Securities Law & Corporate Counsel Blog

The first few months of 2021 have marked a clear shift in how the U.S. Securities and Exchange Commission (SEC) could soon start holding corporations to a much higher standard of accountability for actions that harm investors. A central theme of the SEC’s emerging mindset, as stated in a March 9, 2021, speech by Commissioner Caroline Crenshaw is the belief that corporate culture comes from the top and there is a strong need to incentivize companies to foster a culture of compliance, not misconduct.

Several recent actions and statements made by the U.S. Securities and Exchange Commission (SEC) have underscored its plans to prioritize enforcement of climate change and other environmental, social, and governance (ESG) issues in 2021.

In early 2021, a prohibited transaction exemption (“PTE”) issued by the Department of Labor (“DOL”) took effect that allows qualifying investment advisers to receive conflicted compensation resulting from nondiscretionary fiduciary investment advice.

The U.S. Securities and Exchange Commission’s (SEC) Division of Examinations ("EXAMS" or the "Division") released its annual priorities on March 3, 2021 in a 42-page report of exam priorities.  Among other things, the list includes an ongoing emphasis on the overall strength of financial advisers’ compliance programs and a growing interest in the evolving risks to investors related to relevant climate and environmental, social, and governance (ESG) funds.

Firms that have seen the recently released 2021 Report on the Financial Industry Regulatory Authority’s (FINRA’s) Examination and Risk Monitoring Program (the "Report") should be formulating plans to fortify their compliance programs based on the noteworthy findings shared from recent FINRA exams. The Report provides firms with valuable insight into 18 regulatory topics categorized by Firm Operations, Communications and Sales, Market Integrity, and Financial Management.

A recent enforcement action by the U.S. Securities and Exchange Commission ("SEC") provides valuable insight for firms seeking to prevent improper recognition of revenue, a common type of accounting fraud regulators contend with each year.

Investment Advisory firms that are eagerly awaiting the revisions recently adopted by the U.S. Securities and Exchange Commission (SEC) to the archaic Advisers Act Advertising Rule previously anticipated to become effective this spring, will have to wait a bit longer.  The Advertising Rule prepared and approved under the former Trump Administration is now required to undergo review by the newly installed Biden Administration.

Financial advisers and broker-dealers should conduct thorough and frequent reviews of their clients’ holdings in certain Chinese companies now that a November Executive Order that prohibits new U.S. investments in companies with alleged ties to China’s military has taken effect.