SEC Accuses Broker-Dealer of “Rubber Stamping” Certifications in Violation of Its Gatekeeper Duties

The SEC regards so-called “gatekeepers,” such as broker-dealers, fund administrators, accountants and attorneys, as important players in its overall efforts to protect investors. In a recently settled administrative proceeding, the SEC accused a broker-dealer of playing fast and loose with its duty to perform due diligence on the over-the-counter securities in which its traders desired to make a market; failing to comply with its existing policies and procedures; and lacking sufficient controls to ensure compliance with those policies and procedures. This article outlines the relevant factual and regulatory background; the broker-dealer’s alleged violations and remedial measures; and the sanctions imposed by the SEC. See “SEC Chair Outlines Approach to Dodd-Frank Rulemaking and Expectations for Fund ‘Gatekeepers’” (Feb. 15, 2018); and “What the SEC’s Enforcement Statistics Reveal About the Regulator’s Focus on Hedge Funds and Investment Advisers” (Oct. 20, 2016).

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