Securities law glossary

An SEC enforcement action brought before an administrative law judge rather than in federal court. The SEC increasingly uses administrative proceedings for enforcement actions against regulated entities.

A firm or individual that buys and sells securities for its own account (dealer) or on behalf of customers (broker). Regulated by FINRA and the SEC.

Excessive trading in a client's account primarily to generate commissions. Proved through turnover ratio and cost-equity ratio analysis.

Commodity Futures Trading Commission — the federal agency regulating commodity futures, options, and swaps markets. Parallel jurisdiction with the SEC in some matters.

A monetary sanction imposed by the SEC or other regulator as part of an enforcement action. Distinct from criminal fines and disgorgement.

The SEC remedy requiring a defendant to give up profits obtained through illegal conduct. The Supreme Court has limited the SEC's disgorgement authority in recent years.

The SEC division responsible for investigating potential violations of federal securities laws and recommending enforcement actions. Walter Mathews served as Senior Counsel in the Southeast Regional Office.

Financial exploitation of investors aged 65 or older. Enhanced penalties and remedies available under Florida law and FINRA rules.

Financial Industry Regulatory Authority — the self-regulatory organization overseeing broker-dealers. Administers the arbitration forum used in most investor-broker disputes.

An order authorizing the SEC to use compulsory process — subpoenas and depositions — in a securities investigation. Signals an investigation has moved beyond informal inquiry.

Federal Trade Commission — regulates unfair or deceptive acts or practices. Jurisdiction overlaps with SEC in some fraud matters.

When the same conduct is subject to both civil enforcement (by the SEC or FTC) and criminal prosecution (by the DOJ or FBI). Requires careful coordination of defense strategy across both proceedings.

A fraudulent investment scheme paying existing investors with funds from new investors. Often the subject of SEC enforcement actions and federal receiverships.

A court-appointed officer who takes control of assets in a Ponzi scheme or fraud case. Walter Mathews has served as counsel to Receivers in high-profile federal receiverships.

Federal court proceeding in which a Receiver is appointed to take control of assets, marshal them, and distribute them to defrauded investors. Often follows SEC enforcement actions.

Regulation Best Interest — SEC rule requiring broker-dealers to act in the best interest of retail customers when making recommendations. Effective June 2020.

The party defending against a FINRA arbitration claim — typically a broker-dealer firm, registered representative, or both.

Securities and Exchange Commission — the primary federal securities regulator. Enforces federal securities laws through civil enforcement actions and referrals for criminal prosecution.

When a broker sells securities outside the scope of their employer firm's approved products. A FINRA rule violation and basis for investor claims and regulatory action.

The initial document filed by a claimant in FINRA arbitration, outlining the facts, claims, and damages sought.

The requirement that a broker only recommend investments appropriate for a client based on their financial situation, risk tolerance, and objectives.

A letter from a federal prosecutor notifying an individual that they are the target of a grand jury investigation. Requires immediate retention of criminal defense counsel.

Executing trades in a client's account without the client's knowledge or approval. A FINRA violation and basis for investor claims.

Uniform Application for Securities Industry Registration — the form used to register brokers with FINRA. Contains employment history, disclosures, and disciplinary history.

Uniform Termination Notice — filed when a broker leaves a firm. Firms sometimes make defamatory or inaccurate U5 disclosures that damage broker careers. Can be challenged through FINRA expungement.

An insurance product with investment components. High fees, surrender charges, and unsuitable sales — particularly to elderly investors — are common sources of FINRA arbitration claims.

An SEC notice informing an individual or firm that the staff intends to recommend enforcement action. The recipient may respond with a Wells Submission before formal charges are filed.

A response to a Wells Notice in which the recipient presents arguments and evidence to persuade the SEC not to bring enforcement action. A critical opportunity that requires experienced SEC counsel.

An individual who reports securities violations to the SEC. The SEC Whistleblower Program provides financial awards and anti-retaliation protections for eligible whistleblowers.