On December 19, 2018, the United States Attorney’s Office for the Southern District of New York (the “USAO”) announced criminal charges against and entered into a deferred prosecution agreement (the “DPA”) with Central States Capital Markets, LLC (“CSCM”), a Kansas-based broker-dealer, under the Bank Secrecy Act (the “BSA”).[1] The charge was for a felony violation of the BSA, which consisted of CSCM’s willful failure to file a suspicious activity report (“SAR”) regarding the illegal activities of one of its customers. According to the USAO, this represents the first ever criminal BSA charge brought against a United States broker-dealer. This case is another milestone in the recent trend towards stricter enforcement of the anti-money laundering (“AML”) regulatory requirements applicable to broker-dealers.
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2019
FINRA Provides Updated Cybersecurity Guidance to Broker-Dealer Firms
By Katherine Mooney Carroll, Alexis Collins, Rahul Mukhi, Adam Motiwala & Whitney A. Lee on
Posted in Cybersecurity, Enforcement
On December 20, 2018, the Financial Industry Regulatory Authority (“FINRA”) released a Report on Selected Cybersecurity Practices for broker-dealer firms. This report reflects FINRA’s current perspective on the cybersecurity threat landscape based on observations from its examinations of securities firms. Below we discuss the report’s key observations and contextualize these insights for members of the financial industry.
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Lessons from the SEC Office of Compliance Inspections and Examinations’ 2019 Priorities
By Robin M. Bergen, Alexis Collins & Zachary Baum on
On December 20, 2018, the U.S. Securities and Exchange Commission (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) released its 2019 Examination Priorities. The six themes for this year’s priorities are: retail investors (including seniors and those saving for retirement), compliance and risk in registrants responsible for critical market infrastructure (clearing agencies, transfer agents, national securities exchanges and Regulation SCI entities), oversight of the Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board, digital assets, cybersecurity and anti-money laundering. The only new theme for 2019 compared to 2018 is digital assets, which we take to imply a plan to more closely—and substantively—regulate investment advisers and broker-dealers involved with this asset class. The 2019 priorities also more explicitly than the 2018 priorities describe specific practices that OCIE found concerning in examinations of those entities, many of which involved failure to adequately safeguard client assets and the adequacy of disclosures of conflicts of interest. We expect to see a corresponding focus in Enforcement Division investigations and cases on these issues as a result.
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