marketing supervision and compliance in today’s regulatory environment

Marketing Supervision and Compliance in

Today’s Regulatory

Environment

Marketing Supervision and Compliance in Today’s Regulatory Environment

•Introductions

•Questions for Panelists

•Audience Q & A

Trevor L. GordonCEO, Sandlapper Securities, LLC

Eric C. PerkinsPerkins Law, PLLC

Joseph E. PriceSenior VP, Corporate Financing/AdvertisingRegulation, FINRA

Ryan O. SmithPresident, DFPG Investments, Inc.

Question #1

Can you summarize FINRA’s recent regulatory and enforcement efforts in the areas of advertising and social media?

Recent Cases and Disciplinary Proceedings

U.S. Courts Bland v. Roberts, No. 12-1671 (4th Cir.) (September 18, 2013): The Fourth Circuit Court of Appeals found that employee’s clicking of Facebook’s “like” button qualified as speech covered by the First Amendment. Plaintiff had been fired from his job as deputy sheriff after “liking” the Facebook campaign page of his boss’s political opponent.

SEC v. Inter Reef, Ltd., et al., No. 13-cv-1104 (N.D.Ga) (April 8, 2013): The SEC filed an enforcement action against Inter Reef, Ltd. and several other defendants for using a website, promoters and social media to operate a fraudulent securities offering.


FINRA Charles Matisi, Letter of Acceptance Waiver and Consent (“AWC”) No. 2012033158601 (September 11, 2013): Respondent settled charges that he violated FINRA Rules 2210 and 2010 for publicly posting a communication on Facebook regarding a drug company that was exaggerated, not fair and balanced, and omitted the material fact that he owned 10,000 shares of the company.

Ralph William Hicks Jr., AWC No. 2010023789701 (March 28, 2013): Respondent settled charges that he disseminated advertising and sales literature to the public via various media including YouTube videos concerning bonus incentives that omitted material information or failed to provide a sound basis for evaluating the facts in contravention of FINRA Rule 2210.


Jenny Ta, AWC No. 20100215387 (March 23, 2010): Respondent settled charges that she did not disclose to her firm that she had a twitter account that she used to tout Advanced Micro Devices stock. Her tweets were unbalanced and did not disclose the she and family members held a substantial AMD position.

Christopher Carra, AWC No. 2214509 (June 29, 2012): Respondent settled charges that he attempted to inflate the stock price of BioDrain in an effort to obtain additional investment banking business for his firm. He used six different “author” names to post to a Yahoo! message board in order to create the appearance that several individuals were commenting on the stock and its prospects.


Christian Genitrini AWC No. 20100228597 (March 15, 2011): Respondent settled charges that he posted an advertisement to Craigslist that said “20% GUARANTEED RETURN TO INVESTORS. We are looking for investors that are interested in an ANNUAL GUARANTEED RETURN OF 20% on the invested capital.” The ad linked to a website wholly owned by the respondent. The web site promoted private placements of promissory notes with “guaranteed” annual returns of 16% to 20%.


Anthony Shakoor AWC No. 2007009442 (August 20, 2009): respondent settled charges that posted about 100 messages to the Google Finance web site discussing securities in which he held positions and traded these securities during the time he was posting messages. He did not have firm approval for these postings. He also failed to disclose material information about the securities, included false and/or misleading information, posted prediction and projections of future price performance for the securities, and failed to include a reasonable basis for the securities he recommended.


Lester Levy, Compliant No. 2009018050201 (June 15, 2011): Respondent, a research analyst, consented, without admitting or denying the allegations in a complaint finding that in contravention of firm policies, he regularly posted responses under a variety of aliases (including “M&A Guy”) to articles on two internet financial blogs: “Dealbook” (NYT) and “Deal Journal” (WSJ).

Question #2

What are b/d firms currently doing to educate their reps and monitor compliance when it comes to FINRA rules governing advertising and social media?

Question #3

How does your b/d firm and its representatives utilize social media networking tools and monitor compliance with applicable FINRA rules?

Question #4

From a regulatory and enforcement perspective, what sort of impact do you see the new Rule 506(c) of Regulation D having on the alternative investment industry?

Question #5

From a b/d perspective, how do you foresee the new Rule 506(c) affecting the way b/ds do business?

Question #6

Do you think the new Rule 506(c) will be embraced by sponsors and, if so, how might it affect the way in which sponsors deal with broker-dealers?

Question #7

When conducting an audit or due diligence review of marketing/advertising material, what are the 2-3 most important things you focus on?

Questions from the Audience

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marketing supervision and compliance in today’s regulatory environment

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