Although market participants are primarily focused on proposed rules put forward by the federal regulators, it would be prudent to be attentive to state activity concerning broker dealers, given the very large role that state regulators play in enforcing suitability standards. It is important that state laws and regulations are neither ambiguous nor overbroad. The  against Robin Hood is illustrative of the significant role that state regulators play in this area. Firms should be aware…

None of these cases, and none of the earlier cases referenced by the SEC, involve assets going missing. The cases concern investment advisers failing to comply with the audit requirements and related reporting requirements that would have afforded them an exception from the qualified custodian requirement.  

Regulated participants in the securities markets are generally very reluctant to sue the SEC, even from behind the relative anonymity of a trade association, for fear of angering their regulator. Obviously that fear was insufficient in the current instance and no doubt each participating trade association drew heart from the participation of the others.

Now that the first challenge to an SEC rule adoption has been filed, the ice has been broken and it is not difficult to imagine a…

Broker-dealers that send consolidated statements to their customers should review the disclosures on these statements to see whether they are reasonably consistent with FINRA's guidance.  Firms should also be mindful that sending a consolidated statement does not satisfy the requirement to send a broker-dealer standalone statement.