Securities Law Related Blogs

It was roughly this same time a year ago when the banking industry in the U.S. was going through a series of serious events. Within the space of a few weeks during March through May last year, three of the five largest bank failures in U.S. history occurred. At the outset, a wider banking crisis was feared, but the Treasury Department, the Federal Reserve, and the FDIC acted forcefully, in effect backstopping all deposits, and the three bank failures did not lead to a systemic event. But while the immediate crisis was averted, many of the underlying problems – interest rate pressure, stress in the commercial real estate sector – continue, and now, a year later, the banking industry remains under stress. Problems have continued to emerge, and signs are that challenges in the industry will continue. Recent evidence points to continuing stress; as I noted in a prior post, in February 2024, the New York Community Bank Corporation was hit with a securities class…

The Securities and Exchange Commission today announced that Nathaniel H. Benjamin has been appointed the Director of the Office of Minority and Women Inclusion (OMWI). Mr. Benjamin will join OMWI from AmeriCorps, where he is the Chief Diversity and…Read the Full Press Release Have a securities law question? Call New York Securities Lawyers at 212-509-6544.

In an article in Investment News, Silver Law Group founder Scott Silver weighed in on a FINRA arbitration action involving a broker-dealer and financial advisor who sold a client GWG Holdings’ illiquid L-Bonds. “The arbitrators in these FINRA claims over the past decade have been seeing cases around product suitability for the clients,” Scott said. “A lot of them involve these illiquid alternative investments like GWG bonds.” Mr. Silver continued, “The question is why anyone would recommend this product to a client. This case is not about the customer, it’s about the product. The arbitrators appear shocked to hear billions of dollars of this stuff is sold.” These investments were never suitable for individual investors, but that didn’t stop brokers and broker-dealers from selling them. In the continuing fallout over L-Bonds, investors have been filing FINRA arbitration claims against the broker-dealers who sold the L-Bonds…

Kwame Adusei (CRD#: 6166926) is a former broker and investment advisor last employed with  Morgan Stanley (CRD#:149777) of Poughkeepsie, NY. His previous employers were J.P. Morgan Securities LLC (CRD#:79) of Brewster, NY, and Wells Fargo Advisors, LLC (CRD#:19616) of Chappaqua, NY. He has been in the industry since 2013. A customer dispute filed on 6/2/2023 alleged that funds were withdrawn from her account from September 1, 2022, to February 3, 2023, without her knowledge. Morgan Stanley Wealth Management settled this dispute for $395,710.21. Adusei voluntarily terminated his employment on 7/24/2024 following allegations of “concerns relating to a client complaint alleging representative made unauthorized transactions in her Morgan Stanley account, possessed her Morgan Stanley online login information, and solicited her participation in an outside residential property investment.” Shortly thereafter, another customer dispute filed on 12/8/2023 included…

Cryptocurrency fraud wasn’t just on the rise last year. It was the number cause of investor headaches. According to the FBI’s 2023 Internet Crime Report, investment losses related to crypto scams sky-rocketed from $2.57 billion in 2022 to $3.96 billion the following year. This 53% increase is understandably alarming. But, perhaps more frightening is [...] The post FBI: Crypto Scams Were Investors Biggest Foe in 2023 appeared first on Stoltmann Law.

By Anne Sherry, J.D.A report commissioned by the SEC’s Office of the Advocate for Small Business Capital Formation finds that investors undervalue crowdfunding offerings by women and minority entrepreneurs. If disparities in funding continue, Regulation Crowdfunding could perpetuate inequalities in business outcomes. The report suggests that government and Reg CF platforms should try to encourage participation by and offer support to women and minority entrepreneurs, as well as attempt to counter investor bias through educational programs.Seven years of crowdfunding. The proportion of women among all individual entrepreneurs participating in Reg CF increased from 17.3 percent in 2016 to 22.5 percent in 2022. Reg CF startups also became more racially diverse, with the proportion of white entrepreneurs decreasing from 83.4 percent in 2016 to 73.0 percent in 2022. As for gender diversity, in 2016, 79.2 percent of founder teams using Reg CF were entirely male; 11.2 percent…

The Securities and Exchange Commission today charged audit firm BF Borgers CPA PC and its owner, Benjamin F. Borgers (together, “Respondents”), with deliberate and systemic failures to comply with Public Company Accounting Oversight Board (PCAOB)…Read the Full Press Release Have a securities law question? Call New York Securities Lawyers at 212-509-6544.

On 1 May 2024, the Payment Systems Regulator (PSR) published Consultation Paper 24/6 ‘Securing compliance: Proposed extensions and exemptions guidance’ (CP24/6).   Background The PSR’s specific directions and requirements are important tools which are used to require firms to implement changes improving payments for people and businesses across the UK. However, the PSR acknowledges that there may be circumstances when an extension or exemption from its requirements may be appropriate. In CP24/6 the PSR is consulting on proposed guidance which sets out factors that it will use to decide whether to grant an extension or exemption to parties affected by one of the specific directions or specific requirements. This includes guidance on when to engage with the PSR on finding a solution when such circumstances arise. Importantly, the proposed guidance only applies to specific directions or requirements under sections 54 or 55 of the Financial Services…

On 1 May 2024, the Financial Ombudsman Service (FOS) published new data on the number of financial complaints received in the second half of 2023. The data reveals that the number of complaints the FOS received overall during that period increased by almost a fifth compared with the same period in 2022 (a total of 95,349 complaints between 1 July and 31 December 2023, compared to 79,921 complaints in the same period in 2022). Key points from the data include: Banking and consumer credit related complaints were the main driver of the rise, with current accounts and credit cards made up over 40% of cases in the sector. Current account complaints continue to be dominated by disputes over fraud and scams. Credit card complaints saw an all-time high of 5,660 complaints in the last three months of 2023, driven by perceived unaffordable and irresponsible lending by firms. The FOS also saw an increase in general insurance cases, with car and motorcycle insurance…

On 3 May 2024, the European Central Bank (ECB) published a final guide on effective risk data aggregation and risk reporting. The ECB has also published a feedback statement on its earlier consultation on the guide. The final guide outlines prerequisites for effective risk data aggregation and risk reporting to assist banks in strengthening their capabilities, building on good practices observed in the industry. It explains in detail how the ECB applies relevant national laws, transposing the Capital Requirements Directive in line with relevant European Banking Authority guidelines. The ECB strongly recommends that significant institutions make substantial progress in improving their data aggregation capabilities and internal risk reporting practices and in the final guide it has identified seven key areas of concern. These seven areas are considered important prerequisites for robust governance arrangements and effective processes for identifying, monitoring and…

Last month, the PCAOB released this spotlight, Inspection Observations Related to Auditor Use of Data and Reports. The report focuses on auditors’ use of information produced by the company (“IPC”), such as invoices and shipping documents, and information from external sources, such as customer purchase orders and bank records, which must be both “sufficient” in quantity and “appropriate” (i.e., relevant and reliable). In issuing the report, the PCAOB hopes to “help auditors understand how the testing of IPC and information from external sources is properly performed” by describing recent staff observations on this issue. 17% of identified deficiencies in the 2021 and 2022 inspection cycles related to insufficient testing procedures over the accuracy & completeness of IPC or other data or the controls over that data. What does this mean for companies? Internal audit teams should take note! This Radical Compliance blog…

Last spring, I blogged that the requirement for auditors to identify “critical audit matters” (CAMs) has not been living up to the PCAOB’s hopes & dreams. As part of its continuing effort to ensure that audit opinions communicate decision-useful information to investors (something that’s surprisingly been questioned as of late), the PCAOB’s Investor Advisory Group has recently announced that it’s soliciting public input from investors, analysts, issuers and auditors on the most “decision-useful” CAMs from public company audit reports in 2023 10-Ks and 20-Fs. The IAG asks that all “nominations” be submitted by June 30 and accompanied by an up to 300-word explanation. The IAG will select its top 3 and report out publicly later this year. It’ll be interesting to see how these stack up to the most common CAMs! – Meredith Ervine 

The transcript for our recent “Conduct of the Annual Meeting” webcast featuring J.M. Smucker’s Peter Farah, Broadridge’s William Kennedy, Intuit’s Erick Rivero, and Carl Hagberg of The Shareholder Service Optimizer is now available. During the program, our panelists shared some really practical tips to make your solicitation and annual meeting run smoothly. Here are just a few: – Ask Broadridge (and other service providers) each year about their technology improvements for virtual meeting platforms — the capabilities have exponentially expanded in a few short years. Not only that, but they still want to hear what other features you’d like to see next year. – Most technology issues are user error on the company side. Have an audio-visual and IT professional in the room with you or at the ready and consider dress rehearsals. Make sure you mimic the conditions of your annual meeting (e.g., have key participants in the same…

On 2 May 2024, there was published in the Official Journal of the EU, a Commission Notice on the interpretation and implementation of the transitional provision laid down in Regulation (EU) 2024/791 amending MiFIR as regards enhancing data transparency, removing obstacles to the emergence of consolidated tapes, optimising the trading obligations and prohibiting receiving payment for order flow. The MiFIR review entered into force on 28 March 2024 and applies from that date. Several provisions in the MiFIR review need to be supplemented by Commission delegated regulations to become fully operational. For the transitional period, Article 54(3) MiFIR provides that the provisions of the delegated acts adopted pursuant to MiFIR as applicable before 28 March 2024 shall continue to apply until the date of application of the delegated acts adopted by the MiFIR review. However, in some cases the new MiFIR provisions are to be supplemented by new or amended Commission delegated…

On 2 May 2024, there was published in the Official Journal of the EU, a Corrigendum to the Regulation on markets in crypto-assets (MiCAR). The Corrigendum amends Articles 45(4), 81(15), 92(2) and 111(1) of MiCAR.

On 2 May 2024, HM Treasury updated its guidance on financial sanctions enforcement and monetary penalties. The Office of Financial Sanctions Implementation (OFSI) will now always apply the most recent iteration of its enforcement guidance to cases. Chapter 3 of the guidance, which covers case assessment, gives details on the change. Other updates are primarily to Chapter 3. The guidance now better explains how OFSI applies and splits the ‘case factors’ that it uses to assess suspected breaches of financial sanctions. It introduces two new distinct case factors, “Knowledge, intention and reasonable cause to suspect” and “Cooperation” that were previously included more generally in the guidance. Chapter 6 also includes a small edit to the delegation of ministerial reviews of monetary penalties.

On 1 May 2024, the House of Lords’ Financial Services Committee (Committee) published a letter (dated 30 April 2024) that it had sent to Nikhil Rathi (Chief Executive, FCA). The letter follows a private briefing that Mr Rathi provided the Committee with and follows up on cost disclosure requirements for listed investment companies which was raised during the session. The letter states that the cost disclosure regime applied to investment trusts in the UK has been a cause for concern in the industry for some time now and that as a result investment flowing into UK investment trusts has been significantly reduced. The letter adds that this issue is founded on an interpretation of the EU-retained versions of MiFID II and the PRIIPs Regulation not shared by any other country and that this ultimately creates an unlevel playing field on an international level. The letter notes that the Government has announced that it will act on the issue and legislate on these matters…

SRS Acquiom recently released its annual M&A Deal Terms Study for 2024 (available for download). This year, SRS Acquiom analyzed more than 2,100 private-target acquisitions that closed from 2018 through 2023. Here are some of the key findings summarized in the introduction: – Strategic buyers (both U.S. public and private) were more active in 2023, with […]

On 2 May 2024, the Financial Conduct Authority (FCA) published a new webpage on the UK European Market Infrastructure Regulation (UK EMIR) reporting questions and answers. The Bank of England (BoE) also updated its Trade Repository Data Collections webpage. Background Under Article 9 of UK EMIR, the BoE and the FCA share responsibility for derivatives reporting. The BoE is responsible for central counterparties and the FCA is responsible for all other counterparties in addition to trade repositories. On 24 February 2023, the FCA and BoE jointly published Policy Statement (PS23/2) confirming changes to the derivative reporting framework under UK EMIR. The majority of the updated requirements are applicable from 30 September 2024, with a transition period for some aspects. Q&As The FCA and the BoE have now published finalised guidance and a summary of feedback from a first consultation on guidance to support the implementation of the amended UK EMIR reporting.…

Last summer, bankers and the lawyers who advise them breathed a collective sigh of relief when the Second Circuit Court of Appeals  upheld a U.S. District Court's opinion that notes in a bank syndicated loan were not securities.   Kirschner v. JP Morgan Chase Bank, N.A., 79 F.4th 290 (2d Cir. 2023), cert. denied sub nom. Kirschner v. JPMorgan Chase Bank, N.A., 144 S. Ct. 818 (2024).   Because the Court of Appeals applied the  “family resemblance” test established by the Supreme Court in Reves v. Ernst & Young, 494 U.S. 56, 110 S.Ct. 945, 108 L.Ed.2d 47 (1990), many lawyers may assume that the case was brought under the federal securities laws. In fact, the plaintiff brought his claims under the state-securities laws of  Massachusetts, Colorado, Illinois, and California.  Both the District Court and the Court of Appeal, however, agreed that the Reves test was the applicable…