exercises. We understands the importance of protecting client data and take steps to ensure that all data at Bates is protected and safe from unauthorized access. Bates Group vigilantly updates its systems to ensure they are secured against vulnerability, based on the latest computer security industry protocols and announcements. We also undertake regular SOC 2 audits to ensure the proper controls around security and confidentiality. For more on our data security measures, please give us a call or visit our Data Security page. For examples of work we have performed in support of litigation or investigation matters, scroll to the bottom of this page
Regulators are dedicated to using large scale market activity data to monitor financial institutions and to bring enforcement actions against them. Against that backdrop, it is crucial that firms understand how a regulator might view their data in case they are targeted for an investigation.
Bates Group has a substantial, proven track record assisting clients in two key areas: abnormal performance indicators and market abuse detection. Both areas are key concerns of regulators and areas in which they are using machine learning and other data analysis techniques to detect illegal behavior (see here for abnormal performance, beginning at slide 13; see here for market abuse and the Consolidated Audit Trail).
Our data-driven detection services can be used to screen for abnormal performance in a fund, manager, or asset’s prior returns. This service is invaluable for financial institutions, family offices, or even individual investors in uncovering and avoiding fraudulent schemes. We evaluate the quality of the reported prior performance from multiple angles, looking for indications that the reported results may not be accurate. Our in-depth understanding and experience in financial markets then allows us to examine each flag or exception generated by our data-driven review, discounting flags and exceptions that may have a reasonable explanation, and thoroughly investigating those that do not.
Bates Group has also developed a number of proprietary programs and platforms for identifying instances of market abuse in both equity and futures markets. Our analysis can be used to identify spoofing, layering, iceberging, momentum ignition, wash sales, painting the tape, insider trading, cherry picking, and pump and dump behavior. Our data-driven capabilities are augmented by our deep experience in trading and trading platforms, allowing us to thoroughly investigate each instance of potentially illegal behavior and to provide concrete guidance back to our clients on whether or not such activity has taken place.
For example reporting from our work in this space, please contact us.
Corporations are increasingly reliant on analysis conducted in a big data environment to drive key decision making, often as a factor in determining the positioning and strategy of the business itself. Frequently the work performed is done with a high degree of care, but it is inevitable that errors will occur in any analysis environment. We have found this to be especially true in instances where the client is utilizing a programming language in which only a few employees are fluent, or when the same team performing the analysis also reviews their own results. Unfortunately, this is a fact of life for even the largest organizations, as they are often building and growing their internal data science teams and may not have standard practices or institutional knowledge developed to conduct a rigorous independent review process.
In these instances, Bates can be an invaluable resource. We have assisted clients by reviewing work that has been performed internally, or by a third-party, replicating the results and verifying the conclusions. Before making a major decision that could impact the future of the business, it pays to ensure that the analysis driving that decision is error free. Bates Group provides its corporate clients with that assurance by validating the work performed by others.
The Regulatory & Internal Investigations team is often a “consumer” of system data or alert outputs generated by our clients, wherein that information is needed to respond to a regulatory investigation. As a result of our visibility into the technology architecture in place at many financial firms, the Bates team can provide insight and guidance into the accuracy, efficiency, and completeness of programmatic processes relied on by our clients. These reviews evaluate the flow of information throughout the firm, and where needed, Bates can provide consultative guidance on modified processes, new technology implementation, or provide custom fixes and improvements to existing programs.
Bates also provides tuning and verification services for specific alert or surveillance functions, such as evaluating AML thresholds in place, or product/activity specific trade alerts.
We focus on three primary review points to do this:
After establishing an understanding of how Alerts are intended to work (through discussion with internal personnel and review of written policy), we replicate the Alert in our own programmatic environment, allowing us to run a large quantity of recent trade data through the replicated system. Comparing the activity that triggered the Alerts in the replicated environment to the Alerts that were triggered internally allows us to identify potential gaps in the way the Alerts are implemented at the firm and how they are understood and described to be functioning. Beyond identifying gaps, Bates can also provide suggestions on whether and how Alert parameters can be refined to generate “better” Alerts (i.e., fewer false positives) in addition to providing perspective on how Alert parameters compare to those of relevant peer firms. Where needed, the technology team will bring in subject matter experts from Bates’ broad range of expertise to provide our clients with the best possible advice.
We have performed an internal investigation on behalf of a large financial institution into the trading activity across the entire trading platform of a financial instrument. The dataset spanned multiple years, included over 6,500 FAs and covered tens of thousands of clients (all equating to 25+ million transactions). During the course of the investigation, we partnered with counsel and utilized our industry expertise to determine the appropriate metrics and presentations that allowed them to reach the necessary conclusions. We also played an instrumental role working with both the IT and the product (at issue) branch of the firm to extract the necessary data; which included performing diagnostics on the data to confirm accuracy/completeness. Our product and services were extremely influential as the investigation transitioned into responding to the regulatory inquiries.
We have analyzed real estate investment trust (REIT) transactions covering a five-year period of time to determine whether the transactions met various suitability guidelines. In performing our analysis on millions of records we created testing protocols that allowed us to determine which, if any, of these transactions violated the individual requirements of the suitability guidelines. The results of our analyses were provided to the broker-dealer and state regulators.
Bates reviewed cancellation activity on behalf of a major broker-dealer following self-reporting to FINRA around weaknesses within the trade system utilized that made the in-place cancellation reason flags unreliable. The technology team was tasked to find inconsistencies in cancellation practices by various departments across the firm and to determine if activity patterns related to cancel activity reflected malicious behavior by individual reps.
Over 2 million cancellations were matched across over 121 million transactions to identify the original trade and the correction that was made after the cancellation occurred. Identification fields were used in the initial matching processes, but completion of the project required that Bates develop, test, and implement a more complex logic to match trading to cancellations based on fields, such as account, CUSIP, or trade date, that the transactions had in common. Each set of matches was categorized according to what changed between the original trade and the last corrected trade and the information was summarized for the client in a variety of reports including by rep, by correction reason, by region, etc. to facilitate identification of 1) bad actors, 2) inconsistent usage requiring re-training, 3) areas requiring a full system overhaul.
Our staff has performed complex regression analysis to investigate the impact of trades and orders on stock prices. Prior to performing such analyses, we collected and standardized millions of records of orders and activity data from the client. Data were processed in a cost-efficient manner such that any additional analysis for a particular stock was automated.
We have researched and analyzed various open-end fund complexes to deduce investment strategy, trading patterns, alleged mispricing, and expense to shareholders. Our staff reviewed a dataset of portfolio trades by the portfolio managers as well as trades by investors.
We also have experience performing a microeconomic study that utilized billions of records including trade and order data for all companies listed on an exchange. Data were also merged with market maker quote data to conduct a comprehensive study on how market makers reacted to investor activity.
Bates Group partners with Summit Security Group to deliver cybersecurity policy expertise, recommendations, and policy templates, as well as a full suite of services for Registered Investment Adviser (RIA) firms, broker-dealers, and hybrid firms. Our comprehensive solutions provide both insights into the security weaknesses of your operating environment and as well as deliver the support you need to meet compliance obligations and objectives.
During this type of engagement, our expert consultants will work with your firm to evaluate the cybersecurity safeguards currently in place as well as which investment adviser cybersecurity policy practices and safeguards fall short of industry standards or fail to meet regulatory requirements. This type of assessment is performed through interviews with key members of the staff, a virtual or physical facility walk‐through, document reviews, etc. The assessment results in a deliverable to your firm, describing gaps between operations and regulatory requirements and industry standards, as well as the potential risks associated with each gap. The report provides a list of recommended actions needed to close gaps in a firm’s cybersecurity policy and practices and reduce risk to a level deemed acceptable by the client
This type of engagement measures the ability of your firm’s technical infrastructure to withstand an attack launched by someone seeking to undermine the security of the systems or any data stored within them. During this type of assessment, security engineers use a variety of technical tools coupled with manual testing techniques to discover, describe and test weaknesses in the system. The result of this type of testing is a technically detailed report that documents vulnerabilities and weaknesses that could be exploited to compromise the confidentiality, integrity or availability of a firm’s systems and data. Our deliverable contains detailed technical proofs of concept and, like all our reports, recommended steps that should be taken to eliminate vulnerabilities and reduce risk
The documentation of a thorough cybersecurity policy and a complete set of procedures is essential to maintaining a robust cybersecurity program and demonstrating compliance. Working with your firm, our team of experts can craft cybersecurity policies, operating manuals, or provide an investment adviser cybersecurity policy template describing the steps that staff need to take to protect your confidential data and support regulatory compliance.
Staff training is a critical component of a healthy cybersecurity program. Our team will work with your firm to provide cybersecurity training that covers industry standards and will help them understand critical areas of risk so they can implement appropriate processes. The training is designed to enhance your team’s overall understanding of your investment adviser's cybersecurity policy and security best practices as well as threats to your environment.
Bates Compliance provides world‐class registered investment adviser Compliance and Regulatory consulting services and support for new and existing Registered Investment Adviser Firms. Our comprehensive set of services is tailored to the needs and requirements of each firm. Whether it is an acquisition of an existing adviser firm or an initial registration of a new firm, our dedicated and experienced professionals assist you at every step along the way.
Using our individual and team advising approach, our staff of senior compliance professionals, former CCOs and regulators, along with our roster of over 175 individual industry and subject matter experts, work with you to deliver tailored services and solutions to meet the current and ongoing compliance needs for a registered investment adviser firm, and to provide a cohesive, all-encompassing client experience.
Learn why Bates Compliance is different.
All Registered Investment Advisers (“RIA”) are required to have a compliance program that addresses certain regulatory requirements; written policies and procedures, designated chief compliance officer, annual program review, as well as other elements. The effective administration of an RIA's compliance program is challenging.
Bates Compliance’s Annual Compliance Program Support provides the following core services:
Bates also provides additional tailored services to be added to the core services depending on a RIAs needs, such as:
This service assists the RIA with the administration of their compliance program. The core annual support services are designed to help address the main elements of a compliance program. It does not include the performance or testing of any specific compliance policy or procedure tasks. Clients have the option of adding in those activities which would be identified and scoped separately as a service.
All Registered Investment Advisers (“RIAs”) are required to file their Annual Updating Amendment (“AUA”) within 90 days after their fiscal year end.
Bates Compliance will assist in the following ways:
This service assists the RIA with all required updates to various filing documents. New registrations in additional jurisdictions, IAR registration, or writing new regulatory disclosure content for an RIA, are distinct from the AUA program, and may be added as a separate service.
All SEC-Registered Investment Advisers (“RIAs”), as well as those engaging in established best practices, are required to perform an annual review of the firm’s Compliance Program under Rule 206(4)-7. This is a review to ensure adequacy and effectiveness of the RIA’s Policies and Procedures and Compliance controls.
Bates will, generally, conduct this review consisting of the following stages:
This service is available for a wide range of clients, from small, one-member firms to the largest in the industry. Bates can scale to deliver a review consistent with the complexity of an RIA business model. Bates annual review report will help RIAs identify areas of weakness and provide recommendations for improvements. Have a sound compliance program is essential. Whether desiring a third-party review perspective occasionally or establishing an ongoing review relationship with someone who knows your RIA business model, the Bates Annual Review service is tailored to your needs.
Registered Investment Adviser (“RIA”) compliance programs will at times need resource assistance or added expertise. Whether it is a change in compliance program personnel, changes in the business, or application of regulatory requirements, RIAs may need temporary assistance.
Bates Compliance provides “As-Needed” compliance program support on a project or hourly basis for various program needs such as, but not limited to:
This is a temporary service to support a RIA’s periodic need for assistance with compliance program administration. Each service includes a statement of work and is engaged as a project with an estimated beginning and end date. Bates consultants and our subject matter expert affiliates can provide experience in the many areas of regulatory compliance.
Registered Investment Advisers (“RIA”) may desire a third party or an Independent Compliance Consultant (ICC) to help remediate a compliance violation or program deficiency. These reviews may be the result of an internal audit finding, in anticipation of a regulatory action, or in response to a regulatory proceeding. Due to the nature of an independent compliance consultant review, they may be performed through a firm’s outside counsel and/or as prescribed by a regulator.
Many Bates consultants and experts are former regulators and are very familiar with regulator expectations.
Bates will, depending on the specifics of the circumstance or regulatory order, conduct this review consisting of the following stages:
This service is generally in response to a specific program weakness, deficiency, or violation. For ICC’s involving regulatory orders, they typically include an initial review with a follow up review a year later. An ICC performed under a regulatory order results in a review report with remediation recommendations that is provided to both the RIA and the regulator. For non-regulatory ICC’s, the review and report is typically coordinated through the firm’s outside counsel.
Bates may involve other practice areas (such as our Data Analyses and Analytics) as well as our Bates subject matter expert affiliates to provide particular experience to the review service.
All Registered Investment Advisers (“RIAs”) are subject to examination by their regulatory authority (state securities division and/or the SEC). This Mock Regulatory Exam service provides firms the opportunity to experience a dry run of the examination experience. The examination follows a routine regulatory exam process with periodic evaluation points to help RIAs assess their preparedness.
Bates Compliance will, generally, conduct this mock exam under the following stages:
This is a preparatory service for RIAs wanting to test their readiness for a regulatory examination. Clients have the option of adding on an analysis of business activities or the adequacy or testing of policies, procedures, or practices contracted as separate services.
Regulatory registration is determined by several factors depending on a firm’s business model, assets under management, location of firm and clients, and type of investment offering. Before providing investment advice and receiving compensation, it is critical that a firm operate with the appropriate registration.
Bates Compliance provides the following registration services:
Advisers that claim an exemption from registration, typically private fund or venture capital advisers (“private fund advisers”) must still report certain information to regulatory authorities (the SEC and/or State) and comply with applicable regulations. Generally, the exemption is available to private fund advisers that have assets under management below $150 million.
Bates will aid in the drafting and submission of all required documents to report Exempt Reporting Adviser (“ERA”) firm. Bates takes a holistic approach to the registration process by first working with your firm to design, create and implement the ERA’s compliance obligations prior to completing your report process. The SEC (as well as state regulators) will expect that, upon approval, your firm is meeting all the regulatory requirements.
The ERA will receive upon completion a host of various documents that include, but are not limited to:
In addition, the client will be able to leverage the knowledge of the Bate’s consultant to explain the exempt reporting adviser obligations.
Once approved by the SEC, we recommend speaking a Bates consultant to inquire about additional services Bates can offer to help the ERA maintain compliance with various ongoing obligations. This can include, but is not limited to, assistance with your Annual Updating Amendment (“AUA”), your Form D filing requirements, other state specific requirements, modifications to offering documents and marketing materials, special considerations for ERISA investors, and annual bad actor certifications.
Bates will aid in the drafting and submission of all required documents to register a Registered Investment Advisor (“RIA”) firm. Bates takes a holistic approach to the registration process by first working with the firm to design, create and implement the RIA’s compliance program prior to completing its registration. The SEC (as well as state regulators) will expect that, upon approval, the firm is meeting all the regulatory requirements from that point forward.
The RIA will receive upon completion a host of various documents that include, but are not limited to:
In addition, the client will be able to leverage the knowledge of the Bate Compliance consultant to explain the content and implementation of all required documents.
Once approved by the SEC, we recommend speaking with a Bates consultant to inquire about additional services Bates can offer to help the RIA maintain compliance with various ongoing obligations. This can include, but it not limited to, assistance with Annual Updating Amendment (“AUA”), Annual Review (i.e. 206(4)-7 Review), 13F Filings, or compliance document updates.
Bates Compliance assists growing Registered Investment Advisers (“RIA”) with transition filings from State to SEC registration. Rule requires State registered RIAs transition to SEC jurisdiction based upon a number of “triggers”. Most commonly, this happens when firms hit $100M in regulatory assets undermanagement.
Bates will review and/or draft various required documents for adherence to SEC rule(s) that include, but are not limited to:
Once approved by the SEC, Bates will also assist with the formal withdrawal from State registration. In addition, the client will be able to leverage the knowledge of the consultant to explain the content and implementation of all required documents.
Please note that once the RIA is newly transitioned to the SEC, the RIA will likely undergo their first SEC Examination within 12-18 months from the approval date. This is a good time to talk to a Bates consultant about the additional requirements your RIA will be required to meet. Some requirements, such as the required Annual Review of compliance Policies and Procedures under Rule 206(4)-7, are all services provided by Bates Compliance.
Form 13F
Registered Investment Advisers ("RIAs") with investment discretion of over $100 million or more of equity securities that trade on an exchange (Section 13(f) securities) must report those holdings quarterly by filing a Form 13F. The Official List of Section 13(f) Securities shows the securities that firms must report on Form 13F. The list is published quarterly. It is available for free by going to https://www.sec.gov/divisions/investment/13flists.htm.
Bates will prepare and submit the Client’s Form 13F including:
This service assists the RIA with identifying, uploading, and submitting reporting data. It does not include evaluating a RIA’s holdings.
Keeping investment advisers up‐to‐date on Rules and Regulations is a crucial part of maintaining a robust compliance culture. Bates Compliance and Regulatory Alerts provide firms with keen insights on what is changing and what they can do to stay compliant.
Investment Advisory Representatives (IARs) registered in certain states are now required to take 12 hours of ongoing continuing education classes from an approved vendor to maintain their advisory registrations. Bates works with Innova Learning to provide our clients with regulatory, compliance and other related training.
Broker-dealers are facing an increasing number of regulations from and responsibilities to a variety of authorities. These include Federal and State government agencies as well as a host of self-regulatory organizations. Our broker-dealer consulting, registration, compliance services and continuing guidance are tailored to meet the needs and requirements of new and existing broker-dealer firms. Compliance has never been so complex. Bates assists firms to not only meet a growing environment of regulatory requirements but to set the foundation for a culture that will promote best practices in compliance throughout their offices.
Our broker-dealer consulting offerings are provided by professionals tenured with decades of industry or regulatory (or both) experience — and range from broker-dealer registration services for new firms to broker-dealer compliance services for existing firms.
Learn More:Â Why Bates Compliance Services are Different
All Broker-Dealers (“BDs”), as required by FINRA Rule 3120, are required to review & test annually, their system of supervisory procedures and internal controls. This is a review to ensure the adequacy and effectiveness of the compliance controls and to provide a summary of the test results and significant identified exceptions. The review will also consider rule changes, as well as recently regulatory developments.
This, generally, includes an evaluation of the following:
Bates Compliance will supplement the documents reviewed with interviews with key personnel to ensure that the written report accurately reflects firm practices. Upon completion of the review, Bates will create a written report for management that includes the required CEO certification.
FINRA Rule 3310 requires that Broker-Dealers (“BDs”) conduct independent Anti-Money Laundering (“AML”) program testing on a calendar year basis or more frequently if circumstances warrant. The independent testing must be conducted by a person with working knowledge of applicable requirements under the Bank Secrecy Act and its implementing regulations.
Bates independent AML review is designed to meet the requirements of FINRA Rule 3310, the Bank Secrecy Act, and the USA PATRIOT Act.
Bates assessment of the adequacy and effectiveness of the AML Program will include a review of the following:
Upon completion of the review, a written report will be provided that details Bates’ observations and recommendations for improvement, where applicable.
The Exchange Act requires that any Broker-Dealer (“BD”) effecting securities transactions by means of interstate commerce be registered. BDs are subject to regulation by the SEC, FINRA and any other Self-Regulatory Organization (“SRO”) in addition to the states where they do business. Unless a registration exemption is available, state laws require registration of any BD doing business from or with residents of their state and the representatives doing business within the state.
Bates Compliance will aid in the drafting and submission of all required documents to register as a Broker-Dealer. Bates takes a holistic approach to the registration process by first working with your firm to design, create and implement the BD’s supervisory program prior to completing registration. FINRA will expect the firm is meeting all the regulatory requirements upon approval.
The BD will receive upon completion a host of various documents that include, but are not limited to:
Bates may involve other practice areas as well as our subject matter expert affiliates to provide particular experience to this service.
Broker-Dealers (“BDs”) must conduct a review of its Office of Supervisory Jurisdictions (“OSJs”) and non-OSJ branches that supervise non-branch locations at least annually. All non-supervising branch offices must be inspected at least every three years. All non-branch offices must be inspected periodically depending on the nature and complexity of the branch’s business, volume of business, and number of associated persons assigned to the branch.
Bates branch inspections includes verification of policies and procedures related but not limited to:
An inspection report will be produced that summarizes the findings and provides recommendations, if applicable. If a firm is utilizing an audit platform (e.g., RegEd AuditTrax), Bates will use the firm platform.
Bates Compliance may involve other practice areas as well as our subject matter expert affiliates to provide particular experience to this service.
Broker-Dealer (“BD”) compliance programs will at times need resource assistance or added expertise. Whether it is a change in compliance program personnel, changes in the business, or application of regulatory requirements, BDs may need temporary assistance.
Bates provides “As-Needed” compliance program support on a project or hourly basis for various program needs such as, but not limited to:
This is a temporary service to support a BD’s periodic need for assistance with compliance program administration. Each service includes a statement of work and is engaged as a project with an estimated beginning and end date. Bates consultants and our subject matter expert affiliates can provide experience in the many areas of regulatory compliance.
Keeping investment advisers up‐to‐date on Rules and Regulations is a crucial part of maintaining a robust compliance culture. Bates Compliance and Regulatory Alerts provide firms with keen insights on what is changing and what they can do to stay compliant.
Bates Group brings together a team of diverse industry and technical experts skilled in designing more efficient safeguards from an enterprise’s risks (which we define as two broad categories that range from those associated with the company’s employees to those exposures relating the business of the company). Our consulting actuaries and risk management specialists will gauge a company’s risk appetite with their want or need for protection. Using a holistic risk review process that properly reflects the nuances of the organization, a comprehensive analysis produces a risk mitigation glide path that prioritizes risk rebalance. The outcome is alignment between the company’s decision making processes and the right amount of protection for an appropriate cost and a balance sheet better protected to absorb risk volatility from these risk exposures.
Workers Comp, General Liability, Professional Liability, Hazard, Esoteric, Business-focus risk exposures typically ‘self-insured’ (whether on purpose or by chance) include the likes of: cyber risk, environmental impairment, business interruption, political risk, product recall, etc.
Retirement, Pension, Executive Comp, Healthcare, Wellness, Voluntary, Fringe & Flex Benefits, which covers group medical, dental, disability, life insurance, drug plans, etc.
Our consultants also provide expert support across these two risk categories:
Financial Report/Planning:
Funding / Minimize Loss Cost:
Employee Risk Focus
Financial Report/Planning:
Funding / Minimize Loss Cost:
The Bates network of actuarial consultants is trusted by many of the industry’s leading life, health and P&C insurance and reinsurance companies, insurance regulators, accounting firms, law firms, agencies and brokers to assist with litigation and consulting engagements. Across the broader insurance space, our actuarial consultants focus by type of risk underwritten by the insurance company. Specifically, the insurance practice segments into the following cornerstones:
Our actuaries have clients ranging from insurers to marketing organizations to third party administrators to investors exploring the earmarking of capital for this space. Those assignments include:
The Bates Group has contracted with a well known group of actuarial consultants that regularly service the needs of the two core healthcare market participants as well as an overarching number of specialty sub-practices. Generally, the bifurcation occurs between healthcare payors (insurers and health plans) and healthcare providers (hospitals, ACOs, etc.) with each category having the following services:
Strategy Focus:
Optimize Margins Focus:
Manage Claims Focus:
Strategy Focus:
Financial Reporting Focus:
Rate Filing Focus:
Ratemaking & Plan Design Focus:
Bates Group’s experienced team of valuation experts, which includes experts and consultants carrying the Certified Valuation Analyst (CVA) and Chartered Financial Analyst (CFA) designations, can help price any asset. Our deep knowledge of valuation methodologies and the nuances that affect market prices equips Bates Group’s consultants and experts to handle a wide range of valuation requests. Our leading experts in this field are often called upon to provide estimates as to the correct valuation approach in many different types of legal proceedings, given our deep experience in this area. We can offer perspectives provided by individuals with high levels of both academic and practitioner experience in this area.
Our valuation team has handled cases involving privately and publicly held companies, internal business segments, real estate, agricultural land, securities and other financial instruments, mortgages, and other unique assets. Having worked on valuation projects in a variety of settings, we are very familiar with the differences between public and private valuation, including the application of both liquidity and control premiums or discounts required in small enterprise valuation. We have advised clients on the required cost of capital and undertaken valuation projects using a multiples-based approach, discounted cash flow, and precedent transactions. In many situations we have used a matrix approach, blending the results produced by several methodologies, in order to produce a synthesized price or valuation.
From a privately-held winery to a single product line at a public perfume company, we have undertaken a wide range of valuation projects. Knowing how to identify and value the unique risks of a business, segment, portfolio or asset takes experience, and we approach each valuation with the same dedication to providing accurate analysis, reporting, and support that Bates provides company-wide. Valuation is about the connection between risk and reward, and understanding how to interpret that relationship into a single number. Each case starts out as a complex problem, and ends in a simple answer. Let our experience navigate the difficult terrain between those two points for you.
Bates Group’s dedicated team of former senior legal and compliance officers, Certified Fraud Examiners (CFEs), and Certified Public Accountants (CPAs) not only has decades of experience conducting internal reviews but extensive hands-on experience undertaking Asset Tracing and Anti-Money Laundering Investigations.
Making full use of proprietary tools and reports developed by our top-tier IT and programming teams, using recognized software platforms such as i2, SAS and Python, we have demonstrated time and again our ability to quickly trace assets and help uncover attempts to launder money or commit fraud. The accompanying visualization tools also allow us to clearly present asset flows to regulators, juries, law enforcement or other audiences. The clarity of these presentations is often a key contributing factor in the favorable resolution of these matters.
In a well-publicized bankruptcy involving a broker-dealer, we managed millions of data points across competing databases. With our IT team and in-house programmers, we efficiently searched each database and succeeded in tracing the movement of the firm’s assets under management (customer funds) in the weeks prior to bankruptcy. In turn, this enabled our team to identify and illustrate when assets had been used inappropriately.
In another matter, the compliance department of a major broker dealer retained us to investigate allegations that an individual financial advisor was “parking” stock purchases in customer accounts, only to cancel these trades and move them to his personal account when the stocks went up. By analyzing internal trade correction records, error reports, trade confirmation slips, time and sales reports, and email correspondence, we quickly identified and documented each unauthorized transaction, allowing our client to promptly resolve this investigation.
Bates is also available to assist you in creating and auditing your AML policies and procedures and meeting your annual AML certification requirements, and our Internal Investigations team can quickly assist you in investigating suspicious activity.
Our team of seasoned experts provides damage analyses in a number of contexts. Bates Group experts have provided opinions in many dispute resolution forums related to economic damages arising from lost profits, lost future wages, and loss of support claims. Our practitioners are experts in generally accepted practices and benchmarks for estimating damages in these type of claims, as well best practices in documenting and supporting the calculated figures. Often, we have helped counsel by ensuring that the appropriate supporting documents are obtained and have helped to separate necessary from irrelevant information in making these calculations. We also provide guidance as to analysis-types that are likely to prevail in a given matter, based on our previous experience. Our experts can also provide valuable insights to counsel by analyzing the damages-related claims put forth by opposing counsel and their experts. In many instances, we have been able to identify and analyze key misstatements, or inaccurate assumptions, that significantly mitigate the damage amount claimed without ever having to create an alternative model ourselves. Our clients have found these types of services to be especially helpful in pre-litigation and mediation phases.
Due to the high caliber of Bates' experts in this area, we have often been called upon to provide damage analyses in non-traditional cases as well. For instance, on behalf of a major medical group, Bates provided a comparative damages analysis evaluating the benefits (in both dollar and patient outcome terms) of selecting one type of heart valve replacement model over another. Or for example, calculating the earning potential of a portfolio of patents as part of an on-going intellectual property dispute. Our depth of experience in the field of damages allows us to confidently tackle large, complex, and unique cases .
Bates is often called upon to analyze accounts that contain less common investments, foreign currencies or that are employing strategies not regularly seen in retail investment accounts. Our group of subject matter and product experts can provide significant insights into these areas, and have worked with Bates to generate a set of standards for analyzing these types of cases.
These cases often begin with simply trying to piece together what happened within the account. Knowing how different types of derivatives behave, and being able to identify a strategy when it is in place, is crucial to these matters. Our team includes professionals who have practical knowledge of all types of derivative products and trading strategies, and includes individuals who have previously held regulatory roles governing these types of accounts.
The simplest of these derivative strategies involves writing naked puts, in which the seller of the put option does not have an existing position in the underlying entity. As a result of general declines in equity markets beginning in 2008, these previously successful strategies suddenly turned into large losses. Often, the positions were rolled forward into more contracts at higher prices, delaying the occurrence of losses within the account.
Bates conducted statistical analysis to determine the likelihood that the underlying asset would experience declines of the magnitude seen during that time period, and then combined these probabilities with the characteristics of the put option (time to expiration, moneyness at issuance, premium received) to determine a probability weighted expected profit from each trade. Our understanding of the intent behind different strategies enables us to produce innovative analyses which capture an ‘a priori’ view of each investment. When a major Wall Street firm was left with massive exposure as a result of naked put writing in one set of accounts, Bates was able to analyze the account records and locate additional assets to meet the liabilities generated by the put writing.
The 2008 Credit Crisis severely impacted investors’ views of structured products. In assessing structured products cases, it is important to stress several key facts: these products were not designed to fail and presumably were added to client portfolios only after a careful suitability analysis of the client’s investment objectives. In short, the fact that a security or product is “structured,” let alone declined in value, does not mean it was ill-advised or unsuitable.
Bates Group has a long history of analyzing structured products and the role they may play in investors’ portfolios. We begin by searching our proprietary database to review product prospectuses and the precise mechanics of each product’s design. Next, we model how the security performs in relation to the underlying assets. This allows us to accurately analyze complex hypotheticals, including, for example, how investing in the underlying asset itself versus the structured product would have impacted investment performance. It also allows us to accurately assess the impact of declines in credit quality and decisions made by investors during the life of the investment. Just like all structured products, leveraged ETFs can play an important role in an investor’s portfolio, and it is essential to analyze ETFs from this perspective, taking due notice of recent guidance from FINRA regarding these securities.
Bates has extensive experience in bringing our substantial market expertise to bear on topics that require a higher level of understanding of markets themselves. Claims related to insider trading, collusive trading strategies, and market and price manipulation often require a trained eye to locate. Because our experts are seasoned market participants from major investment banking and financial institutions who have been responsible for sales and trading of numerous asset classes, we can provide the sophisticated analytical look these types of cases require. Our experts have participated in all aspects of securities and derivatives creation, production, underwriting, syndication, marketing and trading. They have also worked closely with issuers, underwriters, institutional and individual investors, and have created and monitored portfolios, measured risk and acted as market makers.
In the context of market-related claims, we have been asked to review the activities of the parties involved as to: collusive trading, price manipulation, spreading of rumors in the marketplace (and the effects of those rumors on securities prices), the use of Credit Default Swaps to influence market prices, effects of shorting securities, the effects of dissemination of research on the marketplace, and the abuse of media and its influence on securities markets.
Our experts are also able to examine and testify on topics including:
Our services revolve around being able to produce precise numbers relating to everything that occurs within a client account. While this becomes more complicated with the addition of derivatives, complex trading strategies, and other investment products, it’s something that still falls directly into our core skills. We can provide you with the same clarity on your most complicated accounts that we provide on your simplest and our experts will help you understand the motivations behind the account activity at the same time.