On April 25, 2024, with the enactment of the final version of its Retirement Security Rule (the "Final Rule"), the Department of Labor (“DOL”) imposed a fiduciary standard under the Employee Retirement Income Security Act of 1974 (“ERISA”) that it believes will "uniformly apply to all investment advice that is provided to [retirement investors], concerning the investment of their retirement assets.”

On May 16, 2024, the Securities and Exchange Commission (“SEC”) adopted significant amendments to Regulation S-P (“Reg S-P”). Among other changes, these amendments require covered institutions to create written policies and procedures for incident response programs addressing unauthorized access to or use of customer data.

As we have highlighted, on March 27, 2024, the Securities and Exchange Commission (“SEC”) amended the internet adviser exemption by requiring functional websites and prohibiting in-person clients. The amendments aim to modernize the 22-year-old rule’s investor protections and address what the SEC considers significant compliance gaps by advisers relying on the exemption.

Managing Partner, Erwin J. Shustak, recently sat down with Chad Franzen of the Rise25.com Podcast to discuss how Erwin decided, at a young age, he wanted to be a lawyer and the path that brought him to his legal career that has spanned four decades. Watch the podcast by clicking on the logo image below. Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes.We represent many investment advisors, financial professionals, broker-dealers, registered representatives, investors and businesses.Attorney Erwin J. Shustak can be reached in the firm’s San Diego office at (619) 696-9500.

On March 27, 2024, the Securities and Exchange Commission (“SEC”) adopted amended rules regarding the registration requirements that apply to internet investment advisers. This anticipated announcement follows other public announcements demonstrating the SEC’s focus on the internet adviser issues.

Beginning January 2024, several new laws began to take effect, impacting various professionals - specifically those U.S. businesses and entities who file documents with the secretary of state. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) began accepting Beneficial Ownership Information Reports (“BOI’s” or “BOI”) in January in an effort to increase transparency surrounding entity ownership. Those who fail to comply could receive significant penalties – including fines and/or imprisonment.

On August 23, 2023, the Securities and Exchange Commission (“SEC”) adopted new rules regarding the regulation of private funds and their advisors, providing an update to the existing compliance rules already in place for investment advisers.

On February 6, 2024, the Securities and Exchange Commission (“SEC”) adopted Rules 3a5-4 and 3a44-2 (“Final Rules”) defining the phrase “as a part of a regular business” and identifying activities that would cause people within certain activities to be “dealers” or “government securities dealers.”

Being fired is never easy, but it is a particularly challenging and uncertain time for licensed financial advisors and their clients. Within 30 days of the termination, the advisor’s prior firm must file a Form U5 with the Financial Industry Regulatory Authority (FINRA), which provides information about the circumstances of the termination. In this blog post, we explore what advisors can expect if they are fired and the implications of the Form U5 filing.

Being fired is never easy, but it is a particularly challenging and uncertain time for licensed financial advisors and their clients. Within 30 days of the termination, the advisor’s prior firm must file a Form U5 with the Financial Industry Regulatory Authority (FINRA), which provides information about the circumstances of the termination. In this blog post, we explore what advisors can expect if they are fired and the implications of the Form U5 filing.

As described in our prior article on the Requirements of New Prohibited Transaction Exemption PTE 2020-02, on December 18, 2020, the U.S. Department of Labor’s Prohibited Transaction Exemption 2020-02 (the “Exemption”) became effective. Among other things, this rule requires advisers relying upon this exemption to perform an annual Retrospective Review (the “Review”). The Exemption requires that the Review be reasonably designed to: (1) detect and prevent violations of the Impartial Conduct Standards, and (2) achieve internal compliance with the Policies & Procedures enacting those Impartial Conduct Standards. The Review consists broadly of two components, the methodology and the results, which are to be memorialized as part of a written report.

The California Department of Financial Protection and Innovation (“DFPI”) has censured a subsidiary entity of Morgan Stanley, Morgan Stanley Smith Barney FA Notes Holdings, LLC (“MSSBFA”) and issued a $1 million fine for acting as an unlicensed, unregistered lender within the State of California.

First Republic Bank’s May 1, 2023, collapse marked the largest U.S. bank failure since the 2008 Great Recession, when Washington Mutual imploded. Regulators were forced to step in, and J.P. Morgan Chase acquired the bank’s deposits and a majority of its remaining assets. First Republic’s 84 branch offices will remain open, at least for now, having been rebranded as JPMorgan Chase Bank. But what about the hundreds of financial advisors affiliated with First Republic’s subsidiary broker-dealer and investment advisory firms?

On April 12, 2023, the SEC approved long-anticipated changes to FINRA’s expungement rules that will make the expungement process more challenging, and likely more expensive, for registered representatives. While the SEC has approved the new rules, FINRA has not yet announced when they take effect.

On February 7, 2023, the Securities and Exchange Commission’s Division of Examinations (“DOE”), formerly the Office of Compliance Investigations and Examinations (“OCIE”), announced its annual exam priorities. DOE Director Richard R. Best said, “[w]e will emphasize compliance with new SEC rules applicable to investment advisers and investment companies as well as continue our focus on emerging issues and rules aimed at protecting retail investors.”

On December 14, 2022, the Securities and Exchange Commission adopted amendments[1] to Rule 10b5-1 of the Securities Exchange Act of 1934 (“Exchange Act”), and to Regulations S-K and S-T. The final rules substantially expand the insider trading safe harbor requirements of Rule 10b5-1, and impose new reporting and disclosure requirements for directors, officers, issuers, and other persons who implement 10b5-1 trading plans. The final rules became effective February 27, 2023.[2] Smaller reporting companies[3] have an additional six months to comply, until August 27, 2023.[4]

Many employees have faced this situation. You have accepted a new position with a new employer. On your first day, you are handed a stack of forms and documents and asked to review and sign them. It is your first day at the new job and your head is swimming. Aside from tax withholdings, health insurance, and myriad other new employee selections and forms, you most likely are asked to review and sign an Employment Agreement. You are not a lawyer and don’t want to start off on the wrong foot in your new job. You sign the agreements given to you. But if the Employment Agreement contains a non-solicitation and/or noncompete provision, what do you do? Call a lawyer and schedule a meeting the first day of the new job or just sign what you are handed? And if you do sign a noncompete, non-solicitation agreement, will you be bound by what you signed if and when your new employment ends? What are you signing that you may be “stuck with?”

Starting on January 1, 2023, an update to the California Insurance Code took effect requiring certain insurance license holders to include their license number on each email they send that involves their licensed activities. These changes will impact investment advisers, broker-dealers, and other financial professionals who provide insurance services as part of their overall client offerings.

On November 16, 2022, the California Department of Financial Protection and Innovation (“DFPI”) proposed new regulations under the Corporate Securities Law of 1968, which would establish annual continuing education (“CE”) requirements for Investment Adviser Representatives (“IARs”).[ ] As we recently reported[ ], the North American Securities Administrators Association (“NASAA”) designed a set of model rules for state regulators to adopt, and thereby implement, IAR CE requirements that are consistent from state to state.[ ] In its current form, the DFPI’s proposal would result in California adopting a rule substantially similar to the NASAA model rules; however, the comment period for interested persons to argue for changes to the proposed rule remains open until January 16, 2023.[ ]

As part of its mission to protect investors, the Financial Industry Regulatory Authority (FINRA) gathers and discloses certain information about registered financial advisors and brokerage firms registered with FINRA, including financial advisors and broker dealers. FINRA houses this information in various databases, including but not limited its Central Registration Depository (CRD) and its publicly viewable registration information portal, BrokerCheck.