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MONTHLY NEWSLETTER Every month SECLaw.com publishes a newsletter containing the latest news, information, regulatory updates and commentary from the site, and the entire web. Subscriptions are free, simply give us your email address.

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NEW AND IMPROVED SECURITIES LAW FORUMS! Every day the discussions continue in the Securities Law Forums, where attorneys, investors, brokers, journalists and others with an interest in the markets, and the laws surrounding the markets, discuss hot topics of the day. View the active topic list, or go directly to the forums.

's Featured Articles, Books and Related Sites:

Featured Article - Lehman Principal Protected Notes Arbitrations - arbitration claims arising from the marketing of Lehman Principal Protected Notes are on the rise as investors seek recover from other firms and brokers for their losses. Analysis of the issues and the claims by Mark J. Astarita, Esq.

Featured Books - Securities Law in a Nutshell and Broker-Dealer Regulation in a Nutshell are excellent introductions to the law that affects your business. If you are an Investment Advisor, you might be interested in Investment Adviser Regulation: A Step-by-Step Guide to Compliance and The Law

Registration of Investment Advisors - what you need to know to start an advisory firm

Guide to Broker-Dealer Registration - an updated version of the SEC's original guide is now online.


The Window of Opportunity Is Opening Again So Jump!
Some good points for brokers looking to change firms from On Wall Street. One point that was overlooked - when signing that deal, whether for $300,000 or $2 million, review your negotiations and the proposed agreements with an experienced securities employment attorney. The firm's "standard" agreement does not include all of the provisions you need, and much of what is in their agreement is negotiable.

Wells Fargo Advisors, I'm Not Happy
Wells Fargo Advisors FAs are in a house of pain according to Registered Rep Magazine

Enforcement Actions

SEC Freezes Assets of French Citizens Within Days of Insider Trading
The Securities and Exchange Commission has obtained an emergency asset freeze against two French men it charged with insider trading the day after they tried to illegally profit from a Paris- based manufacturer’s acquisition of another health care products company located in Chattanooga, Tenn.

SEC Charges Austin-Based Investment Adviser in Fraudulent Scheme Utilizing Football Stars
The Securities and Exchange Commission today filed securities fraud charges against an Austin, Texas investment adviser and two businesses he controls for operating a multi- million dollar scam that used former professional football players to promote its offerings.

SEC Charges U.S. Subsidiary of World's Largest Inter-Dealer Broker for Displaying Fictitious Trades and Misleading Customers
ICAP Securities USA LLC to Pay $25 Million to Settle SEC Findings

NASDR Notices to Members

10-04 SEC Approves Consolidated FINRA Rules Governing Clearly Erroneous Transactions
On December 1, 2009, the SEC approved FINRA's proposed rule change to adopt a new set of rules governing clearly erroneous transactions in the consolidated rulebook. The new FINRA Rule 11890 Series replaces NASD Rule 11890, IM-11890- 1 and IM-11890-2 and was adopted as part of a market-wide effort by multiple self-regulatory organizations to provide transparency and finality with respect to clearly erroneous executions. Among other things, the new rule series includes a new general rule defining "clearly erroneous" transactions, separate provisions for the determination of clearly erroneous transactions depending upon whether the transaction involves an exchange-listed security or an over-the- counter equity security and procedures for appealing FINRA clearly erroneous determinations. In addition, the new rule series codifies minimum numerical criteria necessary for a transaction to qualify as clearly erroneous.

10-03 FINRA Requests Comments on Proposed Consolidated FINRA Rules Governing Securities Loans and Borrowings, Permissible Use of Customers' Securities and Callable Securities
As part of the process of developing a new, consolidated rulebook (the Consolidated FINRA Rulebook), FINRA is requesting comment on three proposed FINRA rules. Proposed FINRA Rule 4314 (Securities Loans and Borrowings) sets forth the requirements applicable to a member firm that is a party to an agreement for the loan or borrowing of securities. Proposed FINRA Rule 4330 (Customer Protection—Permissible Use of Customers' Securities) sets forth the requirements applicable to a member firm's borrowing or lending of a customer's margin securities that are eligible to be pledged or loaned. Proposed FINRA Rule 4340 (Callable Securities) sets forth the obligations applicable to any callable securities a member firm has in its possession or control.

10-02 Broker-Dealer, Investment Adviser Firm, Agent and Investment Adviser Representative, and Branch Renewals for 2010
FINRA is issuing this Notice to help firms review, reconcile and respond to their Final Renewal Statements and reports that are currently available in Web CRD/IARD for the 2010 Registration Renewal Program.

10-01 Proposed Consolidated FINRA Rules Governing FINRA’s Membership Application Proceedings
As part of the process of developing a new, consolidated rulebook (the Consolidated FINRA Rulebook), FINRA is requesting comment on proposals relating to FINRA's membership rules. These rules, which were adopted in August 1997, provide a means for FINRA, through its Membership Application Process (MAP), to know and assess the proposed business activities of its potential and current member firms. The proposed amendments revise certain provisions of the existing membership rules to streamline the standards of review for new and continuing membership applications, clarify certain administrative aspects of the MAP process, update or eliminate outdated terminology and require certain additional information (including certain affiliate information) about the applicant and incorporate certain provisions from the Incorporated NYSE membership rules.

09-74 SEC Approves Changes to Arbitration Rules on Definition of Associated Person, Distribution of the FINRA Discovery Guide and Applicability of Hearing Session Fees
Effective January 18, 2010, amendments to the Customer and Industry Codes of Arbitration: 1- clarify the definition of "associated person" and make it conform to the same term in the FINRA By-Laws; 2-streamline a case administration procedure; and 3- clarify that customers could be assessed hearing session fees based on their own claims for relief in connection with an industry claim.The amendments will apply to claims filed on or after the effective date.

09-73 FINRA Reminds Firms of Their Sales Practice Obligations Relating to Principal-Protected Notes
The retail market for principal-protected notes (PPNs) has grown in recent years, in part because they are often marketed as combining the relative safety of bonds with a potential for growth not available with traditional fixed income products. However, these products are not risk-free, and their terms and structures can be complex. Firms must ensure that their promotional materials or communications to the public regarding these products are fair and balanced, and do not overstate either the level of protection offered or an investment's potential returns. Firms also have a duty to ensure that their registered representatives understand the risks, terms and costs associated with these products, and that they perform an adequate suitability analysis before recommending them to a customer.

FINRA Disciplinary and Other FINRA Actions for December 2009
FINRA has taken disciplinary actions against the following firms and individuals for violations of FINRA rules; federal securities laws, rules and regulations; and the rules of the Municipal Securities Rulemaking Board (MSRB).

09-71 SEC Approves Consolidated FINRA Rules Governing Financial Responsibility
The SEC approved FINRA's proposed rule change to adopt a new set of financial responsibility rules for the consolidated rulebook (the Consolidated FINRA Rulebook). FINRA Rules 4110, 4120, 4130, 4140 and 4521 are new consolidated rules governing financial responsibility that are based in part on, and replace, provisions in the NASD and Incorporated NYSE Rules. The rule change also amends FINRA Rules 9557 and 9559 to, among other things, provide members served with a notice under the financial responsibility rules an expedited appeal process, and makes certain conforming revisions to Section 4(g) of Schedule A to the FINRA By- Laws.

09-70 FINRA Requests Comment on Proposed Consolidated FINRA Rules Governing Registration and Qualification Requirements
As part of the process of developing a new consolidated rulebook (the Consolidated FINRA Rulebook), FINRA is requesting comment on a proposal to streamline and amend the FINRA registration and qualification rules.

09-69 FINRA Requests Comment on Proposed Consolidated FINRA Rule Governing Payments to Unregistered Persons
As part of the process to develop a new consolidated rulebook (the Consolidated FINRA Rulebook), FINRA is requesting comment on a proposed FINRA rule regarding payments to unregistered persons. Proposed FINRA Rule 2040 (Payments to Unregistered Persons) would be a new consolidated rule that streamlines the provisions of current rules.

09-66 SEC Approves Changes to FINRA's BrokerCheck Disclosure Rule to Retain and Make Publicly Available Information About Final Regulatory Actions Against Former Brokers
Beginning November 30, 2009, information concerning final regulatory actions against brokers—as well as certain administrative information (e.g., employment and registration history) and information about qualification examinations, if available, and the broker's most recently submitted comment, if any—will be permanently available in BrokerCheck,® regardless of when they were employed in the securities industry.

09-65 FINRA Delays the Effective Date for Increased Margin Requirements for Options on Leveraged ETFs and Day-Trading Requirements for Leveraged ETFs
To accommodate ongoing changes in options symbology and other systems-related concerns, FINRA is deferring the effective date for increased customer margin for uncovered options overlying leveraged ETFs, as well as the application of day-trading margin requirements for leveraged ETFs to April 30, 2010. Firms should be aware, however, that the increased maintenance margin for leveraged ETFs will take effect as originally scheduled on December 1, 2009.

09-64 Verification of Instructions to Transmit or Withdraw Assets from Customer Accounts
As part of their duty to safeguard customer assets and to meet their supervisory obligations, FINRA firms must have and enforce policies and procedures governing the withdrawal or transmittal of funds or other assets from customer accounts. Among other things, the policies and procedures should be reasonably designed to review and monitor all instructions to transmit or withdraw assets from customer accounts, including instructions from an investment adviser or other third party purporting to act on behalf of the customer. FINRA firms are required to test and verify their procedures for adequacy and to update them when necessary.

09-63 FINRA Requests Comment on Proposed Consolidated FINRA Rule Governing Discretionary Accounts and Transactions
As part of the process of developing a new consolidated rulebook (the Consolidated FINRA Rulebook), FINRA is requesting comment on a proposed consolidated FINRA rule governing discretionary accounts and transactions.

09-62 Broker-Dealer, Investment Adviser Firm, Agent and Investment Adviser Representative, and Branch Renewals for 2010
The 2010 renewal process begins on November 16, 2009, when online Preliminary Renewal Statements are made available to all firms on Web CRD/IARD.

News Items

SEC Issues Concept Release Seeking Comment on Structure of Equity Markets SEC Issues Concept Release Seeking Comment on Structure of Equity Markets
The SEC issued a concept release as part of its review of the equity market structure, voting unanimously to issue a concept release seeking public comment on such issues as high frequency trading, co-locating trading terminals, and markets that do not publicly display price quotations.

SEC Proposes New Rule to Effectively Prohibit Unfiltered Access and Maintain Market Access Controls
The Securities and Exchange Commission today voted unanimously to propose a new rule that would effectively prohibit broker-dealers from providing customers with "unfiltered" or "naked" access to an exchange or alternative trading system (ATS).

SEC Announces Initiative to Encourage Individuals and Companies to Cooperate and Assist in Investigations
The SEC announced a series of measures to further strengthen its enforcement program and encourage greater cooperation by individuals and companies in the agency's investigations and enforcement actions.

SEC Charges California Telecom Company With Bribery and Other FCPA Violations
The Securities and Exchange Commission today charged Alameda, Calif.- based telecommunications company UTStarcom, Inc. with violations of the Foreign Corrupt Practices Act (FCPA) for authorizing millions of dollars in unlawful payments to foreign government officials in Asia.

Merrill Veteran to lead JHS Capital Advisors
A former Merrill Lynch southeast regional managing director has been tapped to run JHS Capital Advisors, the brokerage arm of the firm founded by former GunnAllen chairman John Sykes. Mary Kennemur, who spent 22 years at Merrill Lynch, will lead the wealth management division that Tampa, Fla.- based JHS bought from GunnAllen Holdings through its purchase of Pointe Capital last week.

FINRA Fines Pacific Cornerstone Capital, CEO $750,000 for Private Placement Offering Failures
$750,000 in fines for failing to include full and complete information in private placement offering documents and marketing material. FINRA also charged Pacific Cornerstone and Roussel with advertising violations and supervisory failures.

FINRA Expels Meeting Street Brokerage, Bars Broker, Sanctions Firm's Owner for Market Manipulation, Other Violations
All Three Schemed to Create Artificial Price and Trading Volume for Relay Capital Corporation

The Top 40 Advisors Under 40
In On Wall Street's third annual ranking, a new class of young advisors emerges from the market meltdown. Here's how this year's top 40 advisors under 40 conquered a tough market.

FINRA Fines Terra Nova Financial $400,000; Firm Made Over $1 Million in Improper Soft Dollar Payments
Three Former Employees Also Sanctioned

FINRA Fines MetLife Securities and Affiliates $1.2 Million for Email Supervision Failures
Investigation of Broker Misconduct Continuing

FINRA Wins Okay for Major Expansion of BrokerCheck, Will Permanently Disclose Disciplinary Actions Against Former Brokers
Permanent Disclosure Cited as Welcome Boost to Investor Protection

Online Publications

Registered Rep.'s 2009 Broker Report Cards: Then There Were 5
Thinking about changing firms? Before you do, get the real deal. Read the results of Registered Rep's 19th annual FA satisfaction survey to find out what FA employees really think about their firms.

Securities Law Blogs

Securities Industry News

Introductory Materials

Introduction to the Federal Securities Laws

Introduction to the Blue Sky Laws (State Securities Laws)

Introduction to Securities Arbitration

Introduction to the Initial Public Offering Process

Introduction to Private Placements

Introduction to Insider Trading


Amazon.com makes it easy to order books online, and we have compiled what we believe to be the most useful books for the brokerage legal and compliance officer in the Compliance and Law Department at the SECLaw.com Bookstore.

The Law of Securities Regulation - from West Publishing, an excellent introduction and overview of the securities laws. This is a "hornbook", books written for law students to introduce a new subject. Excellent reference material for layman, compliance officer or an attorney seeking an introduction to the subject. With full citations, attorneys can quickly locate the major cases on a particular topic and obtain additional information.

Securities Regulation in a Nutshell (6th ED) - This book summarizes the essential background and current status of each major area, while keeping details and citations to a minimum. It includes references to the relevant statutes, SEC rules and releases, and other governmental materials, as well as to "leading cases."

Statutes and Rules

Investment Advisor's Act

Securities Law Blog

Questions? Comments?


Mark Astarita

Beam & Astarita, LLC

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Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article. SECLaw.com was created by and is sponsored by Mark J. Astarita, Esq., a securities attorney and partner in the law firm of Beam & Astarita, LLC, who represents all participants in the financial markets. Mr. Astarita can be contacted by email at astarita@beamlaw.com.

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