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Articles - Statutes - Rules - Decisions - News

Featured Books:

The Securities Enforcement Manual, Second Edition: Tactics and Strategies - Published by the American Bar Association, this new Second Edition completely updates the first edition published in 1997. Included is comprehensive coverage to proven approaches and techniques for dealing with an enforcement threat from the SEC, self regulatory organizations, or state securities regulators. It takes you step-by-step through enforcement investigations and proceedings, providing you with strategies to influence the outcome of an investigation and prevent or minimize the adverse effects of enforcement actions

Capital Markets Handbook considered by some to be the definitive desk reference for capital market professionals and a complete resource for anyone working in the financial markets field. Written by seasoned professionals in association with the SIA, Capital Markets Handbook covers the latest developments in major securities legislation, and all aspects of documentation, underwriting, pricing, distribution, settlement, immediate aftermarket trading of new issues, compliance issues, a glossary, a bibliography, and appendices containing the full text of the primary statutes and regulations.

21st Century Complete Guide to the SEC with Forms, Regs, Answers, Bulletins, Orders and more - This electronic book on CD-ROM presents the complete story of the Securities and Exchange Commission (SEC) with an enormous library of SEC documents: Public Forms and Regulations, Fast Answers from A to Z, Staff Legal Bulletins, Publications for Investors, Rulemaking, Commission Opinions and Orders, Policy Statements, Proceedings, and Reports.

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.

Introductory Materials

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

Introduction to the Federal Securities Laws - an introduction to the laws which govern the purchase and sale of securities in the United States, including the Securities Act of 1933 and the Securities Exchange Act of 1934

Introduction to the Blue Sky Laws (State Securities Laws)- in addition to the federal securities laws, each state has its own securities laws, rules and regulations. This article provides an overview to the function and purpose of those state laws, known as "blue sky laws."

Introduction to Securities Arbitration - today, nearly all disputes between customers and firms, and between brokerage firms, are resolved in binding arbitration. An overview of the process, from Mark Astarita.

Introduction to the Initial Public Offering Process -any offer to sell securities must be registered with the federal and/or state securities regulators, or exempt from registration. A description of the law, and the registration process.

Introduction to Private Placements - stock offerings which are not made to the general public are called private placements, and are exempt from registration with the securities regulators. A description of the exemption, and the private placement process.

Introduction to Insider Trading - insider trading refers to two types of trading, one that is legal, and the other that is not.

Enforcement Actions

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.

10-02 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.

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.

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

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

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.

Past Articles and Commentary
Every month The Securities Law Home Page brings together commentary and updates from securities law practitioners and regulators. Past articles are collected here in chronological order, or simply search for the topic you are interested in.

Statutes and Rules

Investment Adviser's Act

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