March 2, 2021
Small World (Opening Remarks for the FinTech Panel at the Institute of International Bankers 2021 Annual Washington Conference by SEC Commissioner Hester M. Peirce)
In an Order Determining Whistleblower Claims https://www.sec.gov/rules/other/2021/34-91225.pdf, the SEC awarded two Claimants an aggregate Award of over $500,000 to be equally split. The Order notes, in part, in Footnote 1 that:
For the purposes of making an award, we determined to treat the judicial and administrative actions in this matter
as a single Covered Action because they arose out the same nucleus of operative facts. See Securities Exchange Act
of 1934 Rule 21F-4(d)(1), 17 C.F.R. § 240.21F-4(d)(1).
An interesting aspect of this Order is noted in Footnote 3:
action constitutes a "related action" to the Covered Action within the meaning of Section 21F(a)(5)
of the Exchange Act, 15 U.S.C. § 78u-6(a)(5), and Rule 21F-3(b) promulgated thereunder, 17 C.F.R. § 240.21F3(b), as a Redacted action that was brought by Redacted and is based on the same
original information that the whistleblower voluntarily provided to the Commission, and that led the Commission to
obtain monetary sanctions totaling more than $1,000,000.
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Louis Capital Markets, LP submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Louis Capital Markets, LP. has been a FINRA member firm since January 2000 and employs about 16 registered representatives at three branches. The AWC alleges that Louis Capital Markets, LP "has no relevant prior disciplinary history." Under the "Overview" portion of the AWC, it is alleged that:
During the period May 20, 2013 through April 10, 2017 (the 2017 exam review period),
at various times, the firm failed to register certain principals and did not amend Schedule
A of its Form BD to accurately identify certain principals, in violation of NASD Rules 1022(a) and (b), FINRA Bylaws Article IV Section l(c), and FINRA Rule 2010.
Additionally, during the period August 4, 2017 through February 5, 2018 (the 2018 exam
review period), the firm failed to establish, document, and maintain risk management
controls and supervisory procedures that were reasonably designed to manage the
financial, regulatory, and other risks of its business activity, in violation of Securities
Exchange Act of 1934 (the Exchange Act) Rule 15c3-5 and FINRA Rules 3110 and
2010, as detailed below.
In accordance with the terms of the AWC, FINRA imposed upon Louis Capital Markets, LP a Censure, a $10,000 fine for registration violations, a $30,000 fine for Exchange Act Rule 15c3-5 violations, and an undertaking to revise the firm's risk management controls and supervisory
procedures with respect to areas of cited deficiencies.
SEC Commissioner Peirce muses about the growing influence of FinTech, and, in part, notes that:
[T]he legacy financial system runs the risk of being sealed in a world of its own, untouched by technological innovation and new approaches to serving clients. The stakes are higher, of course, than they are for the shrimp, who candidly look quite content in their tiny globe. The risk that financial institutions will cut themselves off from the most innovative parts of the economy arises for a number of reasons that I will touch on briefly today. There is still time, however, to change course and build a financial system that is open to new ideas, new entrants, and new technologies.
BrokeAndBroker.com Blog publisher, Bill Singer, is no fan of Wall Street's version of self regulation, as spearheaded by the Financial Industry Regulatory Authority ("FINRA"). At best, FINRA comes off as a glorified trade group on steroids; at worst, as a lap dog for its larger member firms. Pointedly, the industry's small fry -- the mom-and-pop brokerages and their hundreds of thousands of associated persons -- never quite seem to get the mercy, the benefit of the doubt, or the concessions that seem afforded to the industry's big fish. In today's featured FINRA regulatory settlement, it could be that FINRA has pulled its punches because of Covid. It could be that what's a "relevant" prior disciplinary history is open to broad interpretation. Maybe FINRA got it right and Bill is being overly sensitive. So . . . why don't you take a smell and see if you would eat this sushi?
FINRA placed Kimberly Springsteen-Abbott squarely in its regulatory crosshairs. After a hearing, FINRA's OHO imposed a Bar, a $208,953.75 disgorgement, and a $100,000 fine. On appeal, FINRA's NAC affirmed. The SEC tossed the case back into FINRA's lap with an order to say what you mean and mean what you say. On remand, the NAC whittled away at the sanctions; and, thereafter, the SEC did more whittling. By the time the federal circuit court received the appeal, the once mighty oak of a case was more like a toothpick.