Morgan Lewis

U.S. SEC, FINRA and NYSE Regulation: Mid-Year Review – Selected Broker-Dealer Enforcement Cases and Developments

Morgan Lewis Title

  • published on:

    August 2008

  • by:

    Morgan Lewis

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This outline highlights selected U.S. Securities and Exchange Commission ("SEC" or the "Commission"), Financial Industry Regulatory Authority ("FINRA"), and NYSE Regulation enforcement actions and developments regarding broker-dealers from January through June 2008.

Picking up where it left off last year, in the first six months of 2008 the SEC brought or litigated actions relating to insider trading, on-line account intrusion, Regulation S-P, stock loan, conflicts of interest, and best execution. The Commission also spent time, effort and resources litigating several market timing and late trading cases. Recently, the SEC launched examinations and investigations concerning new topics, such as the malicious creation and spread of rumors intended to manipulate securities prices and showed a renewed interest in auction rate securities following the issues that arose recently in that market. A discussion of SEC enforcement statistics, priorities, actions, and new initiatives, policies, and procedures in the first half of 2008 can be found on pages 3 - 30 of this outline.

This year is the first full year since the merger of NASD Regulation and NYSE Regulation and the resulting creation of FINRA in late July 2007. As we reported in the 2007 Year in Review outline, the number of cases brought by FINRA and the amount of fines in those cases were down from levels that NASD Regulation and NYSE Regulation combined brought in prior years. During the first half of 2008, FINRA brought enforcement actions on various traditional topics, including variable annuities, mutual fund sales practices, disclosures, markups, municipal securities, and form filings. In addition, a sweep action relating to trade volume reporting and a multi-firm OATS case were announced this year. FINRA has also devoted substantial time and energy to creating a single rulebook, examination program, and enforcement arm. Those steps are now well under way or have been completed. A discussion of FINRA's enforcement statistics, priorities, actions, and new developments between January and June 2008 can be found on pages 31 - 51 of this outline.

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