The Financial Regulatory Authority (FINRA) recently announced an initiative it presents as an effort to promote member firms’ compliance with rules applicable to the recommendation of 529 plans. FINRA’s initiative is designed, first and foremost, to encourage firms to engage in a self-assessment specific to their 529 plan sales as well as the supervision of such sales.  But, as with similar regulatory initiatives, this program only affords firms a degree of protection as to any issues identified by the firm if the firm self-reports to FINRA and takes corrective measures.  The decision to self-report always requires a considered approach guided by experienced securities regulatory counsel.  Of course, that calculus is dramatically impacted by the announcement of such an initiative. Thus, to avoid (or least minimize) problems with FINRA, member firms are encouraged to review their practices as well as supervisory procedures and controls with an eye on the key areas of regulatory concern. Continue Reading 529 Problems, but FINRA Ain’t One

The SEC recently announced insider-trading charges against the former senior lawyer at Apple specifically tasked with ensuring insider-trading compliance at the company.[1]  The Department of Justice also addressed this case of “the fox guarding the hen house” by filing criminal charges against the former Apple attorney.  The defendant, Gene Daniel Levoff, denies all charges and vows to defend himself. Continue Reading Attorney Responsible for Insider-Trading Compliance Faces Charges of…Insider Trading

A former broker at a national brokerage firm was recently sanctioned by FINRA after accepting instructions to transfer assets out of a client account. The problem? The instructions were actually sent by an imposter who had obtained access to the client’s account, presumably through some form of cyber-crime.  Unfortunately, the broker unwittingly contributed to the imposter’s malfeasance by not only accepting the instructions but by also taking pro-active steps to circumvent his brokerage firm’s controls. Continue Reading Cybersecurity: Don’t Become a Different Kind of Victim

On September 28, 2018, the U.S. Congress passed an appropriations bill that extended the EB-5 Immigrant Investor Program (the “EB-5 Program”) in its current form through December 7, 2018.[1] Thus, the EB-5 Program will expire on December 7, 2018, unless it is renewed once again for another couple of months to a year.

Although the EB-5 Program has been renewed every time it has come close to expiration, over the years many have called for significant reforms, or the elimination of the EB-5 Program altogether, amid concerns about fraud.  Last year, the Department of Homeland Security (“DHS”) proposed changes to the minimum investment amounts and designation of targeted employment areas[2] (“TEA designations”).  Under the current guidelines of the EB-5 Program, foreign investors may obtain a green card if they invest $500,000 (rural setting) or $1,000,000 (city setting) in a new or existing business enterprise that create at least ten full-time jobs per EB-5 investor.

However, the DHS proposed to drastically increase the minimum investment amount to $1.35 million for TEAs, and $1.8 million for high employment areas to “ensure that program requirements reflect present-day dollar value of the amounts established by Congress in 1990.”[3]  DHS also proposed to “reform the TEA designation process to ensure consistency in TEA adjudications and ensure that designations more closely adhere to Congressional intent.”[4] Specifically, DHS proposed to, among other changes, eliminate state designations of high unemployment areas, and instead, DHS would itself determine which areas qualify as TEAs. Whether any of these proposed changes will be implemented, however, depends on the renewal of the EB-5 Program.

While it is unlikely that the EB-5 Program will be allowed to expire, it is likely to change.  Stay tuned for more on any alterations to the Program.


Jamie Lacy

Toby Galloway

Ronak V. Patel

[1] H.R. 6157, The Department of Defense and Labor, Health and Human Services Appropriations Act, 2019 and Continuing Appropriations Act, 2019, available at,

[2] A targeted employment area is “a rural area or an area which has experienced high unemployment (of at least 150 percent of the national average rate).” 8 U.S.C. 1153(b)(5)(B)(ii).

[3] EB-5 Immigrant Investor Program Modernization, 82 F.R. 4738, (Jan. 13, 2017), available at,

[4] EB-5 Immigrant Investor Program Modernization, 82 F.R. 4738, (Jan. 13, 2017), available at,

The regulatory framework for virtual currencies is evolving, as federal and state regulators and courts wrestle with the circumstances in which cryptocurrencies are securities.  For instance, the staff of the Securities and Exchange Commission (“SEC”) has observed that tokens, which start as securities, can become something other than a security over time as a token’s network becomes “sufficiently decentralized.”[1]  In fact, the SEC staff indicate that more comprehensive yet “plain English” guidance will be forthcoming before the end of this year.[2]  In the meantime, we highlight a recent court case considering the question.  In U.S. v. Zaslavskiy[3], a federal court considered whether a cryptocurrency can be regarded as a security.  That case involved criminal charges against Maksim Zaslavskiy accused of promoting digital currencies backed by investments in real estate and diamonds that prosecutors said did not exist.[4]  The U.S. District Judge in New York decided that the prosecutors could proceed with their case alleging that the cryptocurrencies at issue were securities for purposes of federal criminal law.

Prosecutors argued that investments offered by Zaslavskiy in two initial coin offerings (“ICOs”)—REcoin Group Foundation and Diamond Reserve Club—were “investment contracts” that were securities under the federal securities laws.  Zaslavskiy, on the other hand, filed a motion to dismiss the prosecutors’ securities fraud claims, arguing that the virtual currencies promoted in the ICOs are “currencies,” and therefore, by definition, not securities.[5] Continue Reading Federal Court Evaluates When Cryptocurrency May Constitute a Security in a Criminal Case

The Texas Lawbook has published an article by Toby Galloway and Justin Freeman, “SEC Enforces Identify Theft Red Flags Rule for the First Time: What it Means for Texas Businesses.”  The article examines the Securities and Exchange Commission’s (SEC) recently settled case involving a dually registered broker-dealer and investment adviser for violations of cybersecurity provisions of the federal securities laws: the Safeguards Rule and the Identity Theft Red Flags Rule. The landmark action has clear application not only to the securities industry but for all businesses, even those not in the financial sector.

READ HERE: SEC Enforces Identity Theft Red Flags Rule for the First Time: What it Means for Texas Businesses


Financial services firms occasionally implement programs for their representatives to receive incentives in connection with specific product or service offerings. For as long as firms have used such programs, securities regulators have scrutinized them. The latest iteration of regulatory attention to sale incentives, however, signals a shift in strategy that carries broader implications for financial firms in Texas and throughout the country.  READ MORE

Published by the Texas Lawbook, February 21, 2018

READ HERE: Massachusetts Heats up Fiduciary Rule Discussion with Cold-blooded Enforcement

The Massachusetts Securities Division (MSD) recently announced that it is seeking comments on a proposed format to standardize the disclosure of investment advisory fees.[1]  This step should be noted by investment advisers across the country.

After all, fee transparency is generally not a controversial objective—especially because fees are publicly disclosed on advisers’ Form ADV Part 2.  Further, regulators and clients may view the publication of simplified fee tables as a means to recognize efficiencies by disrupting existing business models.  Moreover, the focus on fee disclosures lines up with the broader conversation about fiduciary duties in the financial services industry.  Finally, the MSD is viewed as a leader amongst securities regulators and has previously led a similar fee disclosure effort for broker-dealers.  These realities suggest it may not be long before your state’s securities regulator considers a similar approach for registered investment advisers.  While the utility of a public, standardized “fee table” is debated, investment advisers should prepare for scrutiny—in the near term—on the form and quality of their fee disclosures.

Continue Reading Investment Advisers and Fee Disclosures