Kaye Scholer’s broker-dealer practice is an integral part of the firm’s investment management and financial services practices. Clients range from international, national and regional broker-dealer firms and their affiliates, to hedge funds, insurance companies and investment advisers. Our broker-dealer lawyers work closely with other practice areas, such as corporate finance, securities, litigation, mergers and acquisitions, employment and antitrust law, allowing us to provide comprehensive advice for businesses engaged principally in broker-dealer activities, as well as diversified financial services companies.
Our lawyers have also represented international firms based in Latin America, Europe and Asia in forming new broker-dealers, establishing rule 15a-6 relationships with U.S. broker-dealers and acquiring existing U.S. broker-dealers. We advise on all relevant aspects of broker-dealer regulation, and have particular experience advising clients on the nuances of issues raised in cross-border activities.
Using our hands-on approach, we manage the registration and self-regulatory organizations ("SRO") membership application process from start to finish. For startups, we advise on the appropriate business vehicle from commercial and tax perspectives, whether as a limited liability company ("LLC") in the United States or as a limited company or limited liability partnership ("LLP") in the United Kingdom and, where a new group is to be established, we can structure tax-efficient ownership and income arrangements both at the country-specific and the global level.
Our lawyers draft organizational documents, operating agreements, advisory agreements, administration agreements, subscription agreements, placement agreements, side letters, registration forms and compliance manuals. We handle all aspects of the regulatory application from the initial filing through the pre-membership interviews.
Working in concert with our mergers and acquisitions colleagues, we advise on various unique regulatory and legal issues that arise when acquiring a brokerage firm. We perform due diligence reviews of broker-dealer, investment management and advisory firms that are candidates for acquisition. We focus on the internal controls of the target, its compliance with regulatory standards and its management structure, and handle all necessary filings with the Financial Industry Regulatory Authority ("FINRA") and state and federal regulators.
Our lawyers review sales materials and advise and prepare filings under federal and state securities laws, commodities laws, international securities laws and tax laws. In addition to these core services, we advise on employment contracts and employee incentives, and protection of intellectual property rights.
When a broker-dealer business or equity interest in such a business is acquired, we advise on the tax, regulatory, corporate and commercial aspects of the deal. We have handled all aspects of these transactions from beginning to end. We have structured equity interest transactions for clients in situations where the goal is continuity of business without interruption and a smooth regulatory process. We are well versed in both the business and regulatory nuances associated with the sale of broker-dealers.
Prime Brokerage Services and Distribution Activities
Since our lawyers represent many hedge fund managers, we are experienced in reviewing prime brokerage documents and custody agreements from the buy-side. This gives us a more rounded perspective and an eye for the key issues when advising the sell-side. We are experienced in advising prime brokerage customers with respect to risks, rights and remedies associated with financially troubled broker-dealers. In addition, we advise parties to financial markets contracts with respect to counterparty insolvency risks.
Our lawyers have represented both placement agents and underwriters in a wide variety of capital raising transactions. We are experienced in navigating the regulatory issues relating to the limitations on underwriting compensation. In this regard, we draft engagement letters, placement agreements and/or underwriting agreements, along with any required selling group or syndicate documents.
Regulatory Compliance and Investigations
Compliance and awareness of impending regulatory changes are critical to a broker-dealer client's success. Our lawyers advise on all relevant aspects of broker-dealer regulation, including authorization requirements, regulatory capital, client classification, market abuse, anti-money laundering, commodity and derivatives trading, and financial promotions. Our broker-dealer lawyers are experienced in drafting, auditing and reforming compliance and supervisory policies and manuals.
Our day-to-day work includes drafting and reviewing counterparty and customer documentation; ISDA documentation; clearing, give-up, introducing broker, repo and stocklending agreements; and compliance procedures and advising on issues relating to exchange-traded derivatives.
We are well versed in regulatory issues and requirements globally and work in close collaboration across our offices to advise on cross-border and region-specific compliance matters. Kaye Scholer has particular experience advising clients on the nuances of jurisdictional issues raised in cross-border activities. Our lawyers actively collaborate with various regulators around the world to reduce unnecessary regulation and generally streamline the regulatory process. We routinely submit comments on SEC, FCA and EU consultation and rule-making processes to promote simpler regulation of investment funds and their advisers.
Internal Audits and Supervisory Reviews
At the request of our clients, our lawyers audit and investigate their compliance with FINRA, SRO, SEC and state regulations. Such audits and investigations help clients identify compliance with best practices in response to regulatory inquiries and investigations, customer complaints, or whistleblowers. We also help clients comply with FINRA Rules 3010, 3012 and 3013 by assisting with internal inspections, evaluations and certifications.
Our lawyers assist clients with responding to inquiries from, and investigations by, regulators and SROs by coordinating with the lawyers in our litigation department who have substantial experience in representing broker-dealers, investment managers and advisers, and other service-provider clients.
We have advised broker-dealers on their obligations and responsibilities associated with the establishment of Anti-Money Laundering ("AML") programs as required by the U.S. PATRIOT Act and other rules promulgated by the various SROs. For our U.K. clients, we advise on the Proceeds of Crime Act and the Money Laundering Regulations. We have drafted AML manuals, conducted training seminars and have advised on matters and issues relating to compliance with reporting requirements applicable to broker-dealers and other financial institutions.
Our lawyers have represented companies and individuals in money laundering investigations and asset forfeiture proceedings by the Department of Justice, including those involving monetary transactions routed through banking institutions on multiple continents.
Foreign Corrupt Practices Act
Operating in environments without the benefit of well-established rule of law presents unique challenges. As cross-border transactions multiply, Kaye Scholer is there to help clients establish their presence around the globe. We advise our transnational clients on the U.S. Foreign Corrupt Practices Act of 1977 ("FCPA") and have represented both foreign and domestic clients being investigated for multi-national transactions by the Department of Justice and the SEC. We have helped develop FCPA compliance programs for many clients.
In the Market
- Representation of multiple New York-based broker-dealers.
- Represented a prominent broker-dealer before the NYSE's enforcement division on matters involving complex short sale trading.
- Advised FINRA members during audits.
- Representation of the then-second largest broker-dealer in South Korea.
- Representation of the then-second largest broker-dealer in Mexico.
- Formation of a broker-dealer for an electronic trading network.
- Formation of a broker-dealer for a mergers and acquisition boutique.
- Formation of a broker-dealer for a large international insurer.
- Formation of a broker-dealer for an asset-backed derivatives boutique.
- Formation of a broker-dealer for one of the larger, publicly traded Swiss private banking groups.
- Formation of a joint venture with a Swiss broker-dealer for the issuance of structured products tied to a commodity index.
- Formation of a joint venture with an Argentine broker-dealer group for development of opportunities in Latin American fixed income markets.
- Advised and drafted various agreements for two broker-dealers forming a real estate joint venture.
- Representation of a Canadian broker-dealer acting as an advisor to a Canadian company with U.S. mining operations in connection with proposed liquidity transactions.
- Acquisition of a Texas-based broker-dealer by a large Mexican broker-dealer.
- Acquisition of a New York broker-dealer for a prominent New York bank.
- Advised a New York broker-dealer on U.K. and various other jurisdictions' financial promotion rules.
- Advised a U.K.-based research house and broker on the Markets in Financial Instruments Directive ("MiFID"), including passporting and disclosure issues, relating to a group reorganization.
- Advised a U.K. broker on business organization issues, including formation of an LLP.
- Representation of a significant New York broker-dealer in several SEC enforcement investigations.
- Representation of a significant New York broker-dealer in commercial, corporate and contract litigation.