Perspective - SDDco Group

November 1, 2018  |  Vol 2. 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


Erin Furtado
Head of Marketing

States Are Cracking Down on Firms’ Cybersecurity Practices, After Finding 590 Deficiencies During 1,200 Exams Last Year 

This has caused the North American Securities Administrators Association to request a new rule proposal on stricter cybersecurity requirements for state-registered investment advisers.  You do not want to fall into the category of being cybersecurity deficient. To mitigate risks, you must ensure you have all policies and procedures up to date on an annual basis. You have until November 26, 2018 to publicly comment on the proposal. To see how you can stay compliant, Read more >

SEC Commish Calls for Stricter Cybersecurity Standards for FAs

Do you think your business needs to be held to higher standards when it comes to cybersecurity? What if you knew cybercrime was projected to cost businesses over 8 trillion over the next five years? We are in a world where fintech firms have emerged but with techfin firms now entering the financial sector they can gather their pre-existing client data into financial services businesses, raising consequences for BDs, IAs, fintech startups and regulators. It’s in your best interest to step up cybersecurity within your firm.  Read more here and here.

Fintech - where the original financial system is improved upon using technology.

Techfin - where Tech companies provide financial services with a more customer & technology centric approach.

Read more on the differences between Fintech and Techfin here.


  • 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.


Bryon Lyons
CEO, SDDco Brokerage Advisors LLC

U.S. District Court Dismisses SEC Insider Trading Complaint for Lack of Facts

In an opinion dated September 27, 2018, District Judge Claire C. Cecchi of the New Jersey U.S. District Court ruled that the SEC presented insufficient facts to “support a reasonable inference of insider trading” in U.S. SEC v. One or More Unknown Traders in the Securities of Fortress Investment Group, LLC. The Court ruled that the SEC’s suspicion that the perfect timing of transactions in February 2017 by foreign investors betting on the highly confidential takeover of Fortress Investment Group, LLC by Softbank Group Corp. is not sufficient “evidence” that a crime was committed. Without facts supporting suspicion the complaint over-reached and was dismissed. But the Court also ruled that “to the extent the pleading deficiencies identified by this Court can be cured by way of amendment, the SEC is hereby granted thirty (30) days to file an amended pleading.” Stay tuned. Read more >

Fidelity Digital Assets to Provide Institutional Digital Asset Custody and Execution Services 

Fidelity Investments announced on October 15, 2018 the launch of Fidelity Digital Asset Services LLC, which will initially provide institutional investors the ability to store and execute trades in Bitcoin and Ethereum and eventually other digital assets. Beginning with institutional investors, Fidelity’s solution will institute vaulted cold storage and allow hedge funds and other money managers to trade digital assets in multiple markets on internal crossing engine and smart order routers perfected in the equity, fixed income, and mutual fund markets. Read more here and here


Gary Fox

Advisors Are Reminded to Review Their Policies and Procedures Regarding Share Classes and Fees

The SEC has been paying close attention to share classes and their attendant fee structures when reviewing how an advisor allocates a client’s portfolio. Of interest to the SEC are transactions involving charitable entities or accounts subject to ERISA. Many RIAs have been forced to pay fines and make restitution to clients when the SEC found that investors were placed in higher fee share classes when other low or no-fee options existed. Firms would be well advised to review their clients’ portfolios for these potential conflicts, as well as enhance their policies and procedures for preventing these problems from occurring in the first place.  Read more >

Ross Marlin
Associate Director

SEC Fines Broker-Dealer $1,000,000 for Cybersecurity Failures

Iowa-based broker-dealer and investment advisor Voya Financial Advisors will pay $1 million to settle charges that it failed to adopt procedures that protected customer records and address weaknesses in its cybersecurity policy, after cyber intruders gained access to the personal information of several thousand customers. This is the first SEC enforcement action charging violations of the Identity Theft Red Flags Rule and should serve as a wake-up call to the financial services industry about the importance of establishing and implementing robust cybersecurity procedures.  Read more > 


Bob Fortino
Co-Managing Partner

SEC Reminder: Interim Financial Statements Must Be "Reviewed"

The SEC settled enforcement charges against five companies for failing to file independently reviewed financial statements with their quarterly reports. The financial statements do not need to be audited, but they do need to be prepared in accordance with GAAP and PCAOB standards and reviewed by a PCAOB registered independent accounting firm. This is the first action of its kind by the SEC and we believe it signals a shift in their enforcement focus related to public company filings.  Read more >

Expenses for Business Meals Under § 274 of the Internal Revenue Code

The Internal Revenue Service has issued transitional guidance as to the deductibility of business meals. The new guidance does not change the disallowance of entertainment or recreation. However, business meals that are separately stated from any related entertainment, retain their deductibility at 50%. The requirements to be deductible must satisfy 5 criteria which includes the expense being ordinary and necessary for the trade or business being conducted. These rules are transitional until the IRS issues proposed regulations and they are effective. Until these regulations are finalized, taxpayers can rely on this guidance.  Read more >


Casey Muller
Senior Contract Administrator

SCOTUS: The SEC’s hiring process of Administrative Law Judges is unconstitutional

The U.S. Supreme Court held that the SEC’s Administrative Law Judges (ALJ) are “Officers of the U.S.” and thus subject to the Appointments Clause of the U.S. Constitution, requiring appointment by the President, a Court of Law, or Department Heads. The SEC’s traditional process of allowing staff members to hire ALJs was deemed unconstitutional. This decision is certain to affect pending and future SEC administrative proceedings. It may also provide relief to respondents of previous proceedings that can make a “timely challenge” on a constitutional basis.  Read more >


We will be exhibiting at the following conferences in November, come find us in the exhibitor area!

FINRA Small Firm Conference
November 7-8, 2018 | Santa Monica, CA

Fairmont Miramar Hotel & Bungalows, Santa Monica
101 Wilshire Boulevard
Santa Monica, CA 90401
Tel: (866) 964-7262

Global Correspondent Clearing Outlook Conference
November 15-16, 2018 | Miami, FL

EAST, Miami
788 Brickell Plaza

Miami, Florida 33131
Tel: (305) 712-7000

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