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Securities Compliance Sentinel blog

The highly regulated securities and financial industry has a host of complex problems—and financial institutions often find themselves on the receiving end of audits, investigations and other compliance issues.

In the Securities Compliance Sentinel blog, Ernest shares his knowledge and experience to address cutting edge issues in the firm’s Securities Compliance Sentinel Blog. Join this team of bloggers in their exploration of this increasingly complex area.

Scroll down to see Ernest's most recent blog posts.

Recent Blog Posts

  • YOU SHOULD ALWAYS USE YOUR FRIENDLY NEIGHBORHOOD BROKER-DEALER! Recently, a REIT sought to avoid using a broker-dealer in a distribution.  Woe, onto those who seek to avoid the broker-dealer, especially when it leads to a SEC investigation and enforcement action.  The REIT charged a 3% commission as part of its sales process, and used its website, social media, and radio ads.  These commissions and marketing tactics violated Exchange Act Rule 3a4-1, and, as a result, the REIT was operating as a broker-dealer in violation of Section 15(a) of the Securities Exchange Act of... More
  • Ernie Badway Quoted in FundFire Ernie Badway was quoted in FundFire regarding a recent lawsuit brought against the SEC concerning a FOIA request.  https://www.fundfire.com/c/2532863/301753.    The FOIA request had sought emails from the former SEC Enforcement Director and his correspondence with various news organizations.... More
  • Interesting Guidance from FINRA on Expungements FINRA has distributed a recording from a neutral workshop on expungement.  It was enlightening and only reinforced the fact that it is very difficult for anyone to obtain an expungement.  You can find the workshop at https://www.finra.org/arbitration-mediation/neutral-workshop-audio-and-video-files.... More
  • Ernest Badway to Speak at NSCP National Conference on Regulation BI Ernie Badway, the Chair of Fox Rothschild’s Securities Industry Group, will be speaking at the National Conference of the  National Society of Compliance Professionals.  Registration information may be found at: https://www.foxrothschild.com/ernest-e-badway/events/the-secs-challenging-new-guidance-on-the-solely-incidental-broker-exemption/... More
  • SEC Wants Comments on Private Offering Rule Changes Recently, the SEC issued a concept release to obtain input on possible changes to the offering rules.  The SEC may change Regulation D private placements, Regulation Crowdfunding, secondary trading rules, the accredited investor definition and the use of private funds to raise capital, among other things. The SEC may consider changes to the definition of accredited investor, by re-evaluating the financial qualifications’ thresholds; making separate categories of investors based upon experience, profession, or an exam; and/or measuring accreditation through investments.  Similarly, the SEC wants to make changes to private... More
  • Fox Partner Kristen Howell Quoted on Security Tokens Fox Partner Kristen Howell was, recently, quoted in a Law360 article on security tokens following the ICO collapse.  https://www.law360.com/assetmanagement/articles/1162154/-security-tokens-slow-to-take-off-following-ico-collapse?nl_pk=5882ca7d-b76e-42a1-a1fe-eb96fcbcf60f&utm_source=newsletter&utm_medium=email&utm_campaign=assetmanagement.... More
  • FINRA’s Customer Dispute Expungement Regime: The Future Is Dark and Foreboding This is the last in our series on the FINRA expungement process, and, unfortunately, the future looks grim. Not only has FINRA made it nearly impossible (in an obvious attempt to curry favor with the public investor bar), but now it is considering some shocking additional changes to the process. Essentially, FINRA is looking to put the proverbial “final nail in the coffin” to any hope for expungement. For example, FINRA is considering increased fees for expungement requests and a one-year limitation... More
  • FINRA’S Customer Dispute Expungement Regime: The Expungement Process This is our second blog on the vanishing FINRA expungement process. FINRA identifies specific grounds for expungement in FINRA Rule 2080. Rule 2080(b)(1) provided three specific grounds for expungement relief: (1)       the claim, allegation or information is factually impossible or clearly erroneous; (2) the registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds; or (3) the claim, allegation or information is false. Although FINRA Rule 2080 does not expressly require that the... More
  • FINRA’s Customer Dispute Expungement Regime: The Central Registration Depository and FINRA BrokerCheck Over the past 20 years, FINRA has made it nearly impossible for brokers to expunge customer complaints and dispute information from their public records. Over the next three blogs, we will discuss the evolution of FINRA’s expungement process and how difficult expungement relief is for brokers to obtain in the future. In 1981, the CRD system was created, and is now an online registration and licensing system for the securities industry. The CRD contains, among other things, information about every broker’s... More
  • FINRA Maybe Making It Easier for Examiners to Deliver Hurt to Member Firms FINRA maybe in the process of allowing its examiners to punish member firms for rules’ infractions.  See  https://www.law360.com/assetmanagement/articles/1143015/finra-wants-to-let-examiners-lower-the-boom-on-brokers?nl_pk=5882ca7d-b76e-42a1-a1fe-eb96fcbcf60f&utm_source=newsletter&utm_medium=email&utm_campaign=assetmanagement.  There is no proposed rule as of today.  However, such a rule would be a game changer in the sense that examiners, who, generally, do not have the authority to enforce FINRA’s rules would now be in the proverbial “driver’s seat” without any of the ordinary checks FINRA usually provides in the enforcement process.  In any event, this is definitely one to... More