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Broker-Dealer Compliance Part I: Status and Exemptions from Registration

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Produced on June 17, 2019

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Course Information

Time 62 minutes
Difficulty Beginner

Course Description

This program is the first of four segments led by K. Susan Grafton, leader of Dechert LLP’s Broker-Dealer, Securities and Trading Markets product line, exploring key regulatory issues applicable to broker-dealers.

Part I of the series will focus on the legal analysis of whether an entity or person is a “broker” or “dealer”, and the implications of being a broker-dealer, including registration with the Securities and Exchange Commission. This segment will also cover the conditions of various exemptions from registration as a broker-dealer.


Learning Objectives:

  1. Determine “broker” and “dealer” status
  2. Examine the conditions of exemptions from registration with the SEC
  3. Understand the implications of being a broker or dealer

Credit Information

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Faculty

K. Susan Grafton

Dechert LLP

K. Susan Grafton counsels a wide variety of broker-dealers, including U.S. and multinational broker-dealers, full service firms, institutional and retail broker-dealers, equity and fixed income alternative trading systems, investment banking boutiques, and private placement agents as well as securities exchanges. She is ranked nationally by Chambers USA in the Broker-Dealer (Compliance) and Broker-Dealer (Enforcement) categories. Clients note her “problem-solving orientation. I find her to be very practical and she can work with us on getting to a positive resolution. She always has her client's goals in mind.” (Chambers USA 2017). Market observers call her “an excellent regulatory attorney” and note that “Susan’s work has always been very impressive.” (Chambers USA 2018). They also note that she is “very well connected in the industry, and is able to get the SEC and FINRA to be more responsive” (Chambers USA 2016). Clients also describe her as “a go-to attorney…especially in Regulation M issues and distribution type questions, [where] she's very knowledgeable” (Chambers USA 2015).

Ms. Grafton’s practice includes representing broker-dealers in all aspects of regulatory compliance, beginning with assisting them in registering with the SEC – as alternative trading systems as well as broker-dealers – and obtaining membership in the Financial Industry Regulatory Authority (FINRA) and other self-regulatory organizations (SROs). As part of this process, she drafts all needed documents, such as written supervisory procedures, customer account documents, soft dollars and commission sharing agreements, and electronic access agreements. She also advises clients on new business initiatives and assists them in obtaining required SRO and state approvals. Similarly, she handles the regulatory approvals in connection with changes of control of broker-dealers. Ms. Grafton also advises clients on broker-dealer status questions for themselves and their employees, including compliance with the Rule 15a-6 safe harbor for foreign broker-dealers and drafts agreements and procedures related to the same.

Ms. Grafton’s practice is wide ranging and includes advising clients on regulatory issues related to nearly every aspect of a broker-dealer’s business, financial, operations and supervisory responsibilities. For example, she advises clients on compliance issues relating to Regulations ATS, NMS, SCI and SHO; sponsored access and other electronic trading issues; large trader and position reporting; suitability and standard of care issues; Regulation M and FINRA’s corporate finance rules; information barriers and insider trading; soft dollars and commission sharing arrangements; research, social media and other written communications; political contributions, outsourcing and expense sharing arrangements; the net capital and customer protection rules; cyber security and data protection issues; books-and-records requirements; and OATS and trade reporting. She is frequently consulted on strategic issues, including the implications of acquiring other financial institutions and developing compliant management and supervisory structures. Ms. Grafton has drafted firmwide and business-specific policies and procedures.

She also represents retail investment advisers, hedge fund and other private fund managers, research providers and trade associations representing the financial services industry. She has been involved in several key policy issues arising from the Dodd-Frank Act, including the uniform standard of care for broker-dealers and investment advisers, municipal advisor registration, private fund adviser registration, and compliance officer responsibilities under new CFTC rules.

Ms. Grafton frequently represents broker-dealers and investment advisers before the SEC and FINRA in connection with regulatory examinations and enforcement investigations pertaining to a wide range of issues, including most recently registration requirements; Rule 15a-6 “chaperoning” arrangements; outside business activities; best execution; markups and markdown, Regulations ATS, M, NMS and SHO; the net capital and customer protection rules; margin requirements; wrap accounts; disclosures; prospectus delivery; supervision; and marketing materials and advertising. She also regularly conducts in-house training on a variety of topics, including preparation for regulatory examinations.

Ms. Grafton has a unique combination of regulatory, in-house and law firm experience. She began her career with the SEC’s Division of Trading and Markets (formerly Market Regulation) where she was responsible for interpretations and no-action relief with respect to the net capital and customer protection rules and broker-dealer books and records requirements. She also led several significant rulemaking initiatives, including the proposal and adoption of Regulation M and amendments to Rules 10b-18, and provided regulatory exemptions and interpretations that facilitated numerous multinational securities offerings, merger transactions, and exchange offers. Subsequently, Ms. Grafton served as a vice president and associate general counsel of Goldman Sachs where she advised on a variety of strategic, regulatory compliance and operational issues related to the firm’s institutional equities sales and trading businesses. Most recently, Ms. Grafton was a partner in the broker-dealer and securities enforcement practices of a large international law firm’s Washington, D.C., and New York offices.




Robert J. Rhatigan focuses his practice on financial services regulation, including financial institutions and broker-dealer regulation, registered funds and private funds.

Mr. Rhatigan advises registered funds and their boards and investment advisers on a variety of operational, compliance and disclosure matters. He also is actively engaged in the firm’s banking and financial institutions practice before the Federal Reserve Board, FDIC, NCUA, NY Department of Financial Services and the SEC. He works with large non-bank financial holding companies as well as banks, broker-dealers and asset managers on matters arising under the Dodd-Frank and Bank Holding Company Acts. He has significant experience guiding clients through conformance with the Volcker Rule and systemic risk regulation. He also has experience with a variety of transactional, regulatory and enforcement issues related to national and state chartered banks and credit unions, as well as government sponsored entities.

Mr. Rhatigan also advises financial institutions and asset managers on all areas related to compliance with the Bank Secrecy Act and related FinCEN anti-money laundering regulations.



Reviews

SG
Stacy G.

Great program.

AD
Andrew D.

Great course and enjoyed the presenters and they way they conveyed the material.

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