On February 10, 2022, the U.S. Securities and Exchange Commission (SEC) issued a settlement order with a firm providing digital investment advice that claimed to operate in compliance with Islamic Shari’ah law (the Robo-Adviser). The SEC’s titling of its own press release, “SEC Charges Robo-Adviser with Misleading Clients,” highlights the SEC’s continued focus on both robo-advisers since the Division of Examination’s November 2021 Risk Alert and the accuracy of fund and adviser communications around investment services based on norms, such as Sharia’ah law, and other environmental, social, and governance (ESG) factors since the Division’s April 2021 Risk Alert.

Humankind Investments LLC was awarded the “Newcomer ESG/Impact ETF of the Year” by Fund Intelligence at the 2021 Mutual Fund Industry and ETF Awards Ceremony. Humankind’s innovative ETF is the first registered investment company to be structured as a Maryland benefit corporation. As interest in ESG investing continues to grow, it is possible to

The U.S. Securities and Exchange Commission granted effectiveness to the registration statement of a client of Perkins Coie, which is the first known registered investment company structured as a Maryland Benefit Corporation. As interest in socially responsible investing continues to grow, it is possible to utilize a governance model that commits an entity through state law organizational documents to pursue broader public benefits, beyond just the pecuniary interests of shareholders.

The Financial Industry Regulatory Authority (“FINRA”) issued two regulatory notices in August 2020 with warnings of imposter websites (Regulatory Notice 20-30 and Regulatory Notice 20-27). In Regulatory Notice 20-30, FINRA warned that it has received notifications from several member firms that malicious actors are using registered representatives’ names and other information to create imposter websites that appear to be the representatives’ personal sites. FINRA also reported that the malicious actors were calling and directing potential customers to use the imposter websites and, in turn, may be responding through imposter-based email addresses that could contain malware or imbedded phishing links. Regulatory Notice 20-30, raises concerns that imposters may be using these sites to collect personal information from the potential customers to commit financial fraud.

In an October 2019 update, we highlighted that the SEC’s attention to Rule 12b-1 fees for over 40 years, along with more recent initiatives, enforcement activities, and FAQs suggested that the Commission would likely continue to closely scrutinize investment advisers’ share class selection and related compensation practices at least for the foreseeable future.

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With the influx of virtual business meetings resulting from the pandemic, FINRA recently issued an FAQ on how non-in-person events should be treated pursuant to entertainment, gifts, and noncash compensation rules. Specifically, FINRA addressed whether it is allowable for an associated person to host virtual business entertainment events or video conferencing with the employees of an institutional customer or third-party broker-dealer and provide food and beverage to be consumed during the event. The guidance is limited to interactions with representatives of institutional customers.

FINRA and the CFTC each issued recent advisories on commodity-linked exchange traded products. Directed at retail investors and broker-dealers, the advisories each highlighted certain issues unique to commodity-linked exchange traded products that were recently demonstrated by market reactions to fluctuating oil prices caused by the COVID-19 pandemic. The advisories provided guidance on relevant considerations in

The Investor Protection Bureau of the New York Attorney General’s Office (“IPB”) recently proposed a series of changes to its rules regulating broker-dealers. The proposal would require “finders” in New York to register as broker-dealers and pass broker-dealer examinations. In doing so, IPB would codify its regulation of finders in a manner similar to several other states.

On May 6, 2020, the U.S. Securities and Exchange Commission (“SEC”) issued an order that required equity exchanges and FINRA to submit a new National Market System (“NMS”) plan with a modernized governance structure for the production of public consolidated equity market data and the dissemination of trade and quote data. As explained in its order, the SEC hopes that a consolidation of equity market data systems will help to eliminate duplicative systems and reduce lags in data dissemination as well as data inaccuracies.

On May 4, 2020, the U.S. Securities and Exchange Commission (“SEC”) approved MEMX LLC (“MEMX”), standing for “Members Exchange,” as a new national securities exchange under Section 6 of the Securities Exchange Act of 1934. According to the MEMX website, the investors in MEMX include global financial institutions, comprised of online retail broker-dealers, global banks and financial services firms, and global market makers. MEMX will operate a fully automated electronic order book, and will not operate a physical trading floor. Similar to other national securities exchanges, only broker-dealer members of MEMX and entities that enter into market access arrangements with members will have access to the MEMX system. As a national securities exchange, MEMX will be a self-regulatory organization and will be responsible for oversight of its members.