Perspective - SDDco Group

April 3, 2019  |  Vol 7. Edition 1

Dear SDDco Clients and Colleagues: Our SDDco Perspective includes industry news, guidance, regulatory rule updates, deadlines, and other timely matters impacting brokers, advisors, fintech firms, taxpayers, investors, and their service professionals. The SDDco Perspective is made available on our website monthly at


Bryon Lyons
CEO, SDDco Brokerage Advisors LLC

SIFMA Endorses SEC’s Development of Regulation Best Interest (“Reg BI”)

For decades, broker dealers have had the regulatory obligation to make sure that an investment sold to a customer is suitable for that customer. The brokerage firm would typically charge a commission for its services, since the transaction is the broker’s focus. Whereas an investment advisory firm has always had a “higher” fiduciary obligation to ensure that its advice places the client’s interests ahead of its own. An adviser focuses on the client relationship, typically charging either fixed fees for its advice or fees based upon the value of a client’s account. This difference between brokers and advisers and the way they engage clients has always been a fundamental financial industry distinction.

The Securities Industry and Financial Markets Association (“SIFMA”) came out in March in support of the SEC’s development of Regulation BI, which would enhance broker conduct beyond current standards by adding new and heightened care, disclosure, and conflicts-of-interest obligations in a way that would not limit customer access to brokers or choices of investment products.

SIFMA Blog on Reg BI
SIFMA Statement to the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets

The End of the Beginning: Digital Token and Currency Exchanges to be Regulated

A recent panel discussion at New York law firm, Sullivan & Worcester, LLP, entitled Token Exchanges: The promise of liquidity, compliance and stability, discussed sea changes in today’s global economies and the financial markets, and the shift to new forms of digital investment and mediums of exchange. Joel Telpner, partner and the Chair of the Fintech & Blockchain Practice at Sullivan & Worcester, made the case that U.S. government policy is by no means behind the curve and that we should see methodical deliberate action over the course of the next year, including three predictions: (i) the SEC should provide guidance on what forms of digital currency should be categorized as securities tokens and which should not; (ii) the CFTC should provide guidance on what forms of tokens and currencies fall under CFTC regulation; and, (iii) in the new curious case of Stablecoins, which are neither securities or commodities, government policy should shed light on how these and other digital currencies will be regulated.

Forbes: Three Bold Predictions
Rise of a Cashless Society
What Are Securities Tokens?


Erin Furtado
Head of Marketing

Russia or China - Which Country poses the Bigger Threat to US Cybersecurity?

Early in March, San Francisco hosted an “RSA Conference”, an annual IT conference centered on cybersecurity issues. These events gather the best and brightest in the field of cybercrime prevention and feature expert speakers and panelists, some of whom hold government positions. The general consensus among these specialists is that, despite the recent media frenzy and widespread awareness surrounding Russia as a cyber threat, China is in fact the greater, and potentially more catastrophic, threat to US cyber security. These experts believe that China is “more complex and damaging than any other digital adversaries” in their attempt to “manipulate the system to its long-term advantage.”

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  • Become compliant with all state and federal requirements including FINRA, NYDFS, SEC, etc.
  • Infrastructure Testing including Penetration Testing
  • Customized and Tested Policies and Procedures
  • Fully Managed Incident Response Coverage
  • Data Security Training
  • Vendor Due Diligence
  • Risk Assessments

Speak with an SDDco consultant about how we can help you navigate the nuances of armoring your firm through SDDco Cyber.


Gary Fox

Extended! FINRA Really Wants You to Come Into The Light

On Wednesday, March 6, FINRA issued “Frequently Asked Questions Regarding the 529 Plan Share Class Initiative” through which member firms may self-report 529 savings plan violations. The FAQ answered 18 questions about various aspects and implications of self-reporting. Among other things, the topics included transaction review requirements, benefits of self-reporting, disciplinary action, and general participation information.

FINRA also extended the deadlines set in Regulatory Notice 19-04. Firms must provide FINRA Enforcement notice of their self-report by April 30, 2019, and then must confirm their eligibility by submitting the additional information specified in Regulatory Notice 19-04 by May 31, 2019.

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Ross Marlin
Associate Director

Broker-Dealer fined $2 Million for Regulation SHO violations and supervisory failures

FINRA fined Cantor Fitzgerald $2 million for failing to allocate sufficient resources to compliance, thereby allowing Regulation SHO violations. FINRA found that the firm’s supervisory systems were not reasonably tailored to its business and that the firm failed to promptly remediate deficiencies in its supervisory systems once alerted to them. As part of the settlement, the firm also agreed to hire an independent compliance consultant.

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To learn more about how SDDco can help strengthen your firm’s compliance program, click here .


Bob Fortino
Managing Partner

House Democrats Propose a Securities Tax

House Democrats reintroduced a bill that would impose a 0.1% tax on securities transactions that involve a U.S. citizen or firm, regardless of whether the trade took place in the U.S. or in a foreign market. The tax, as proposed, would be on stocks, bonds, and derivatives, but exclude initial public offerings and short-term debt (defined as less than 100 days to maturity). The purpose of the bill is to reduce market risk from high-frequency trading and to raise tax revenue. Revenue estimates are expected to be $777 billion over 10 years. Opponents of the bill cite inflated revenue estimates and the harm it will cause to ordinary Americans’ 401k and pension plans.

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Casey Muller
Director of Legal & Internal Compliance

NYS DFS Cybersecurity Requirements are now Fully Installed

The Cybersecurity Requirements program (the “Program”) of the New York State Department of Financial Services, which was designed to govern the cybersecurity practices of financial services companies, is now fully installed and in effect. The Program strategically used a rollout period, implementing requirement checkpoints, which allowed companies plenty of advanced notice and fair opportunity for proper transition. The Program was first introduced in September 2016, and its final checkpoint came on March 1, 2019, which included the requirement that companies have written procedures designed to ensure the adequacy of their third-party providers’ cybersecurity practices. At this point, New York financial services companies are expected to be fully compliant with the Program.

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Keep a look out for us at the FINRA Annual Conference:

Washington, DC | May 15-17, 2019

Marriott Marquis Washington, DC
901 Massachusetts Avenue, NW
Washington, DC 20001

SDDco Group makes this general information available for educational purposes only, the contents of which were not originated from SDDco. SDDco is not affiliated with any of the publishing persons or entities of the articles herein. The information provided should not be construed as legal advice. This email may constitute an advertisement under U.S. law. | | (212) 751.4422