Legal Alerts

2012 Fall Securities Luncheon Seminar Recap


On Wednesday, October 24, 2012, the Lindquist & Vennum Securities Litigation group hosted its Fall Securities Compliance Luncheon Seminar at The Westin Hotel in Minneapolis. The luncheon, attended by more than 40 professionals, addressed current regulatory compliance issues facing broker-dealers and investment advisors, and featured a keynote speech by Robert C. Moilanen, Director of the Securities Division for the Minnesota Department of Commerce. The panel discussed topics ranging from challenges facing industry professionals participating in Reg D Offerings, recent developments in electronic data management, and hot topics investment advisors are now facing. 

Panel one featured Lindquist & Vennum attorneys Mark Enslin and Sharda Kneen. The panel focused on the challenges of selling Reg D and other private placements in the current regulatory environment, including identifying exemptions applicable to such offerings and how the new suitability rule applies to these types of transactions. The panel explained how suitability consists of not only a “reasonable basis” analysis but also a “customer specific” analysis, and how a customer’s status as an “accredited investor” is only one factor to be considered among other factors such as the customer’s other financial holdings, situation, and needs; tax status; and investment objectives. The “high risk conundrum” security sale discussed was particularly sobering given the fact it showed how an investor who purchases a perennially well performing investment that some may consider speculative or high risk might expose both broker and firm to liability despite the investment’s long track record of solid performance. The panel also identified certain litigation risks facing individuals and firms selling these types of investments, such as due diligence and erroneous reliance on registration exemptions.  

Panel two featured guest panelist Heidi J.K. Fessler of Applied Discovery, Inc. The panel engaged in an in-depth discussion of electronic data management fielding several poignant questions from the audience throughout their presentation. Audience members seemed particularly interested in the use and prohibition of social media by different firms and the different models firms have used to address regulatory and compliance concerns. The panel also discussed current trends and issues facing firms having to respond to discovery in the “electronic age” including preservation of electronic evidence and deciphering employee business from personal use for maintaining compliance with FINRA rules. The panel concluded by presenting attendees with several best practices and solutions for handling social media such as having a social media plan and training in place, identifying technological solutions to head off problems before they arise, reviewing and modifying document retention policies as appropriate and consideration of centralized archiving as a method to preserve electronic data. 

Panel three, which featured Lindquist & Vennum attorneys Terry Fleming and Chris Grgurich, discussed a wide number of “hot topics” registered investment advisors are currently facing. Among other things, the panel provided a legal and regulatory update concerning the status of lawmaker efforts to create a uniform fiduciary duty standard for broker-dealers and investment advisors, and they identified areas of concern regulators such as the North American Securities Administrators Association have flagged for market participants. The panel also noted of some of the pitfalls and traps in defending claims brought against broker-dealers and investment advisors where underlying investments have turned out to be Ponzi schemes, including defending against claims by bankruptcy trustees for commissions, defending against claims that the brokerage firm failed to conduct adequate due diligence, and defending against claims that the investments were not registered or exempt from registration. Each of these types of cases presents unique challenges to the parties and defense counsel, making it all the more important to formulate a litigation strategy tailored to the unique circumstances of the case.

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