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FINRA Intends To Probe Brokerages’ Compliance Culture

FINRA intends to investigate whether complying with rules is part of brokerage firms' culture during its examinations this year. The regulatory authority announced on Tuesday that it will more formally scrutinize how firm culture affects compliance and risk management practices. “A firm's culture is both an input to and product of its supervisory system, including its approaches to identifying and managing conflicts of interest and ensuring the ethical treatment of customers,” FINRA said. “This means that firms should take visible actions that help mitigate conflicts of interest and promote the fair and ethical treatment of customers.” Other focus areas for FINRA exams include the management of conflicts of interest in the sale of proprietary products and products the firm is paid to sell, technology, anti-money laundering and firm liquidity. Among the cultural aspects FINRA will investigate are whether compliance is valued at the firm and violations are not tolerated, whether the firm aggressively targets potential compliance problems, whether senior management serves as good role [...]

By |January 5th, 2016|FINRA, Press Releases & News, SEC|
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Lawsuit Alleges Fiduciary Breach Under ERISA

A class-action lawsuit was filed last week alleging breach of fiduciary duty resulting from excessive record-keeping fees and use of proprietary investment funds. The suit, Pledger et al. v. Reliance Trust Co. et al., targets the fiduciaries of the Insperity 401(k) Plan for allegedly causing participants to pay excessive fees to the plan record keeper, Insperity Retirement Services. The complaint further alleges that Insperity and Reliance Trust Co., the plan's discretionary trustee, breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 by offering funds with high expenses and poor performance, including proprietary mutual funds and collective investment trusts offered by Reliance. Insperity also failed to adequately monitor Reliance, a fiduciary responsible for investment selection in the plan. “We allege that Insperity and Reliance Trust together operated the plan for their own self-interest, sending excessive record-keeping fees to Insperity's in-house record keeper,” said one of the plaintiffs' attorneys. “Reliance Trust was a fiduciary responsible for investment selection and [...]

By |December 28th, 2015|Press Releases & News|
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AR Capital Halts Creation Of New Nontraded REITs

AR Capital, the massive real estate investment trust sponsor established by Nicholas Schorsch, will cease creating and selling new alternative investment products. “As a result of regulatory and market uncertainty affecting capital raising for both new and existing offerings in the direct investment industry,” AR Capital will stop taking new investor funds for the programs by the end of this year, according to a company statement. These programs include Business Development Corporation of America II, ARC Healthcare Trust III, New York City REIT II, ARC Hospitality Trust and ARC Global Trust II. William Kahane, co-owner of AR Capital, noted the Department of Labor's proposed fiduciary standard and new client account statement pricing standards for nontraded REITs and other alternative investments as reasons for AR Capital's decision to withdraw from the market it used to control. This decision comes mere days after the commonwealth of Massachusetts charged Realty Capital Securities ("RCS") with fraudulently gathering proxy votes to support real estate deals sponsored [...]

By |November 17th, 2015|Press Releases & News|
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Legislators Frustrated As SEC Slogs Toward Proposing A Fiduciary Rule

Legislators have expressed frustration with how slowly the SEC has moved toward proposing a rule that would raise investment advice standards while the Department of Labor speeds along. In an appearance before a House Financial Services subcommittee, SEC Division of Investment Management Director David Grim was pressed about the timing of a potential rule. Grim denied to give a timetable but noted that his staff "has done extensive analysis" toward developing a proposal. When asked when the analysis would go to the commission, Grim replied, "As soon as it's ready." Rep. French Hill, R-Ark., called Grim's response "ridiculous." Hill, who is a critic of the Labor Department rule, is angered that the Department has preempted the SEC on the investment advice issue by proposing a rule that would require a best-interests standard on 401(k) and individual retirement accounts. Hill and other critics of the Labor Department rule believe the Department should wait until the SEC acts. Proponents of the Labor [...]

By |October 26th, 2015|Press Releases & News, SEC|
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