Friday, March 5, 2010


The Florida Office of Financial Regulation (“Office”) recently updated some of its securities rules. The Office submitted notice for several proposed rule changes that are primarily to keep its rules up-to-date with the most current federal laws and cross references. For example, references to NASD had to be switched to FINRA after the SEC approved their consolidation back in 2007. Despite these “housekeeping” changes, there are a few noteworthy proposals that are substantive in nature. The substantive proposals come pursuant to House Bill 483 that passed during the 2009 Florida legislative session. The purpose of the bill was to increase investor protection through an expansion of certain agency powers. House Bill 483 became effective July 1, 2009, but the Office of Financial Regulation is beginning to submit its proposals for the supplementary rules.

One such substantive change is Proposed Rule 69W-1000.001, which creates a set of disciplinary guidelines in accordance with House Bill 483. The rule expands the disciplinary power of the Office of Financial Regulation to impose additional sanctions against individuals and firms that are subject to regulation under the Florida Securities and Investor Protection Act (“Securities Act”). Under the new rule, the Office has the power to impose cease and desist orders in conjunction with any sanction laid out in the Securities Act and raises the levels of minimum fines. The rule also sets out an extensive and comprehensive factors list to determine the appropriate sanction.

Proposed Rule 69W-600.0011 was also added pursuant to House Bill 483. Under this proposed rule, applicants could be subject to registration disqualifying periods for dealers, issuer dealers, investment advisors, as well as “relevant persons.” “Relevant persons” for purposes of the rule include “any direct owner, principal, or indirect owner that is required to be reported on behalf of the applicant on a Form BD or a Form ADV.” A Form BD is required for the application for broker-dealer registrations, and a Form ADV is required for applications for investment advisor registration. Grounds for disqualifying periods are based upon criminal convictions, pleas of nolo contendere, and pleas of guilt, regardless of whether there was an adjudication. The disqualifying periods range from five years to fifteen years depending on whether the crime is a classified as “Class A” or “Class B.” Class A crimes are felonies involving an act of fraud, dishonesty, breach of trust, money laundering, and any other crime involving a question of “moral turpitude.” Class B crimes are misdemeanors involving “fraud, dishonest dealing or any other act of moral turpitude.” Pleas receive a disqualifying period of three years. There is also a provision allowing registrants to submit any evidence of mitigating factors that may reduce the length of disqualification.

The Office of Financial Regulation is charged with safeguarding private financial interests of the public through licensing, chartering, examining, and regulating depository and non-depository financial institutions and financial service companies in Florida. It also serves to protect consumers from financial fraud and preserve the integrity of Florida’s markets and financial service industries.

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