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Your professionally curated research and reference resource fully integrating treatise and how-to guidance with underlying laws, rules, interpretations, and hundreds of sample documents.

DoL Fiduciary Rule Developments

The DoL Rule is effectively dead. The SEC has proposed Reg. Best Interest. See the News column to see recent updates.

Adviser Regulatory & Compliance News

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Fiduciary Stds Developments—June 2018

June 29, 2018

Given its importance, we're republishing our May update. A federal court has essentially struck down the DoL Fiduciary Standard. No appeal was made. Meanwhile, the SEC has proposed two things: (1) a "Best Interest" Standard for Broker-Dealers (and certain advisers); and (2) Form CRS which would require brokers and advisers to provide to investors a document describing their services and nature of their client relationships, i.e., a Relationship Summary. The attached page has a list of the best law firm summaries we've seen to date. Please click the heading above to access the detailed discussion and links.

Lucia v. SEC:  Supreme Court Holds SEC’s Past Hiring of Administrative Judges Unconstitutional

June 21, 2018

On June 21, 2018, the U.S. Supreme Court ruled in the appeal of the Lucia v. SEC case which has worked its way through the courts the past several years. In essence, the Supreme Court determined that the SEC’s old administrative law judges (“ALJs”) hiring practice was unconstitutional. In recent times, the SEC staff has guided appointments of ALJs. This decision resolved an outstanding split between federal circuit courts as to whether the SEC's ALJs are “officers” of the United States subject to the requirement of the Appointments Clause. The Court concluded that ALJs are “officers” who must be appointed pursuant to the Appointments Clause by the President, “courts of law,” or “heads of department.” For these purposes, the Commissioners of the SEC are deemed to be "heads of department," meaning that ALJ appointments will have to be by the Commission, courts or the President.However, the Court's decision does not resolve a variety of open questions that follow from this significant decision. Most notably, the decision throws into question the validity of the recent decisions of the ALJs that decide most of contested SEC enforcement actions.Such questions will likely take years to resolve in lower courts, and perhaps a revisit to the Supreme Court. The heading to this blurb links to an excellent summary by our friends at Ropes & Gray.

Updated Custody Q&A

June 21, 2018

The SEC's Div. of Investment Mgmt. has updated its custody Q&A page on its website. The updates primarily address advisers continuing questions and challenges regarding what is termed "inadvertent custody.," The press release which is linked to in the heading above, details specifically the additions to the Q&A for your ease of access.

Adviser Fails to Disclose to Clients a Conflict of Interest

June 8, 2018

The SEC found that an investment adviser recommended a security without disclosure to its client that it had a financial interest in the issuer of the security. The SEC stated that Larry Werbel from at least 2011 through 2014 introduced his clients to VGTel, Inc. and informed them that VGTel was as an investment opportunity. The SEC found that Werbel willfully failed to tell these clients that he was being compensated to recommend the purchase of VGTel securities. The SEC noted that this compensation agreement was an agreement with Ed Durante, a convicted felon. The SEC further noted that he failed to inform these clients that New Market Enterprises, the entity he directed his clients to send their money for the purchase of VGTel securities, was run and controlled by Ed Durante. The SEC stated that he met with Ed Durante in connection with his compensation agreement to discuss his clients' investment opportunities in VGTel.