Monthly Archives: December 2012

Social Media Sites Making Compliance Easier for Users

Back in January, the Securities and Exchange Commission (“SEC”) issued guidance regarding Registered Investment Adviser’s (“RIA’s”) use of social media in a National Examination Alert, Investment Adviser Use of Social Media (the “Alert”).  Part of the Alert dealt with third-party content – specifically stating how “likes” and comments from third-parties on social media websites may be interpreted as improper testimonials prohibited by Rule 206(4)-1(a)(1) of the Investment Advisers Act of 1940.

As a result, the SEC suggested that RIA firms develop guidelines that not only account for these occurrences, but also establish periodic, or real-time monitoring to ensure that such “testimonials” are not being made by third-parties.  This type of monitoring often required substantial effort on the part of compliance personnel at a firm.  For more information on this Alert, please see January’s blog posting for the month entitled “New Guidance for Investment Advisers & Social Media: Should Advisers Dislike Their Likes?

This week, however, LinkedIn announced that all of these third-party testimonials made at its website can be hidden with a single click of a button.  Developers at LinkedIn made changes to the website effecting how owners of a profile can manage endorsements.  While the ability to hide individual endorsements and endorsers has been available since the site first launched its “endorsement” aspect of the website, the new feature finally gives the ability to hide all endorsements at once.

While it is debatable whether or not such endorsements need to be hidden – especially in the wake of the court decision In the Matter of Anthony Fields (more on that to come in next week’s blog posting), compliance officers at least have the option now of completely hiding from the public all endorsements that could be construed as improper testimonials.

For further information on this, or other related topics, please contact us at or (619)298-2880.

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Regulators Continue Focusing on Anti-Money Laundering Violations

Recent settlements continue to show how regulators are cracking down on Anti-Money Laundering (“AML”) violators of all shapes and sizes.  This week HSBC, Europe’s largest bank by market value, agreed to a settlement after facing accusations it transferred funds through the U.S. from Mexican drug cartels and on behalf of nations such as Iran that are under international sanctions.  The settlement – $1.9 billion, or 9% of the company’s 2012 profits, is the largest penalty ever imposed on a bank.  Additionally, another British Bank – Standard Chartered PLC, signed an agreement with New York regulators this week for $340 million to settle a money-laundering investigation involving transactions it undertook with funds from Iran.

Pursuant to the Bank Secrecy Act (“BSA”) and the USA Patriot Act (“Patriot Act”), many financial services firms are required to institute AML programs in order to detect and help prevent money laundering.  It is necessary for these firms to identify each client, conduct a thorough evaluation by gathering important information and documentation and then making a determination of whether or not the client seems legitimate. This process occurs before engaging in any business practices with the client and therefore avoids “willful blindness” issues.

While organizations such as The Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) have recently revealed they are working on a proposed rule that would require investment advisers to implement AML compliance programs; currently the Investment Adviser’s Act of 1940 does not require investment advisers to establish such programs.  However, with recent trends in regulation, investment advisers would be wise to consider their fiduciary duty and develop the following:

  • A systemic process for reviewing of all incoming accounts, including a customer identification program, to ensure compliance with AML regulations;
  • Designation of an AML Officer who is responsible for daily coordination of AML compliance;
  • Mandatory annual training for personnel; and
  • Independent annual testing of AML compliance

For additional information about anti-money laundering laws and regulation, or any other compliance concern, please contact us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or (619) 298-2880.

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FINRA Seeking Further Disclosure & Promotion of “BrokerCheck” Program

Recently, the Financial Industry Regulatory Authority (“FINRA”) has requested the Securities and Exchange Commission (“SEC”) to approve amendments to Rules 2267 and 8312, which would increase disclosure requirements and promotion of their BrokerCheck program.

In an attempt to facilitate and increase investor use of BrokerCheck information, Rule 2267 would be amended to require FINRA member firms to include a reference and link to BrokerCheck on their websites. In addition, member firms would be required to maintain the reference and link on related websites “maintained by, or on behalf of, any person associated with a member firm.”

Rule 8312 would be amended to make information regarding investment-related civil actions brought by state or foreign regulatory authorities against associated persons of a member firm permanently and publicly available in BrokerCheck, even if such actions have been dismissed as a result of a settlement agreement.

These requests come on the heels of changes FINRA made to BrokerCheck in May, and further magnifies registered complaints made towards brokers and investment advisers – whether those complaints are warranted or not.  For those firms who find their records spotted with unfair, inaccurate, or outdated customer complaints, FINRA Rule 2080 could provide relief for expungement in certain situations.  Furthermore, as discussed in a prior blog post (September 21, 2012), a California court of appeals recently found that even if a broker has not met the grounds set forth in FINRA Rule 2080 for granting expungements, expungement may be granted by the courts on purely equitable grounds.

For further information on this, or other related topics, please contact us at or (619)298-2880.

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