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Government’s Willful Blindness Theories Put Lawyers At Risk

By Melissa Maleske of Law360.com The government's recent focus on holding individuals accountable for corporate misdeeds is supporting the rise of aggressive theories of prosecution, including the idea that even absent actual knowledge, they should have known something was amiss — and defense experts say that's an especially dangerous development for attorneys. Willful blindness is a boon to prosecutors, a theory that allows them to bring cases even where lawyers can show they had no actual knowledge that they were involved in misconduct. "In a world where second-guessing has become a blood sport, lawyers can be exposed," says Lawrence Spiegel, a partner at...

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State regulators reveal top enforcement targets and the price they pay

Agencies brought more cases against registered advisers than unregistered entities, and certain products featured in many of them By Mark Schoeff Jr. of investmentnews.com For the first time since they've been keeping enforcement statistics, state regulators last year brought more cases against registered financial advisers than against unregistered entities. In its 2015 enforcement report, the North American Securities Administrators Association said 812 registered advisers were named as respondents in cases, compared to 791 unregistered individuals and firms. Overall, state regulators opened 4,487 investigations last year and took 2,074 enforcement actions, according to the report, which was released at the NASAA annual conference in...

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SEC Wants Firms To Watch Reps With Troubled Pasts

By Carmen Germaine of Law360.com The U.S. Securities and Exchange Commission announced Monday that it is launching exams to test the compliance oversight and controls of investment advisers that hire individuals with a disciplinary history. The SEC’s Office of Compliance Inspections and Examinations released a risk alert Monday saying the office’s staff will soon start conducting examinations of investment advisers registered with the SEC that employ or contract with individuals who have a history of disciplinary events in order to assess how firms supervise higher-risk individuals. “Such individuals may present an increased risk of future misconduct, and thus can present harm to clients,”...

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2 Firms To Pay SEC Fines Over Wrap Fee Compliance Failures

By Carmen Germaine of Law360.com James & Associates and Robert W. Baird & Co. agreed Thursday to pay a fine to the U.S. Securities and Exchange Commission over claims they failed to ensure clients enrolled in programs with a single annual fee weren’t being overcharged commissions for certain trades. The two firms both agreed to pay civil penalties without admitting or denying the SEC’s allegations that they failed to ensure clients in their “wrap fee” programs, who are charged a single annual fee for bundled investment advisory and trade execution services, weren’t being charged unsuitable commissions on trades made with broker-dealers outside...

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SEC Says Advisers Must Report Clients’ Derivatives Risk

By Jody Godoy of Law360.com Law360, New York (August 25, 2016, 5:11 PM ET) -- The U.S. Securities and Exchange Commission said on Thursday investment advisers must disclose more about assets held in separately managed accounts, including their level of exposure to derivatives, cementing rules industry stakeholders previously worried could expose trading strategies. The regulator announced final changes to a reporting form called Form ADV requiring advisers to report aggregate data on SMAs, including their exposure to derivatives and borrowings, and on other aspects of the advisers' businesses. The SEC also tightened certain record-keeping requirements under the Investment Advisers Act. Advisers will have...

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Finra fines UBS $250,000 for overcharging mutual-fund customers

The firm allegedly failed to provide about 2,700 customers waivers tied to upfront sale charges InvestmentNews.com By Christine Idzelis A unit of UBS Group AG will pay a $250,000 fine to settle charges that it failed to waive certain fees for eligible mutual-fund customers, according to the Financial Industry Regulatory Authority Inc. The brokerage firm charged customers an excess of $277,636 to invest in mutual funds from September 2009 to June 2013, according to a settlement notice that Finra accepted Monday. The alleged supervisory failures were tied to so-called reinstatement rights that allow investors to avoid front-end sales charges. “We are pleased to have resolved...

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Finra panel orders adviser to pay $333,000 to Morgan Stanley

Louis D. Dworsky was found in breach of promissory notes when he left the brokerage firm InvestmentNews.com By Christine Idzelis A former broker for Morgan Stanley must pay the wirehouse $333,000 in damages for failing to pay back money he owed when leaving the firm in 2013, according to the Financial Industry Regulatory Authority Inc. Morgan Stanley will recoup money tied to four promissory notes issued to Louis D. Dworsky in 2007, 2008 and 2009, according to a Finra dispute resolution document released on Monday. Promissory notes are a form of compensation that brokers receive from their employer. Mr. Dworsky now works at Zermatt Wealth...

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Former Merrill Edge adviser accused of misleading customers

Finra said the adviser misled five IRA customers and then did not give an honest account of his actions InvestmentNews.com By Tanvi Acharya The Financial Industry Regulatory Authority Inc. accused former Merrill Lynch adviser of allegedly misleading five clients with individual retirement accounts at the firm by providing incorrect information while making recommendations. Landon L. Williams, who is currently not registered as a Finra member, also “made false statements about what he discussed with and disclosed to the customer” in his notes, according to the complaint filed Thursday. Mr. Williams was an adviser at Merrill Lynch Edge Advisory Center, which serves customers with $250,000 or...

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FINRA panel directs broker to pay Wells Fargo almost $1 million after his termination

Robert Edward Loftus was discharged in 2013 and found in breach of a promissory note InvestmentNews.com By Christine Idzelis Broker Robert Edward Loftus must pay Wells Fargo almost $1 million in compensatory damages after his termination in 2013, according to the Financial Industry Regulatory Authority Inc. An arbitration panel decided that Mr. Loftus owes the firm $930,874 in damages for breach of a promissory note, a form of compensation that he received upfront when he joined Wells Fargo in 2009, according to a Finra document dated Aug. 3. Mr. Loftus is also responsible for $300,000 of the brokerage firm's attorney fees. Mr. Loftus, who now...

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Investment Branch of Fidelity Sued for Fiduciary Breach

Individuals that contribute to a Delta Air Lines Inc. 401(k) plan have sued sections of Fidelity Investments, on the claim of wrongdoing in the firm’s record keeping role. According to its latest Form 5500, the Delta Family-Care Savings Plan had approximately $7.8 billion in assets. The participants in this investment fund are seeking a class-action status and allege that Fidelity hired Financial Engines to provide investment advice and to collect a piece of the action. The complaint stated, “In order to be included as the investment advice service provider on Fidelity’s (record-keeping) platform, Financial Engines agreed to pay – and is paying – Fidelity a significant percentage of the fees it collects from...

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