financial services

Broker-Dealers, Securities Trading and Markets

Wide-ranging legal and regulatory guidance for broker-dealers

Dechert is a leader in providing sophisticated counsel to broker-dealers and national securities exchanges; advising on a range of matters – including regulatory compliance, and regulatory and self-regulatory investigations and examinations – while shaping policy that affects the industry.

Our broker-dealer, securities trading and markets lawyers represent leading full-service broker-dealers, U.S. securities exchanges, equity and fixed income alternative trading systems, banks, investment banking boutiques, institutional-only broker-dealers, and several of the largest U.S. retail broker-dealers and investment advisers. We also assist foreign broker-dealers seeking to do business in the United States and a range of clients seeking to avoid broker-dealer registration.

Integrated practice advising asset management clients

Our broker-dealer, securities trading and markets lawyers are an integral part of our financial services practice, which is one of the largest of any U.S. firm. Dechert represents 24 of the 25 largest global asset managers, and many of their affiliated broker-dealers. In addition to advising on distribution and other sales issues for registered funds, we represent the affiliated placement agents of dozens of private funds. Dechert’s lawyers also work with clients to find solutions for avoiding broker-dealer registration.

Distinguished and experienced team

Our lawyers have a unique combination of regulatory, in-house, and law firm experience. Dechert’s lawyers have decades of experience working with broker-dealers, securities exchanges, and other financial intermediaries. Our team includes former staff of the SEC’s Division of Trading and Markets, Division of Enforcement, and Office of Compliance Inspections and Examinations as well as former counsel to SEC commissioners. Dechert lawyers also have experience as lawyers in the Financial Industry Regulatory Authority’s (FINRA’s) Office of General Counsel and Departments of Member Regulation and Enforcement. Several Dechert lawyers have worked as in-house counsel and compliance officers at broker-dealers. 

  • Multiple non-U.S. broker dealers with conducting internal reviews of customer accounts to assess compliance with U.S. broker-dealer registration requirements and assisted the clients in implementing chaperoning and other arrangements to comply with U.S. law.
  • A private equity firm as broker-dealer regulatory counsel in the recent acquisition of multiple independent retail broker-dealers and investment advisers.
  • A large multi-service financial institution as broker-dealer regulatory counsel in their acquisition of several broker-dealers.
  • An institutional broker-dealer in a FINRA investigation related to prospectus delivery requirements for transactions in exchange-traded fund shares. The matter was resolved without action.
  • Multiple broker-dealers and asset managers on U.S. and EU soft dollar requirements, including how to navigate conflicts between the upcoming MiFID II prohibitions on the use of soft dollars and Section 28(e), and investment adviser-status questions for investment banks determining whether to sell their research for hard dollars.
  • A novel fixed income security alternative trading system in obtaining SEC registration and FINRA membership.A large trading venue with conducting a comprehensive review for compliance with Rule 605 of Regulation NMS.
  • A large broker-dealer with conducting a comprehensive review of state and municipal pay-to-play and lobbying requirements.
  • Multiple broker-dealers in a FINRA enforcement investigation involving violations of the net capital rule, FOCUS reporting, and books and records requirements.
  • A large retail broker-dealer on revising its account agreements.
  • An international accounting, tax and advisory network with respect to U.S. broker-dealer registration issues raised by the solicitation of potential U.S. buyers in connection with an M&A transaction.
  • Multiple broker-dealers in adjusting their research and soft dollar practices to address conflicts between MiFID II and U.S. regulatory requirements.
Registration, Business Expansions and Changes of Control

Dechert handles all aspects of broker-dealer registration and business expansions. We help clients:

  • Develop business plans and organizational structures
  • Prepare registration forms and new and continuing membership applications
  • Create written supervisory procedures and compliance policies
  • Draft anti-money laundering policies and business continuity plans
  • Manage FINRA requests and interviews
  • Handle state notices and approvals
  • Determine whether new activities require FINRA approval and assist them with materiality consultations

In addition, we counsel banks on compliance with Regulation R.

Our broker-dealer team has also registered equity and fixed income alternative trading systems, including drafting Forms ATS and applicable policies and procedures.

We also represent clients seeking to acquire or sell broker-dealers. Our team handles all aspects of these transactions, including conducting due diligence, advising on transaction terms, obtaining regulatory approvals, and counseling on post-closing integration.

Importantly, we also counsel Dechert’s fund clients on solutions for avoiding broker-dealer registration, and have assisted many non-U.S. broker-dealers in crafting Rule 15a-6-compliant chaperoning arrangements.

Financial and Operations Rules

Our broker-dealer team advises clients on the most technical aspects of the net capital, customer protection and margin rules, and has conducted detailed analyses of the application of these rules to various transactions and practices.

We also advise on regulatory issues related to sweep accounts and the transfer of customer accounts from one broker-dealer to another.

Our team drafts and negotiates clearing, prime brokerage and customer agreements, and is assisting clients in preparing for the transition to T+2 settlement.

Our lawyers also advise clients on compliance with record retention requirements, especially in connection with the use of new forms of social media and technology; anti-money laundering rules, confirmation disclosure and delivery requirements, and prospectus and proxy delivery requirements.

Sales and Marketing Activities

Our lawyers are regularly consulted on a wide range of sales and marketing activities, and assist clients with complex questions related to institutional and retail suitability, selling away, and outside business activities.

We also advise clients on compliance with FINRA, Municipal Securities Rulemaking Board (MSRB), state and city lobbying and political contributions (“pay-to-play”) restrictions.

Clients regularly call upon Dechert for assistance in navigating inconsistencies between SEC, Commodity Futures Trading Commission (CFTC) and FINRA requirements in connection with selling registered and unregistered funds. Reflective of our work with the majority of large global asset managers, our broker-dealer lawyers are well regarded for their skill in representing fund distributors and fund distribution activities.

Our lawyers are also regularly consulted on SEC and FINRA requirements related to the publication and distribution of research reports and requirements applicable to U.S. registered broker-dealers as well as foreign broker-dealers. 

Trading Activities

We regularly counsel clients on a wide range of trading-related issues. Our team is particularly adept at handling time-sensitive trading issues, which often related to short sale marking requirements and compliance with Rule 105 of Regulation M. We assist clients with internal reviews of their algorithmic trading businesses, Rules 605 and 606 reporting protocols, Regulations ATS reporting requirements, and Order Audit Trail System (OATS) reporting. We also work with clients on issues related to fixed income trading, including FINRA and MSRB markup reporting requirements.

Dechert is a go-to resource for sell-and buy-side clients on their soft dollars arrangements, including addressing conflicts between MiFID II and Section 28(e) and the Investment Advisers Act of 1940.

We also advise clients on compliance issues related to 24-hour trading and help desk services, including the activities that can be performed by unregistered personnel.

Underwriting, Private Placement and Other Capital Markets Activities

Dechert’s lawyers advise broker-dealers and other clients on diverse regulatory issues related to participation in public and private securities offerings and other transactions.

We frequently respond to questions relating to compliance with Regulation M, including the applicable restricted period and stabilizing requirements. Our team also advises on broker-dealers’ filing requirements related to Regulation M as well as FINRA’s Corporate Finance rules.

We assist buy-and sell-side in determining “restricted person” status under FINRA’s Rules 5130 and 5131. We also advise clients on SEC and SRO prospectus delivery and voting requirements.

Our broker-dealer team works closely with our asset management clients on all manner of fund distribution and private placement issues, including compliance with Regulation D, Rule 144A and Regulation S under the Securities Act of 1933.

Enforcement Investigations and Compliance Examinations

We represent broker-dealers and their personnel in enforcement investigations and compliance examinations and inspections by the SEC, FINRA, other SROs and the states.

Clients also look to Dechert for preparation and counsel in connection with SEC and SRO examinations, conducting mock exams and responding effectively to deficiencies identified by regulatory staff. Our team also advises firms and individuals on their disclosure obligations as a result of regulatory investigations and actions and securities litigation, and helps them obtain approval to continue in business. Dechert lawyers also counsel clients on reporting violations to the SEC and FINRA.

Policy Leadership

Our team is involved in key legislative and regulatory policy issues, including advising buy-and sell-side clients on the conflicts between MiFID II, Section 28(e) and the Investment Advisers Act of 1940, the DOL’s new fiduciary rules, SEC initiatives related to a uniform standard of conduct for broker-dealers and investment advisers, and senior protections initiatives by Congress, the states and FINRA. We participate in several legal groups advising FINRA on its retrospective rule review.

In addition, several of our broker-dealer lawyers are part of Dechert’s Financial Regulatory Reform working group, which advises clients on such legislation as the Financial CHOICE Act and the Dodd-Frank Act implementation and possible rescission. We also help individual clients and trade associations with drafting comment letters on SEC and SRO rule proposals, while helping them adapt their business to comply with – and take advantage of – regulatory developments.

Several Decherts lawyers are part of our firm’s FinTech team and advise clients on issues related to developments with Blockchain and bitcoin and other distributed ledger technology.