The Beck Law Firm, LLC Blog

UPDATED: Enforcement Appeals. Was: FINRA Hearing Panel Decision Issued in Key Arbitration Case

Feb 21, 2013:  FINRA announced today that a Hearing Panel issued a Decision in the case of FINRA's Department of Enforcement v. Charles Schwab & Co., Inc.  In doing so, the Hearing Panel dismissed two of three causes of the action against Schwab, and found for Enforcement on the remaining cause.  The Panel imposed a fine of $500,000 and ordered that Schwab take specific corrective action.  The Panel Decision was issued today (2/21/13) and is not final.  It may be appealed by either party, or it may be called for review by FINRA's National Adjudicatory Council.  I don't know how the case will finally end, but the ending will be very significant to the industry and investors.  

The Hearing Panel Decision is about 49 pages long, and takes some time to go through.  Here's my attempt at a down and dirty summary based on a quick review (links to the press release and the decision itself are above, so you can access the documents yourself if you are interested):

March 5th Complimentary Webinar: Understanding Basic Estate Planning in Georgia

Joel Beck of The Beck Law Firm, LLC, Lawrenceville, Georgia, will be presenting a webinar/teleconference on March 5th on understanding basic estate planning in Georgia.  

This workshop will be offered twice on March 5th, first at 4PM and again at 7PM.  Each session will cover the same material and will be about 30 minutes.

During this workshop you can learn about the basics of estate planning in Georgia.  We'll talk about wills, testamentary trusts, advance directives for healthcare and powers of attorney, and a few other planning tools.  Joel Beck will also discuss recent changes to the federal estate tax laws that were passed as part of the "fiscal cliff" legislation by Congress at the start of the year. It is appropriate for individuals and couples who are interested in estate planning for themselves, as well as for financial advisors who need to get a refresher on common planning tools in Georgia.

Parents of minor-aged children will also learn about how to plan for their children if a "what if?" type situation occurs.  

The program is free, but space is limited. Register online today.

 

SEC to Host 2013 National Compliance Event for Broker-Dealers

The SEC's annual national compliance event is scheduled for April 9, 2013, at the SEC headquarters in Washington, DC.  It will also be streamed on the SEC website.  Registration for in-person attendance is limited, and is available online.  

 

Email Monitoring - Are Your Search Terms Set To Catch Issues?

Securities broker-dealers have regulatory obligations to review certain correspondence and communications of their registered representatives, and those obligations relate to both traditional correspondence via mail, as well as electronic communications such as email.  To help in their monitoring, many firms use surveillance programs that search through electronic communications looking for certain keywords or phrases, etc. in addition to the old-fashioned piece by piece review or sample reviews.  One of the concerns in this area is knowing whether you've set the search parameters accurately so as to pick up on communications that might be troublesome or need further review.

Earlier this year, the folks over at computerweekly.com published an article on the most common phrases used by wrongdoers in connection with communications about fraud via email. Phrases like "backdate" or "cover up" along with "grey area" were identified among the top 15 phrases used by wrongdoers in their communications, according to a study by Ernst & Young in collaboration with the FBI.  If you are involved in email or communication surveillance, this is a must read.  Even if you're not, it's still interesting.

Recap from 10 Things to Do - Or Not Do - To Help Avoid Regulatory Troubles in 2013

In January 2013, I presented a webinar/teleconference for stockbrokers, investment advisers and principals/managers on ten things to do, or not do as the case might be, to help avoid regulatory problems in 2013.  We looked at some hot topic compliance issues, as well as discussed practical ways to avoid problems that consistently trip up the well-meaning broker.  There were a few folks who registered for the free event but ultimately could not attend, and a few others that asked whether a transcript would be made available.  

Keep reading this post for the transcript from the event and get some insights into some common broker issues, as well as some compliance pointers for 2013.  

Mary Jo White Nominated to Head SEC

Yesterday, January 24, 2013, President Obama nominated former US Attorney in New York, Mary Jo White, to serve as the next chairman of the US Securities and Exchange Commission.  Her nomination goes to the US Senate for confirmation.  

2013 Regulatory Priorities

FINRA recently issued its Annual Regulatory and Examination Prioritites Letter, highlighting areas of regulatory focus and concern this year.  This is a must read for all compliance and legal folks, and it is a good read for any registered person as well.  It is always good to know what has the attention of the regulators.  Forewarned is forearmed.

Obviously, regulators will investigate, and take action on, items not on this list.  They are still interested in the standard, basic sales practice, market regulation or membership violations, but the letter highlights some issues for which, in light of recent exam findings and the market environment and business climate, the regulators have concerns.  In the sales practice area, some highlighted areas include: suitability of complex products, data integrity and cyber-security, microcap fraud, private placements, anti-money laundering, automated investment advice, and branch office supervision.  Several other areas are mentioned, so go ahead and click on the link and read the letter for yourself.  

Reminder: Friday is the Webinar: 10 Things to Do (Or Not Do ) To Help Avoid Regulatory Problems in 2013

This Friday, January 18th is the date for the first of our 2013 webinars.  Registration for the January 18, 2013 webinar/teleconference entitled, "10 Things to Do (Or Not Do) To Help Avoid Regulatory Problems in 2013" is now up and running.  Space is limited, so reserve your spot for this webinar and teleconfernce now, and put January 18, 2013 at 2PM Eastern on your calendar.  This free program will help stockbrokers and financial advisors understand  - and hopefully learn how to avoid - some major regulatory problems that they can inadvertently get themselves into.  By avoiding regulatory and compliance problems, brokers are better able to focus on serving their clients, growing their business, and enjoy their work.  

I hope to see you on the call/webinar on January 18th.  To get your spot, register today.  And, then be sure to check our email newsletter and BDLawBlog for future events in 2013.  

The Fiscal Cliff Legislation and Estate Planning = Good News

When Congress passed the American Taxpayer Relief Act of 2012 last week to resolve the so-called fiscal cliff, they made some significant changes to the estate tax system that will greatly benefit a majority of Americans.  

Under the existing law, the estate tax exemption (the unified credit) was set to automatically drop from about $5 Million in 2012 to $1 Million in 2013, and the tax rate on estates greater than $1 Million would have increased as well to a maximum tax rate of about 55%, if my memory is correct.  An exemption of only one million would have ensnared many Americans, as it doesn't take much - a house, some life insurance, and some modest retirement and savings - to exceed that amount.  

Now, based on this new legislation, the exemption (the unified credit) is pegged at $5 Million, indexed to inflation (so this year will likely be around $5.25 million or so), and the estate tax is set at 40%.  

There are some other good developments in this legislation for estate tax issues.  First, the change is permanent, or at least until other legislation is passed to change it.  This is significant because the last few changes had sunset provisions ending the law and requiring Congress to do something.  Second, the unified credits (the exemptions) are portable among spouses.  So, the portion of the unified credit that is not used by the spouse that dies first, can be added to the credit for the second spouse if properly elected by the executors.  This means that more people will be suitable for basic estate planning tools given the larger, and portable, credits.  

 

FINRA Seeks Comment on Recruitment Compensation Disclosure Rule

FINRA has published Regulatory Notice 13-02 seeking public comment on a rule proposal that would require disclosure of recruitment compensation when a broker moves from one firm to another, and receives, for example, a forgivable loan or a bonus based on production, transition expenses or bonuses, or other compensation as defined under the proposal.  Interestingly enough, the proposed framework of the new rule does not require disclosure of ALL additional compensation a rep. might receive.  For example, the receipt of a higher payout would not have to be disclosed.

The comment period expires March 5th, and I think it will be interesting to see what types of comments - and from where - are submitted.  I could see that big firms might be in favor of such proposal if they think this will drive down recruiting packages, but I imagine that the brokers who might avail themselves of recruiting packages would not be in favor of the proposal.  But beyond that, I wonder if this is really a solution in search of a problem?  After all, there are other rules to deal with the standard conflicts of interest that might arise here, including suitability rules and the like.