On July 26, 2023, the Securities and Exchange Commission (“SEC”) adopted its long-anticipated cybersecurity reporting rule (the “Final Rule”). The Final Rule applies to public companies subject to the reporting requirements of the Securities Exchange Act of 1934 and, in some cases, to foreign private issuers. As quoted in the SEC’s press release, SEC Commissioner Gary Gensler noted that many public companies already make cybersecurity disclosures to investors, and the Final Rule provides uniformity and structure for these future disclosures. The Final Rule also imposes a tight timeline for cybersecurity incident reporting and may include disclosure of an ongoing cybersecurity incident, as well as requiring periodic disclosures concerning organizational cybersecurity risk management processes and governance.
Last week, blockchain analysis firm, Chainalysis, held its annual conference, Links 2023, in New York City, where private and public sector leaders met to discuss emerging issues impacting the blockchain, cryptocurrency, and digital asset space. The conference featured presentations from notable public and private sector leaders, including government regulators, enforcement bodies who investigate and assist in prosecuting virtual asset fraud, and executives from financial institutions.
Over the past 15 years, chief compliance officers (“CCOs”) for financial services firms have come under increased scrutiny as the Securities and Exchange Commission (“SEC”) and Financial Industry Regulatory Authority (“FINRA”) have brought more frequent enforcement actions seeking to hold CCOs personally liable. CCOs understandably have been concerned about this trend and financial service firms have focused on the chilling effect that the enforcement actions may have on the vital role CCOs play in their organizations and the quality of the COO applicant pool.
Last week, the Securities and Exchange Commission’s Division of Examinations (the “Division”) released its 2021 examination priorities. The priorities reflect the impact of the COVID-19 pandemic, including how it has increased risks related to cybersecurity; a new focus on climate change; and appear to recognize concerns raised by the recent trading in GameStop stock.
Impact of COVID-19
The onset of the work-from-home environment arising from the COVID-19 pandemic, has, among other things, increased the SEC’s concerns about “endpoint security, data loss, remote ...
Recently, the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert to provide broker-dealers with guidance on examinations regarding regulation Best Interest (“Reg BI”). Reg BI requires that when broker-dealers make a recommendation regarding securities to a retail customer it must act in the best interest of the customer, without placing its own financial or other interest ahead of the retail customer’s interest. The Financial Industry Regulatory Authority (“FINRA”) also ...
On August 20, 2019, the Securities and Exchange Commission (“SEC”) charged Mosaic Capital, LLC, formerly known as AOC Securities, LLC (“AOC”), and its CEO with failing to adequately supervise an employee who engaged in securities fraud. Pursuant to the SEC Orders, AOC and its CEO were ordered to pay penalties of $250,000 and $40,000, respectively. The SEC’s actions serve as a reminder to broker-dealers—and members of firm management—of the potential for liability based on the actions of a self-dealing employee, and the need to guard against such activities.
Broker-dealers (“BDs”) should be aware that, on June 5, 2019, the SEC adopted “Regulation Best Interest” (“Reg BI”), which requires BDs and their registered representatives (“RRs”) to “act in the best interest of the retail customer,” when “making a recommendation” regarding “a securities transaction or investment strategy.” In addition, the SEC’s new rules require BDs to deliver Form CRS relationship summaries (“Form CRS”) to retail customers. BDs will need to be in compliance with Reg BI and Form CRS, which were accompanied by more than ...
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