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Topic: Trading Desk Issues

The CAT Takes a Step Forward and a Step Back

September 7, 2018
The SEC is finding that its progress in creating a comprehensive electronic blueprint of securities transactions, the Consolidated Audit Trail (CAT), is proving as difficult as getting real cats to do what you want. It issued a statement that demonstrates the forward-and-back nature of this project: the arrival of a detailed master plan, but the delay of three key deadlines by a year.

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SEC Keeps its Eye Out for Cherry-Picking as Another Adviser Settles

August 24, 2018
Itís always easier for enforcers to go after the low-hanging fruit, and in the case of the SEC, that fruit happens to be cherries. The agency on August 17 took another step in its ongoing crackdown against cherry-picking, reaching separate settlements with an advisory firm and an investment adviser representative who worked for it.

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Trade Pre-Clearance and Blackout Periods: Use Them Wisely

April 13, 2018
Trade pre-clearance and blackout periods are two reliable methods used by advisers seeking to avoid certain kinds of problems when trading securities or with personal trading. Thatís not to say, of course, that these methods donít carry their own problems if not done right.

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Restricted Lists: Update, Monitor and Avoid Common Errors

April 6, 2018
Many advisory firms maintain "restricted lists:" compiled names of companies and securities with which they do not allow trading. These lists protect an advisory firm from a number of dangers Ė but advisers with such lists need to ensure they are properly updated, monitored and that they avoid mistakes that may cause problems down the road.

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F-Squared Founder Ordered to Pay More than $13 Million

March 30, 2018
The F-Squared Investments saga seems to open or close a new chapter every few months since 2014, when the SEC first brought charges against the advisory firm for allegedly making false and misleading statements about its investment strategy algorithm. The latest development occurred March 22, when a federal judge ordered that F-Squared founder and former CEO Howard Present personally pay $13 million, including a $1.58 million civil money penalty, following his loss at trial this past October.

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Follow State Restrictions When Offering Investments to Public Pension Plans

December 8, 2017
Just because a state allows its public pension plans to place money in types of funds that it had previously not allowed does not mean that advisers should rush in with investments. As with any type of investment, the fine print needs to be read first.

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Clayton Rejects Request to Extend CAT Deadline

November 17, 2017
SEC chairman Jay Clayton on November 14 issued a nuanced statement?rejecting a request from the national securities exchanges and FINRA to delay the initial deadline of the Comprehensive Audit Trail Ė better known as the CAT Ė by a year, and other deadlines by a year or more. His decision leaves at least the short-term implementation of the much-discussed high-tech tool up in the air.

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SEC Provides Temporary Relief from MiFID II Research Requirements

October 27, 2017
Advisers and broker-dealers can relax Ė at least a bit. In a trio of no-action letters issued October 26, the SEC assured them that they will not take enforcement actions against them if they fail to meet certain European Union requirements regarding research dollars and more that take effect January 3.

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Jury Rules Against F-Squared Founder in Federal Court

October 13, 2017
The SEC came out the winner on October 6, when a federal jury ruled against advisory firm F-Squared Investments founder and former CEO Howard Present in a case the agency brought almost two years ago in federal district court.

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Settlement Shines New Light on Old Practice of Scalping

October 6, 2017
With ever-more sophisticated securities transactions seemingly becoming the norm, the SEC increasingly relies on its own high-tech abilities to identify fraud. Elaborate new ways of investing and transacting should not, however, distract compliance departments from monitoring their firms for some of the most basic kinds of fraud. The practice known as "scalping" is a case in point.

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12b-1 Fees: SEC Settles Share Class Charges with Two More Advisers

September 29, 2017
If you think the SEC only occasionally charges advisers for placing clients in expensive share classes when less expensive classes are available, recent events should change your mind. The agency reached settlements with two advisory firms involving share classes just last month, and those followed up on still other settlements and developments earlier this year and the year before.

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Trade Aggregation and Allocation: Key Practices to Keep Your Advisory Firm Safe

July 28, 2017
The trading desk is, in many ways, the heart of what your advisory firm does. Itís where client securities are bought and sold, where critical decisions on investments are made Ė and where missteps can lead not only to bad investment results, but attention from government regulators.

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Latest Cherry-Picking Case Includes Improper Fee, Investment Strategy Charges

June 23, 2017
Itís no secret that the SECís Division of Enforcement is targeting advisers that misallocate trade results to favor themselves, a practice known as cherry-picking. What is also turning up in some of these enforcement actions are additional charges, such as improper fees and deviations from investment limitations.

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Portfolio Manager Charged with Stealing Dollars in Matched-Trades Scheme

April 28, 2017
Chief compliance officers know that high among the advisory firm employees they need to monitor are portfolio managers. After all, they sit at the nexus of the trading action. The SEC, in an April 24 complaint filed against a Massachusetts-based portfolio manager, makes clear just how serious the dangers are.

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Another Wrap Fee Adviser Settles with SEC Over Tradeaway Disclosures

March 31, 2017
The SEC isnít letting up in its scrutiny of dually registered advisers/broker-dealers, particularly those offering wrap fee programs that result in clients paying unexpected fees for transactions that are "traded away" to other brokers. It settled two such cases a few months back Ė and on March 13 settled a new one.

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Liquidity Risk Management Rule Compliance: Don’t Wait for 2018, Prepare Now

October 28, 2016
December 1, 2018 may seem like a long time away, and June 1, 2019 even longer. But smart chief compliance officers at advisory firms managing mutual and exchange-traded funds will not let those dates lull them into putting off needed preparations to comply with the SECís final liquidity risk management rule, adopted earlier this month. The time to begin compliance preparations is not in 2018 or 2019, but now.

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SEC Charges Adviser for Steering Clients to More Expensive Share Classes

August 26, 2016
Less than three weeks after the SEC announced in a risk alert that it would be scrutinizing advisory firms that, without disclosure, place clients in mutual fund share classes that are more expensive than others, the agency charged an adviser with doing just that.

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Trading Desk Challenges: What Advisers Need to Know

April 15, 2016
Advisers need to pay particular attention to their trading desks. Thatís where securities are bought and sold, and, for that reason, itís where a lot of things can go wrong.

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Portfolio Rebalancing: Know When It’s Needed and Avoid Red Flags

March 25, 2016
One of a portfolio managerís responsibilities is making sure that portfolio investments match the allocation percentages listed in a clientís governing documents. When those percentages change, the portfolio managers may need to rebalance the allocations Ė and do so in a way that does not cause compliance problems.

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Prearranged Trades May Set Your Firm Up for SEC Enforcement

January 15, 2016
Watch out for red flags telling you that portfolio managers prearranged trading to favor one set of clients over another. Failure to act on those flags is likely to prearrange two other results: an SEC investigation followed by an enforcement action.

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