In previous statements we indicated that firms requiring new authorisations or a VoP under MiFID II needed to submit a complete application to us by 3 July 2017. After that date, we could not guarantee to determine applications in time for new permissions to be in place for 3 January 2018.
Good progress has been made. We have received applications from a significant number of firms seeking to operate a trading venue or become a Data Reporting Services Provider (DRSP). We have already determined a number of applications from DRSPs authorised to provide Approved Publication Arrangements.
What you need to do
If you have not yet applied at all, you urgently need to submit an application with all the information we require. You may find it helpful to consult legal or compliance professionals familiar with the MiFID II regime and our expectations of authorisation applications to ensure your application is complete.
If you have already sent an application and we have subsequently been in contact to tell you that it is not complete, you need to provide the missing information as soon as possible. Without this, we cannot assess your application.
If you are unsure whether you need new permissions you should take action now. Start by consulting our application and notification user guide (PDF) and consider whether you need professional support to get back on track.
Any firm which needs new permissions under MiFID II and has not submitted a complete application needs to take immediate action. Given that firms can only carry out MiFID II activities for which they have the appropriate regulatory permissions, this will need to include contingency planning for the event that new permissions are not in place by 3 January 2018.
Proprietary traders and those providing them with market access
We want to highlight that some proprietary traders who are not authorised may need to be authorised under MiFID II.
For example, if you are an unregulated proprietary trader who uses a form of direct electronic access provided by a regulated firm to access trading venues (a ‘DEA client’), you may need authorisation from 3 January 2018. Further guidance is available in the application and notification user guide (PDF) and our Handbook (PDF). You need to confirm urgently whether you will need authorisation and, if so, make an application.
If you are a firm or venue providing your clients with direct electronic access to trading venues (a ‘DEA provider’) you will have a duty under MiFID II to carry out due diligence on your prospective DEA clients. You should therefore work closely with your clients to ensure they are aware of the potential need to be authorised and be authorised on time.
- ^‘Direct electronic access’ means an arrangement where a member or participant or client of a trading venue permits a person to use its trading code so the person can electronically transmit orders relating to a financial instrument directly to the trading venue. This includes arrangements which involve the use by a person of the infrastructure of the member or participant or client, or any connecting system provided by the member or participant or client, to transmit the orders (direct market access) and arrangements where such an infrastructure is not used by a person (sponsored access).
The Securities and Exchange Commission today announced that Ken C. Joseph, Head of Investment Adviser/Investment Company Examination Program in the New York Regional Office, is planning to leave the agency.
Since 2012, Mr. Joseph has led a team of over 130 accountants, examiners, attorneys, and support staff responsible for the examination of investment companies and investment advisers in New York and New Jersey. During that time, the IA/IC Examination Program in the New York Regional Office has steadily increased the number of exams of investment advisers and investment companies and has made many changes that have led to a more efficient and effective examination program.
Before joining the National Exam Program, Mr. Joseph started at the SEC as a Law Clerk. He went on to serve as an Assistant Director in the SEC's Enforcement Division, New York. When the division was reorganized in 2010, he joined the newly formed Asset Management Unit.
During his tenure with the Enforcement Division, Mr. Joseph investigated a wide array of alleged violations of the federal securities laws, including those involving financial fraud, auction rate and subprime securities, credit default swaps, reinsurance transactions, hedge funds, private equity funds, Ponzi schemes, special purpose entities, auditors, investment advisers, investment companies, self-regulatory organizations, transfer agents, and broker-dealers.
"Throughout his over two decade career at the SEC, Ken has served the Commission with dedication, leadership and integrity," said Pete Driscoll, Acting Director of the SEC's Office of Compliance Inspections and Examinations. "We and the investing public have greatly benefitted by his outstanding stewardship of the IA/IC Examination Program in New York and his commitment to the SEC's mission."
"Ken is the quintessential public servant, who has worked tirelessly for investors these last 21 years. He is, without a doubt, one of the most gifted and talented managers I have ever encountered – a true visionary with a mighty work ethic who has spent night and day thinking about how to do his job better," said Andrew M. Calamari, Director for the SEC's New York Regional Office. "After a stellar enforcement career, Ken took on leadership of our investment management program and in five short years transformed the program in many positive ways including innovative ideas and changes that contributed to the National Exam Program. It has been my privilege to serve with Ken, and I will miss him greatly."
Mr. Joseph said, "It has been a privilege and an honor to be entrusted with ever increasing responsibility for fulfilling the Commission's mission. I have been fortunate to work cooperatively and collegially with professionals, all of whom have been bound by our deep commitment to public service. I also wish to acknowledge the support my teams have received over the years from law enforcement partners at the state, local and federal levels."
Under Mr. Joseph's supervision, the examination team has referred a number of impactful matters to the Division of Enforcement, which resulted in the payment of significant disgorgement and penalties. These impactful actions included:
- In the Matter of Royal Alliance Associates, Inc. et al., which resulted in the payment of $9.5 million in monetary relief stemming from alleged anti-fraud violations based on alleged failure to monitor client accounts and to disclose conflicts in selecting mutual fund share classes for clients.
- Morgan Stanley Smith Barney LLC, which resulted in $13 million in monetary relief for alleged overcharges to clients of more than $16 million and alleged violations of the custody rule and compliance rule.
- Kohlberg Kravis Roberts & Co. for alleged violations of the anti-fraud rules and for alleged misallocation of broker-dealer expenses, which resulted in monetary relief of $30 million for alleged misallocation of broken deal expenses.
- Barclays Capital Inc., for alleged anti-fraud violations based on alleged overbilling of advisory fees and excess mutual fund sales charges, which resulted in $97 million monetary relief.
Mr. Joseph earned his B.S., M.B.A., and post-graduate degrees from St. John’s University, New York, and his J.D. from the University of North Carolina at Chapel Hill School of Law.
The Securities and Exchange Commission today charged the investment services subsidiary of SunTrust Banks with collecting more than $1.1 million in avoidable fees from clients by improperly recommending more expensive share classes of various mutual funds when cheaper shares of the same funds were available.
SunTrust Investment Services has agreed to pay a penalty of more than $1.1 million to settle the charges. SunTrust separately began refunding the overcharged fees plus interest to affected clients after the SEC started its investigation. SEC examiners cited the practice during a compliance review of the firm in mid-2015. More than 4,500 accounts were affected.
According to the SEC’s order, the Atlanta-based firm breached its fiduciary duty to act in clients’ best interests by recommending and purchasing costlier mutual fund share classes that charge a type of marketing and distribution fee known as 12b-1 fees. Investors were not informed that they were eligible for less costly share class options that did not charge 12b-1 fees. The avoidable fees flowed back to SunTrust in the form of higher commissions from the funds.
“SunTrust made self-serving investment recommendations to the detriment of everyday investors who rely on mutual funds to secure their financial futures,” said Aaron W. Lipson, Associate Regional Director for Enforcement in the SEC’s Atlanta office. “The story has a happy ending for customers with the extra fees back in their accounts, and an obvious lesson for investment advisory representatives that you must always recommend the best deal for your clients, not yourselves.”
The SEC’s order finds that SunTrust violated Sections 206(2), 206(4) and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-7. Without admitting or denying the findings, SunTrust agreed to pay the penalty totaling $1,148,071.77 as well as disgorgement plus interest on any leftover amount of the avoidable 12b-1 fees that are being refunded to clients. The firm also agreed to be censured.
The SEC’s investigation was conducted by Brian M. Basinger and supervised by Mr. Lipson and Stephen E. Donahue in the Atlanta office with support from the Division of Economic Risk and Analysis. The SEC examination that led to the investigation was conducted by Vincent H. Catrini and Samra Fleschner of the Atlanta office.
Almost all firms and individuals carrying out financial services activities in the UK have to be authorised or registered by us. This firm is not authorised or registered by us but has been targeting people in the UK, claiming to be an authorised firm.
This is what we call a 'clone firm'; and fraudsters usually use this tactic when contacting people out of the blue, so you should be especially wary if you have been cold called. They may use the name of the genuine firm, the 'firm reference number' (FRN) we have given the authorised firm or other details.
You can find out more about this scam tactic and how to protect yourself from clone firms.
Clone firm details
Fraudsters are using or giving out the following details as part of their tactics to scam people in the UK:
Beaufort Securities (clone of FCA authorised firm)
Address: Castlemead, Bristol BS1 3AG
Telephone: 0208 068 2778
Be aware that the scammers may give out other false details or mix these with some correct details of the registered firm.
FCA authorised firm details
This FCA authorised firm that fraudsters are claiming to work for has no association with the ‘clone firm’. It is authorised to offer, promote or sell services or products in the UK and its correct details are:
Firm Name: Beaufort Securities Limited
Firm Reference Number: 155104
Address: 63 St Mary Axe, London EC3A 8AA
Telephone: +44 02073828300
How to protect yourself
We strongly advise you to only deal with financial firms that are authorised by us, and check the Financial Services Register to ensure they are. It has information on firms and individuals that are, or have been, regulated by us.
If you want to check a consumer credit firm that may not yet have been authorised by us, please also check the Interim Permission Register.
If a firm does not appear on the Register but claims it does, contact our Consumer Helpline on 0800 111 6768.
There are more steps you should take to avoid scams and unauthorised firms.
You should also be aware that if you give money to an unauthorised firm, you will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.
Report a clone firm
What to do if your firm is cloned
If you think your authorised firm has been cloned or scammers are fraudulently using your name or other details, contact our Firm Helpline on 0300 500 0597.