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Fundamentals of Broker-Dealer Regulation 2013


Speaker(s): Allison Reid, Chris Salter, Clifford E. Kirsch, Debra A. Roth, Doria G. Bachenheimer, G. Philip Rutledge, Joanne C. Rutkowski, John R. Hewitt, Mark J. Happe, Robert L.D. Colby, Stephen Luparello, Susan S. Krawczyk
Recorded on: Jun. 24, 2013
PLI Program #: 41451

Allison Reid is a regulatory principal with FINRA’s Membership Application Program. Her responsibilities include conducting legal reviews of transactions, including stock purchases and asset sales. She also provides strategic guidance on complex new and continuing membership matters and is responsible for developing and delivering regulatory training. Ms. Reid has worked as an associate director in FINRA’s Membership Application Program and with FINRA’s Next Generation Regulatory Initiatives Group, where she worked with internal and external constituents in the development of the regulatory intelligence framework, methodology and business processes around the new membership application program. Previously, Ms. Reid was director for international education and training with NASD’s International Division. Ms. Reid joined NASD in 1997, and has served in a number of capacities, including an associate director for the New York District Office, where her responsibilities included managing that District Office’s Membership Application Program, as well as managing other regulatory functions including examinations of member firms and the inspection of their compliance with various rules and regulations. Ms. Reid was also the national membership manager in the Office of Regulation Policy in the Department of Member Regulation, in Washington, DC. Additionally, Ms. Reid was selected as a national expert for NASD’s Regulatory Expertise Group for the Membership Application Program, and acts as a resource to staff and external constituents on membership issues. Ms. Reid earned her MBA in Finance from Fordham University’s Graduate School of Business, and her law degree from Fordham Law School in New York; she is a member of the New York bar.


Cliff Kirsch began his career at the U.S. Securities and Exchange Commission (SEC), became chief legal officer for one of the country’s largest dually- registered broker-dealer/advisers and then joined Sutherland (now Eversheds Sutherland) in 2006. He relies on his regulatory and in- house background and an up-to-date knowledge of regulatory developments to provide practical and innovative counsel to broker-dealers and investment advisers in the areas of securities regulation and compliance.

With more than 25 years of experience, Cliff regularly counsels clients on the design and distribution of investment products including wrap-fee programs and other advisory products, mutual funds, bank collective investment funds and insurance products. He also focuses on issues related to the design and implementation of compliance programs at financial services firms.

While at the SEC, Cliff received the Manuel F. Cohen Award, which recognizes younger lawyers who have displayed outstanding legal ability, integrity and judgment and he served as assistant director of the SEC's Division of Investment Management.

Cliff is a frequent speaker at industry conferences, and is the author and editor of two of the leading treatises in the broker-dealer and adviser arena: Broker-Dealer Regulation and Investment Adviser Regulation (published by the Practising Law Institute).

Cliff is also co-founder of the Julia Anne Kirsch Foundation, which seeks to serve the needs of disabled individuals and their families.

Experience

Eversheds Sutherland counsels a coalition of major life insurance companies on evolving state and federal regulations and other legal developments.

Eversheds Sutherland represents a coalition of major life insurance companies, which collectively account for more than 80% of the annuity business in the United States, in their efforts to affect the direction and details of various SEC, FINRA, CFTC, NAIC and state rule proposals and initiatives.

Eversheds Sutherland serves as outside counsel on broker-dealer and adviser regulatory issues for one of the largest independent broker-dealer networks in the country.  Eversheds Sutherland serves as regular primary outside counsel on broker-dealer and adviser regulatory issues for one of the largest independent broker-dealer networks in the country.

Eversheds Sutherland represents coalition of collective trust fund sponsors, advisers and other service providers.

Eversheds Sutherland serves as counsel to the Coalition of Collective Trust Funds. Among other things, Sutherland monitors and reports on legal and regulatory matters affecting collective trust funds.

Professional Activities

Member, New York City Bar Association

Faculty, FINRA Compliance Institute at The Wharton School of the University of Pennsylvania

Former Chair, FINRA Variable Products Committee

Former Board Member, National Society of Compliance Professionals


Robert L.D. Colby is the Chief Legal Officer of FINRA, which he joined in June 2012. In this capacity, he oversees FINRA’s corporate and regulatory General Counsel functions, as well as FINRA’s Advertising and Corporate Financing Departments, the Office of Hearing Officers and Dispute Resolution.

Previously, Mr. Colby was a partner in the Washington, DC, office of Davis Polk & Wardwell LLP, where he advised on regulatory and compliance matters involving securities and derivatives for financial institutions, markets and clearing organizations.

Before joining Davis Polk in 2009, Mr. Colby served for 17 years as Deputy Director of the Securities and Exchange Commission’s Division of Trading and Markets. In that role, he was responsible for the regulation of broker-dealers, securities markets and clearing organizations. Previously, for 11 years he was Chief Counsel of the Division and Chief of the Division’s Branch of Market Structure.


Stephen Luparello is a partner in WilmerHale's Securities Department and a member of the Broker-Dealer Compliance and Regulation, and Litigation and Enforcement Practice Groups. He joined WilmerHale in 2012.  Previously, Mr. Luparello served as Vice Chairman with the Financial Industry Regulatory Authority (FINRA). Prior to joining FINRA, he served Chief of Staff to Chairman Mary Schapiro at the Commodity Futures Trading Commission and spent nine years at the Securities and Exchange Commission, where he advised on regulatory and enforcement matters.

Mr. Luparello is a graduate of LeMoyne College and Washington and Lee University School of Law.


Mr Rutledge is a partner of Bybel Rutledge LLP, Harrisburg, PA where his practice focuses on corporate and securities law, regulation of financial intermediaries and regulatory representation.  He is a nationally recognized expert in securities regulation and was instrumental in shaping various provisions of the Securities Markets Improvement Act of 1996, the Gramm-Leach-Bliley Financial Modernization Act of 1999 and the Sarbanes-Oxley Act of 2002. He has served as an expert witness for the Pennsylvania Office of Attorney General and has prepared expert opinions and testified as a securities expert before the U.S. Senate Permanent Subcommittee on Investigations, in FINRA arbitrations and in civil litigation.

Mr. Rutledge has taught securities regulation at Widener University School of Law, The Dickinson School of Law of the Pennsylvania State University and the FINRA Compliance Certificate Program at The Wharton School, University of Pennsylvania.  He currently holds an appointment as a Tutor, Centre for Financial and Management Studies, University of London. In 2015, he was appointed Visiting Professor in Securities Law and Regulation in the LLM Program at BPP University, London.  He routinely is a guest lecturer at the Cambridge International Symposium on Economic Crime held at Jesus College, University of Cambridge, England.

He writes extensively in his area, most recently contributing chapters on State Regulation of Broker Dealers and State Regulation of Investment Advisers for the Practising Law Institute’s  multi-volume Treatise on Broker-Dealer Regulation and Investment Adviser Regulation, respectively.  He also is the author of books on Electronic Markets and Civil and Administrative Liability under Pennsylvania Securities Law and has written chapters for The Sarbanes-Oxley Handbook, The Fiduciary, the Insider and the Conflict, and International Tracing of Assets.  His legal articles have appeared in the Banque de France Financial Stability Review, ABA Business Lawyer, Journal of European Financial Services Law, The Dickinson Journal of International Law, Journal of Financial Crime and The Company Lawyer.

Mr. Rutledge is a member of the Securities Regulation Advisory Committee for the American Law Institute and the Securities Advisory Committee of the Pennsylvania Department of Banking and Securities.  He also served on the Board of Editors of the ABA Business Lawyer.   For the past five years, he has been named in The Best Lawyers in America and, in 2015, was named “Lawyer of the Year” in Central Pennsylvania for his expertise in securities and securities regulatory matters.


Ms. Bachenheimer is currently the Managing Director, General Counsel for Regulatory Law with TIAA-CREF, a national financial services group of companies and the leading provider of retirement saving products and services in the academic, medical, cultural and research fields.  Ms. Bachenheimer oversees many of the Company’s regulatory relationships and provides advice regarding significant regulatory issues, including investigations, examinations and Dodd Frank rule making.

Prior to joining TIAA-CREF in 2008, Ms. Bachenheimer was an Assistant Regional Director in the Enforcement Division at the US Securities and Exchange Commission (“SEC”) where she oversaw enforcement matters related to a variety of issues including insider trading, market timing and research analyst conflicts of interest.  Ms. Bachenheimer also previously served as a Senior Attorney at the US Department of Justice in the Office of the US Trustee and began her career as a litigation associate in private practice in New York.

Ms. Bachenheimer received her J.D. from Boston University School of Law and was a Paul J. Liacos Scholar. She received her B.A. from Brandeis University and graduated Magna Cum Laude.


Chris Salter's practice focuses primarily on advising financial institution clients, and specifically broker-dealers, investment advisers, private equity funds, and hedge funds on compliance with the federal securities laws and regulations and on compliance with the rules of the self-regulatory organizations (SROs), including the Financial Industry Regulatory Authority.

Previously, Chris worked at the U.S. Securities and Exchange Commission (SEC) as an Attorney in the Division of Market Regulation. Chris also is a Certified Public Accountant who worked as an Audit Manager for the U.S. Government Accountability Office and as a Staff Accountant for KPMG Peat Marwick, where he obtained extensive accounting and financial regulatory experience.

While at the SEC, Chris responded to requests from broker-dealers and self-regulatory organizations for interpretation, guidance, and no-action relief with regard to the SEC's broker-dealer financial responsibility rules, including the net capital rule, the customer protection rule, the books and records rules and the financial reporting rules. In addition, Chris worked extensively on various SEC rulemaking efforts, including the adoption of a limited regulatory structure for dealers active in the over-the-counter derivatives market.

Chris has extensive experience advising clients with respect to broker-dealer and investment adviser regulation. He routinely helps broker-dealers and investment advisers in registering with the SEC, the states and becoming members of SROs. Chris routinely advises clients on their supervisory procedures and compliance policies, and assists clients with the development of their policies and procedures. Chris has extensive experience with compliance reviews and audits as well as internal investigations. Chris also represents clients in enforcement actions before the SEC, SROs, the U.S. Attorney's Offices, and the State Attorney General's Offices.

Experience highlights include advising:
  

  • A bidder on the sale by auction of Hartford Financial Services' broker-dealer subsidiary, Woodbury Financial Services, ultimately acquired by SunAmerica Financial Group, a subsidiary of AIG.
  •   A leading global alternative investment manager on ongoing regulatory issues related to compliance with the Advisers Act, including custody issues, marketing fund interests, conducting annual compliance reviews, conflicts of interest, and reviewing private placement memoranda and other offering documents to ensure appropriate disclosure information is included. We also advised on preparing the Form PF, which includes detailed information on private funds advised by the investment adviser. Among other things, Form PF requires disclosure of the types and amounts of investments made by the funds, the funds' assets and borrowings, the funds' ownership structure, and performance information.
  •   A major international financial services company on conducting an internal investigation of its U.S.-based brokerage firms' compliance with record retention requirements, and reviewing its supervisory structure and internal controls governing compliance with those requirements. The SEC and FINRA require registered broker-dealers to make and retain certain records relating to their securities business. Following identification of multiple record retention problems, we were asked to assist our client in investigating its record retention problems and in developing and implementing new internal controls and supervisory procedures. The client self-reported the problems and we are now representing the client with respect to a FINRA investigation.
  •   A specialized commercial finance company in connection with its joint venture with a U.S.-based financial institution to determine whether the proposed activities to be conducted required registration under the Advisers Act; on the structure and operations of the joint venture to determine whether a different approach would impact the analysis of whether registration under the Advisers Act was required; and ultimately, on registering as an investment adviser under the Advisers Act.
  •   A U.S. investment adviser on the regulatory and compliance issues in connection with business expansions and the acquisition of additional asset management businesses. We also provide ongoing regulatory advice and counseling related to compliance with the Advisers Act.
  •   A mezzanine fund, a leading global alternative investment manager, a UK-based adviser to private funds, and a distressed debt fund that invests solely in investments based in China on registering as investment advisers under the Investment Advisers Act of 1940 (Advisers Act), to include preparing Part 1 of the Form ADV, the brochure and brochure supplement; and drafting and developing written supervisory procedures reasonably designed to prevent violations of the Advisers Act and a code of ethics. 

 

 Career History
  Partner, Allen & Overy LLP, Washington, D.C., 2011
  Partner, O'Melveny & Myers LLP, Washington, D.C., 2005-2011
  Fried, Frank, Harris, Shriver & Jacobson LLP, 1999-2005
  United States Securities and Exchange Commission, 1996-1999
  United States Government Accountability Office, 1990-1996
  KPMG, 1989-1990 

 Legal Qualifications
  Admitted to the Bar, District of Columbia, 2000
  Admitted to the Bar, State of Virginia, 1995 
 
Academic Qualifications
  J.D., George Mason University School of Law, 1995
  B.B.A, cum laude, James Madison University, 1989


Debra A. Roth is an Executive Director and Head of the Compliance Regulatory Group at Morgan Stanley, where she is responsible for coordinating and managing the Firm's relationships with the SEC, CFTC, self-regulatory organizations, exchanges and state regulators on behalf of both the institutional and retail broker dealers.  In this role, she supervises the Firm's responses to regulatory examinations, inquiries, sweeps, surveys and informal information requests directed to the Firm's North American broker-dealers.  Prior to joining the Compliance Department, Debra was the East Coast Head of Client Litigation for Morgan Stanley, where she oversaw a team of attorneys handling arbitrations, mediations, litigation and related regulatory matters.  She was previously a partner in a New York City law firm where her practice focused on civil litigation and arbitration matters.  She received her J.D. from Brooklyn Law School and her B.A. from Purchase College, SUNY. 


JOANNE RUTKOWSKI is Senior Special Counsel in the Office of Chief Counsel of the Division of Trading and Markets (formerly the Division of Market Regulation) at the U.S. Securities and Exchange Commission.  In this capacity, Ms. Rutkowski works on public policy and regulatory issues related to broker-dealers.  She also has worked extensively on issues related to the implementation of business conduct standards for security-based swap dealers and major security-based swap participants under Title VII of Dodd-Frank, as well as crowdfunding initiatives under the JOBS Act.  Prior to rejoining the Commission, she worked in both the public and private sectors, most recently as a partner in the Washington, D.C. office of Baker Botts LLP.  Ms. Rutkowski received her J.D. from Harvard University, and her B.S. in Mathematics from Albright College.


John R. Hewitt is a partner at Gibbons P.C. and focuses his practice on securities litigation, along with regulatory advice and counsel to broker-dealers, investment banks, and investment advisors. Mr. Hewitt has represented these firms, their officers, and employees in SEC and FINRA enforcement investigations and enforcement actions. These matters have encompassed virtually every aspect of the federal securities laws, including equity and fixed income trading, net capital, Reg SHO, suitability, record retention, insider trading, and registration issues. Mr. Hewitt also advises and counsels clients in these areas of the law and is frequently invited to speak on related topics at PLI and SIFMA seminars.

He has written extensively on the regulation of electronic technology in the securities markets, including a series of articles for the New York Law Journal, and has chaired and spoken at numerous seminars on the subject. Mr. Hewitt is the author of the Bloomberg BNA Portfolio, Cybersecuity in the Federal Securities Markets and is the editor and author of Securities Practice & Electronic Technology, a treatise that addresses every facet of the use and regulation of electronic technology in the securities markets. He is also the author of the Record Keeping and Advertising Chapters of the PLI Broker-Dealer Regulation treatise. Mr. Hewitt is the 1998 recipient of the Compliance Reporter Compliance Person of the Year award, was a participant in the Securities and Exchange Commission’s roundtable discussions on internet issues, and is listed on the International Who’s Who of e-Commerce Lawyers.

Previously, Mr. Hewitt was Senior Vice President and Associate General Counsel at Lehman Brothers, and Senior Counsel at the SEC's Division of Enforcement. He has a Master of Laws in Security Regulation from Georgetown University Law Center.


Mark J. Happe is the President and the Chief Risk & Chief Compliance Officer at MMC Securities Corp., which is owned by Marsh & McLennan Companies, Inc. in New York. He also serves as a director for MMC Securities (Europe) Ltd., an affiliated UK-based financial services firm. Prior to joining MMC, he was the Director of Enforcement for the Pacific Exchange. Prior to that, he spent three years at two NY-based broker/dealer subsidiaries of Royal Bank of Canada, serving as the CCO of its institutional investment firm and, most recently, as the General Counsel and CCO of one of its retail brokerage subsidiaries.  Prior to working at RBC, he was a senior in-house attorney with Prudential Securities, Inc., where his responsibilities included internal investigations, regulatory exams, and customer and employee related arbitrations / litigation. Previously, he worked for the SEC, last serving as a Senior Counsel with its Enforcement Division.

Mr. Happe received a J.D. degree from the American University Washington College of Law and graduated with a B.S., magna cum laude, from Seton Hall University.  He successfully completed the FINRA/Wharton Certified Regulatory and Compliance Professional (CRCP) Program and holds / has held the Series 7, 8, 14, 24, 51, 63 and 65 licenses.


Susan Krawczyk is a partner with the law firm Sutherland Asbill & Brennan. Susan advises clients regularly on distribution and wholesaling arrangements for both public and private securities offerings, including incentive, non-cash compensation and marketing support arrangements. Susan has particular experience with firms involved in the sale and distribution of investment products and programs in the registered investment adviser context (i.e., the RIA channel) and retirement plan markets. Currently, she is assisting clients in establishing arrangements for programs that will satisfy the new Department of Labor “conflict of interest” regulations for fiduciaries to retirement accounts.