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Article
Publication date: 6 November 2017

Russell Sacks, Jennifer Morton, Jenny Jordan, Steven Blau and Sean Kelly

In April 2017, FINRA issued a regulatory notice addressing the use of social media and digital communications by broker-dealers. The notice expanded on previous FINRA guidance on…

127

Abstract

Purpose

In April 2017, FINRA issued a regulatory notice addressing the use of social media and digital communications by broker-dealers. The notice expanded on previous FINRA guidance on these topics. This article provides clarity regarding how social media and digital communications fit within the requirements of various FINRA rules and provides guidance to firms and their registered representatives.

Design/methodology/approach

The principal topics addressed by FINRA’s regulatory notice are: (a) text messaging, (b) personal versus business communications, (c) third-party content and hyperlinks, (d) native advertising, (e) testimonials and endorsements and (f) links to BrokerCheck. This article presents an overview of each of these topics, respectively.

Findings

Under recordkeeping requirements, firms must ensure that they are able to retain communications made through text messaging and chat services. Business communications, which relate to the products or services of the firm, are subject to filing and content requirements, while personal communications are not. Under certain circumstances, third-party posts on social media sites established by the member and testimonials may be attributable to the firm. Native advertising, while permissible, must comply with content requirements. Firm-created electronic applications do not have to provide a link to BrokerCheck.

Originality/value

Firms and their registered representatives will gain a better understanding of what is permissible pursuant to FINRA and SEC rules as they communicate digitally and via social media.

Details

Journal of Investment Compliance, vol. 18 no. 4
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 3 May 2016

Russell D. Sacks, Steven R. Blau and Taro Nishide

To address practical issues broker-dealers may face in reviewing and revising their policies and procedures in response to FINRA’s new fixed-income research rule, modifications to…

123

Abstract

Purpose

To address practical issues broker-dealers may face in reviewing and revising their policies and procedures in response to FINRA’s new fixed-income research rule, modifications to its equity research rule, and its FAQs regarding conflicts of interest in the offering process.

Design/methodology/approach

Reviews FINRA’s new fixed-income research rule, modifications to its equity research rule, and its FAQs regarding the its equity research rule, and provides detailed comparisons between current rules and new rules to help firms consider how to review and revise their policies and procedures.

Findings

Although significant exemptions may apply depending on firm structure, under FINRA’s new fixed-income research rule, firms producing fixed-income research reports will now be subject to regulation similar to that FINRA has imposed on firms producing equity research reports, including with respect to information barriers, other policies and procedures, and certain disclosures. The modified FINRA equity research rule retains the core provisions of the existing NASD and NYSE equity research rules and adds a “principles-based procedures” approach to potential conflicts of interest, shortens or eliminates quiet periods, and imposes some of the Global Settlement prohibitions on all firms. Firms will need to review and revise their policies and procedures for research in response to these rule changes. Firms should also take note of FINRA’s guidance in its FAQs regarding conflicts of interest in the offering process.

Originality/value

Overview of recent FINRA enforcement activity, rule modifications, and practical guidance from experienced securities and financial services lawyers.

Details

Journal of Investment Compliance, vol. 17 no. 1
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 1 July 2021

Jennifer Morton, Russell Sacks, Jenny Ding Jordan, Steven Blau, P. Sean Kelly, Taylor Pugliese, Andrew Lewis and Caitlin Hutchinson Maddox

This article provides a resource for traders and other market participants by providing an overview of certain automatic circuit breaker mechanisms and discretionary powers that…

830

Abstract

Purpose

This article provides a resource for traders and other market participants by providing an overview of certain automatic circuit breaker mechanisms and discretionary powers that the U.S. Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) and the U.S. president, as applicable, can exercise to pause or stop the trading of individual securities or trading activities across exchanges during extreme market volatility, each of which can cause interruptions to trading activity.

Design/methodology/approach

This article surveys automatic and discretionary mechanisms to halt trading activity under extreme market conditions. In particular, the article examines automatic cross-market circuit breakers, limit up-limit down pauses, the alternative uptick rule, as well as discretionary authority to stop short selling of particular securities and to stop trading across exchanges.

Findings

The article concludes that market participants must be cognizant not only of automatic cross-market circuit breakers, but also several other forms of potential market disruptions that may occur due to increased market volatility during the COVID-19 pandemic and beyond.

Originality/value

By exploring various mechanisms that respond to market disruption, this article provides a valuable resource for traders and other market participants looking to identify and respond to potential interruptions to their trading activity.

Details

Journal of Investment Compliance, vol. 22 no. 3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 1 October 2005

Charles S. Gittleman and Russell D. Sacks

To describe and to discuss the implications of the US Department of the Treasury's PATRIOT Act regulations requiring “covered financial institutions” (including broker‐dealers…

339

Abstract

Purpose

To describe and to discuss the implications of the US Department of the Treasury's PATRIOT Act regulations requiring “covered financial institutions” (including broker‐dealers, banks, and mutual funds) to maintain risk‐based procedures to ensure that: correspondent accounts held on behalf of specified non‐US financial institutions; and private banking accounts, are subject to due diligence procedures to ensure that those accounts, and the financial institutions holding those accounts, are not being used for money laundering purposes.

Design/methodology/approach

Summarizes and analyzes the adopted rules.

Findings

Since the passage of the USA PATRIOT Act, regulation relating to anti‐money laundering has been among the highest profile – and highest priority – activity of securities and financial institution regulation. Consequently, anti‐money laundering rules and regulations have become a major aspect of compliance programs at financial institutions such as banks and broker‐dealers. The rules that are the subject of this article are noteworthy in part because they continue the trend of widening the universe of “financial institutions” that are now subject to substantial anti‐money laundering regulation. The rules described in this article add substantially to the complexity of anti‐money laundering regulation at financial institutions for a number of reasons, including: firstly, placing new, broad‐based requirements on financial institutions; secondly, requiring those financial institutions to make judgments regarding both the level of risk posed by certain accounts and the appropriate diligence that may be necessary for each such account; and thirdly, interpretive and implementation challenges.

Originality/value

A summary and analysis of new anti‐money laundering regulation, which comes at a time when US regulators are placing substantial emphasis on anti‐money laundering.

Details

Journal of Investment Compliance, vol. 6 no. 4
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 12 April 2011

Russell Sacks, Michael Blankenship and Steven Blau

The purpose of this paper is to describe the Financial Industry Regulatory Authority's new rule for IPO allocation and the requirements for compliance with the rule.

419

Abstract

Purpose

The purpose of this paper is to describe the Financial Industry Regulatory Authority's new rule for IPO allocation and the requirements for compliance with the rule.

Design/methodology/approach

The paper provides an overview of the new FINRA Rule 5131, containing, among other things, provisions that prohibit the “spinning” of IPO shares to certain present and prospective investment banking clients. Specifically, the paper outlines the new regulations on “quid pro quo” allocations, “spinning”, “flipping” and IPO pricing and trading practices. The paper also provides detailed guidance to broker‐dealers regarding their obligations under the rule.

Findings

The proposed new rule is intended to prevent the following types of conduct: the allocation of IPO shares as consideration or inducement for the payment of excessive compensation for other services provided by the member; the acceptance of market orders of IPO shares prior to the development of a secondary market; the allocation of IPO shares to an executive officer or director of a company on the condition that the officer or director send the company's investment banking business to the member, or as consideration for investment banking services previously rendered; and the imposition of a penalty on registered representatives whose retail customers have “flipped” IPO shares when similar penalties have not been imposed with respect to syndicate members.

Originality/value

The paper provides practical guidance from experienced regulatory lawyers regarding an important proposed change.

Details

Journal of Investment Compliance, vol. 12 no. 1
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 1 June 1989

Russell Abratt and Diane Sacks

Whether societal marketing is regarded as a legitimate andnecessary aspect of marketing in the tobacco and liquor industries isinvestigated. A review of previous research on…

6148

Abstract

Whether societal marketing is regarded as a legitimate and necessary aspect of marketing in the tobacco and liquor industries is investigated. A review of previous research on societal marketing has been undertaken. The views of both industries are discussed and some conclusions are made with regard to their role in practising societal marketing and, thus, their influence on consumer welfare.

Details

European Journal of Marketing, vol. 23 no. 6
Type: Research Article
ISSN: 0309-0566

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Article
Publication date: 27 February 2014

Charles S. Gittleman, Russell D. Sacks and Jennifer D. Morton

– The purpose of the paper is to describe the recent amendments to FINRA's IPO Allocation Rule that were approved by the US Securities and Exchange Commission.

98

Abstract

Purpose

The purpose of the paper is to describe the recent amendments to FINRA's IPO Allocation Rule that were approved by the US Securities and Exchange Commission.

Design/methodology/approach

The paper provides a description of the IPO Allocation Rule and its operation, followed by a description of the IPO Allocation Rule amendments recently amended.

Findings

On November 27, 2013, the Securities and Exchange Commission approved a change to FINRA's IPO allocation rule 5131 (the “amendment”). The amendment allows a fund of funds or other collective investment account that is investing in an IPO to rely on a written representation from an unaffiliated private fund investor that does not look through to its beneficial owners, provided that such unaffiliated private fund is managed by an investment adviser, has assets greater than $50 million, and meets certain other indicia of independence that are described.

Originality/value

The paper provides practical guidance from experienced regulatory lawyers regarding an amendment to an important rule governing IPO sales and allocation practices.

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Article
Publication date: 14 September 2010

Russell D. Sacks and Michael J. Blankenship

The purpose of this paper is to describe the Securities and Exchange Commission's recently proposed new rules to establish a large trading reporting system.

4776

Abstract

Purpose

The purpose of this paper is to describe the Securities and Exchange Commission's recently proposed new rules to establish a large trading reporting system.

Design/methodology/approach

The paper provides an overview of the new Rule 13h‐1, which, if adopted, would require large traders to identify themselves to the SEC and to be issued a “Large Trader Identification Number”. It outlines the proposed definition of a large trader and describes how a large trader would report itself to the SEC and the broker‐dealers it uses to effect trades using a new Form 13H. The paper also provides detailed guidance to broker‐dealers regarding their books and records obligations under the proposed rule.

Findings

The proposed new rule and form are intended to provide the SEC with data to facilitate its ability to assess the impact of the trading activity, to reconstruct trading activity following periods of unusual market volatility, and to analyze significant market events for regulatory purposes. Registered broker‐dealers would also be under an obligation to maintain records of transactions effected in accounts identified to it as large trader accounts; electronically report large trader transaction information to the SEC upon request; and monitor compliance with the new rule.

Originality/value

The paper provides practical guidance from experienced securities lawyers regarding an important proposed change.

Details

Journal of Investment Compliance, vol. 11 no. 3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 3 June 2014

Russell D. Sacks, Thomas Donegan and Charles S. Gittleman

To explain a No-Action letter recently issued by the USA Securities and Exchange Commission (SEC) permitting persons who qualify as “M&A Brokers” to facilitate the sale of private…

79

Abstract

Purpose

To explain a No-Action letter recently issued by the USA Securities and Exchange Commission (SEC) permitting persons who qualify as “M&A Brokers” to facilitate the sale of private companies without registering with the SEC as broker-dealers, subject to a number of restrictions.

Design/methodology/approach

Explains how persons engaged in merger and acquisition activity have historically been required to register with the SEC, summarizes the conditions to the relief for the newly defined M&A Broker, explains what an M&A Broker can and cannot do, lists 10 criteria an M&A Broker must meet to obtain relief from registration, recommends policies and procedures for companies planning on taking advantage of the exemption from registration, and explains comparable UK legislation that applies to financial advisers advising on investments or arranging deals for M&A transactions.

Findings

While many questions and considerations remain, including how this guidance will play out in respect of various state law regimes, the M&A Broker designation has the potential to relieve some of the burdens of registration for advisors specializing in private business combinations.

Originality/value

Practical guidance from experienced securities and financial services lawyers.

Details

Journal of Investment Compliance, vol. 15 no. 2
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 6 April 2012

Russell D. Sacks and Michael J. Blankenship

The purpose of this paper is to provide frequently asked questions and answers in connection with the large trader reporting system.

1755

Abstract

Purpose

The purpose of this paper is to provide frequently asked questions and answers in connection with the large trader reporting system.

Design/methodology/approach

The paper explains the large trader rule and filing requirements, including the application of the rule to non‐US entities; definitions, including Securities and Exchange Commission's (SEC's) definition of a “large trader”, a “NMS security”, and “person” for purposes of the rule; filing requirements; and the likely impact of broker‐dealers.

Findings

Certain broker‐dealers and entities that meet a trading threshold of aggregate transactions in NMS securities that equal or exceed two million shares or $20m during any calendar day, or 20 million shares or $200m during any calendar month, must file a Form 13H with the SEC.

Practical implications

The rule requires attention to an entity's trading levels, and requires making a filing with the SEC upon meeting certain activity levels.

Originality/value

The paper presents practical guidance from experienced financial services lawyers and compliance officers.

Details

Journal of Investment Compliance, vol. 13 no. 1
Type: Research Article
ISSN: 1528-5812

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