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Supervision of Branch Offices, OSI’s and Offsite Brokers and Independent Contractors

Supervisory responsibilities in connection with branch offices, offices of supervisory jurisdiction (“OSJs”), and offsite brokers, including independent contractors, can be particularly challenging. Without on-site supervisors and compliance personnel, there are more opportunities for supervisory failures and sales practice abuse. The most serious of these problems is selling away of securities products or Ponzi schemes, many […]

Broker-Dealer Customer and Recruiting Disputes

This article focuses on selected customer litigation issues that arise in customer disputes and unfair competition. The areas covered include controversies dealing with arbitrator selection, discovery in arbitration, emerging on-line brokerage litigation issues, clearing firm liability, and correspondent arbitration agreement coverage under clearing firm customer agreements. The content sets forth the procedural or substantive rules […]

The Post-Sale Duty to Warn and Recall: Are They Preempted When NHTSA or the CPSC Oversees the Manufacturer’s Conduct?

When the American Law Institute introduced the Restatement 3rd of Torts (the “Third Restatement”), which included, for the first time, sections proclaiming that sellers of commercial products had post-sale duties to consumers, it announced a manufacturer’s post-sale duty to warn of product risks, whether or not the product was defective at the time sold. This […]

Who is a Proprietary Trader? A Changing and Rocky Landscape

In a 2000 article, we noted increasing attention and focus on whether individuals described as “proprietary traders” were truly trading on behalf of a firm or were, in fact, customers trading under the guise of proprietary trader. Nearly four years later, regulatory guidance in this area remains inconsistent and continues to result in uncertainty and […]

Securities Sites and Online Trading Become Regulatory Priorities

Issues faced by regulators include the validity of electronic signatures, disclosures required in online trading, whether hyperlinks are regulated with the documents in which they are embedded, what obligations online sites have to day traders, when offers to buy can be accepted in IPOs, and more. Inconsistencies between the U.S. and other national and regional […]

Regulation of Electronic Communication, Execution and Delivery of Documents to FCM/BDs

The CFTC has taken a definitive position that electronic signatures are permitted for customer agreements, required disclosure consents and other documents where signatures were previously required. CFTC Rule 1.4, 17 C.F.R. 1.4. Neither the CFTC nor the National Futures Association (“NFA’) mandates customer agreements; however, they do mandate customer acknowledgment of margin disclosures and agreements […]

When is an FCM, CTA or Pool a Securities Broker-Dealer, an Investment Adviser or an Investment Company Under the Securities Laws?

Futures Commission Merchants (“FCMs”), Commodity Trading Advisers (“CTAs”), Commodity Pool Operators (“CPOs”) and commodity pools frequently deal with securities incidental to futures and futures activities. Considerable uncertainty exists as to when these securities activities trigger registration as a broker-dealer, investment adviser or investment company. These uncertainties have increased dramatically in the last year, as electronic […]

State and Federal Court Litigation Involving Futures and Derivatives

This article compares the advantages and disadvantages of litigation in federal or state court with reparations proceedings under the Commodities Exchange Act (“CEA”) and arbitration under the rules of futures exchanges or the National Futures Association (“NFA”). The content discusses the jurisdictional basis for litigation and the substantive claims that may be filed in state […]

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