We advise broker-dealer clients on registration issues (including state registration of associated persons), post-registration compliance and adherence to the rules of the Financial Industry Regulatory Authority (“FINRA”). Importantly, we are uniquely positioned to provide legal and strategic advice in responding to inquiries by government regulators and demands by the plaintiff’s bar. With a substantial financial institution client base, we also are experienced in drafting and reviewing third party broker-dealer networking agreements, custodial account agreements and agreements relating to the acquisition of broker-dealers and investment advisers by financial institutions.
The investment advisory industry has grown phenomenally in the past decade and is on a trajectory for higher growth as responsibility for retirement planning has moved almost totally from corporations to individuals. At the investment adviser level, regulation is divided between the SEC and the states. However, regulation of investment adviser representatives is subject to complex federal and state rules and administrative interpretations which can be a minefield for the uninitiated. We help clients navigate these regulatory intricacies to avoid significant regulatory penalties and civil liability. We also have experience drafting mandated investment adviser brochures, fee agreements, and discretionary investment agreements.
Compliance and Risk Management
Compliance has become the watchword for government regulators. SEC has issued a substantial number of regulations and interpretive guidance aimed at improving compliance and imposing significant and high level sanctions on those found wanting.
Compliance should be an important component of the risk management program of every financial intermediary. The imperative on broker-dealers to minimize regulatory and civil liability risk is accentuated by control person liability imposed on them by Section 20(a) of the Securities Exchange Act of 1934. Under that section, every broker-dealer is a de jure control person of its registered representatives and, in any action alleging violations of that act, the burden is on the broker-dealer to prove that it maintains and enforces polices and procedures reasonably designed to detect and prevent securities law violations. We advise clients on addressing licensing, conflict of interest, business conduct and other aspects of their business which may give rise to serious compliance risks.
Government agencies regulating financial intermediaries have the authority to conduct investigations, issue subpoenas and initiate administrative proceedings. They also often are authorized to assess civil monetary fines and impose sanctions against the firm and certain individuals therein, including debarment and curtailment of permitted business activities.
When these matters arise, they need to be handled with great care as even a consent settlement with a government agency has the potential to significantly impair an organization’s ability to grow and operate in desired business sectors.
In this regard, Bybel Rutledge LLP can bring years of experience to bear in assisting a client in communicating with the regulator, focusing on major issues and crafting acceptable resolutions which achieve the regulator’s aim and is consistent with the client’s business objectives. Firm attorneys have represented individuals, broker-dealers, investment advisers and other financial firms which have been the subject of regulatory subpoenas, inquiries and actions initiated by the Pennsylvania Department of Banking and Securities, other state securities commissions, the U.S. Securities & Exchange Commission, and FINRA.
Our partner, G. Philip Rutledge, who previously served as general counsel to the Pennsylvania Securities Commission, has substantial experience in preparing expert witness reports and testifies as an expert witness in FINRA arbitrations and civil litigation.