Regulators at SIFMA Regional Conference Highlight Regulatory, Litigation and Arbitration Risks

In a recent regional SIFMA conference, the Investments and Exchange Commission (SEC), the loan industry Regulating Authority (FINRA) and condition government bodies talked about the potential risks natural within the ongoing low-yield atmosphere. The government bodies expressed concern over individuals’ trading in items typically only at institutional traders and also over yield chasing after, each of which lead to elevated risk and lead for an atmosphere of ever-growing regulating scrutiny. Government bodies recognized numerous issues as causing elevated buying and selling, regulating and lawsuit exposure, and regulator attention, including:

  • Inadequate monitoring of customer accounts to detect abuses
  • Anti-money laundering efforts
  • Discipline trading
  • Best-execution violations
  • Breakpoint issues
  • Market access
  • Transparency
  • Lack of proper algorithms that are adequately designed, tested, implemented and utilized
  • High-frequency trading
  • Rogue brokers being “sheltered” by broker-dealers
  • Inadequate supervision of branch offices
  • Cybersecurity
  • Consolidated customer account statements
  • Suitability of variable annuities
  • L shares
  • Breakpoint issues
  • Conflicts of issues

In the conference, FINRA also talked about statistics surrounding arbitration. Based on FINRA, the amount of customer cases and customer’s winning rates along with the quantity of damages clients are recuperating are lower. FINRA also noted that the elevated quantity of claimants are trying to find to influence arbitration sections to overlook the law and also to decide cases exclusively on equitability and justness grounds. Considering this disturbing trend, participants should be ready to

  • develop and present equitability and fairness facts and arguments favorable to them;
  • remind the panel at the hearing that refusing to consider applicable law and deciding the case solely on equitable and fairness grounds constitute a massive disregard of the law, one of the few bases for appeal from an unfavorable award; and
  • offer expert testimony on the law and the complex set of rules and regulations under which the securities industry must act.