Toby Walters, CFA, CFP®

So FINRA just fined a securities firm $10 million (yes, that FINRA; I had to double-check when I saw the amount too) for allowing employees to lavish gifts and entertainment spending on clients. First, the sheer money involved was a lot. Second, employees not only falsified records in the firm’s own systems; they helped the clients evade *their* gifts and entertainment policies, too. Yeesh. Lots of #compliance lessons here, both on weak corporate culture *and* the nitty-gritty of effective controls for recordkeeping compliance. #finreg #audit #GRC #securities #corpgov Link in the comments, since this new algorithm sucks and I’m trying to keep visibility high.

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The breakdown of the Federal Deposit Insurance Corporation (FDIC)'s consent order for Quaint Oak Bank in PA is below. While this order comes under the new administration, if you read between the lines (timelines), it really is from the prior administration, given that the exam issues were from mid-2023. A few lessons learned and reminders for all banks and CUs ⬇️ 1) Third-party relationships (TPRM) - still a thing. Transference of risk from unregulated or partially regulated or poorly regulated entities doesn't go away just because your next exam may not be focused on it. 2) AML/CTF Risk Profile is used several times... to me, this is your threat landscape. Think like a criminal. If you start from a defensive position (why that risk isn't related to your FI), then you'll miss something. 3) The threat landscape is then tied to your threat assessment (not your Risk Assessment)... threat + vulnerability = risk. Not risk = what I think/feel/hope. Move away from feelings into facts. Best way to do that? Threats + vulnerabilities = risk. 4) Resources reviews - yes for people and tech, but don't forget OFAC/sanctions in that. Often times, because this is decentralized most FIs don't consider that - and frankly, what it *should* look like. If you haven't touched your OFAC screening program in a while. You should definitely do it soon. Especially under this administration - FTOs and SDGTs are real. And beyond sanctions penalties, criminal charges await. And it is not just screening a name. Hasn't been for several years. Start with the Treasury Framework from 2019. 5) CDD is directly linked to, as it should be, the threat landscape, threat assessment, and risk appetite statement. (pg. 9) All dirty money and illicit activities don't happen without a customer at some point. 6) QC/QA mentioned several times... again, I call it QX. It just needs to happen, at some point. 7) AMLO's skills and ability and experience... that seems to be what regulators focus on. But how do we predict success beyond the resume? We've unlocked that at Hyper-S Research. Check us out. 8) Training - if you only deploy CBT canned training by grouped generic job titles from mainstream sources, is that really sufficient? NO. Must be tailored for your FI's threats. A good way to test for effectiveness - How many referrals are you getting from the various areas? 🧐 9) Audit - if it's a clean audit, it is not a good audit. Same goes for the review performed by FIs on their third-parties... if it's a clean review, it is not a good one. 10) For third-parties, use that same threat mindset when evaluating for adherence to AML and sanctions requirements. Check box approaches clearly don't work and leave FIs open to not just findings for unidentified risks, but also weaknesses in the oversight function as well. It's a 2-for-1. #ifollowdirtymoney

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Direct indexing and portfolio personalization without a risk model is like nutrition without a label — you don’t really know what you’re serving clients. As a portfolio manager, I see risk models as essential tools for advisors (but are still underutilized). They don’t add noise — they create clarity. By showing where portfolios are truly exposed, they give you the confidence to move beyond generic models and deliver direct indexing and personalized portfolios at scale (all while balancing out the tax implications). When you understand the factors driving risk — equities vs. bonds, sectors, rates — rebalancing isn’t just maintenance. It’s a chance to guide clients with intention, align portfolios with their goals, and prove the value of personalization. 👉 Risk models aren’t just about measuring risk — they unlock the strategies that set your practice apart.

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A pending CECL update could ease the math for acquirers — another factor that could contribute to more deals. “It does shorten that earn-back period in the dilution, essentially,” says Alan Lloyd, a principal in the assurance group with Wolf & Company, P.C. “It’s a little sweetener for deals that maybe were very close but couldn’t quite come to an agreement. Link to this article by Bank Director's Laura Alix in the comments.

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FINRA has fined a clearing firm $500,000 for off-channel comms, a lack of investment, and senior leadership involvement. Despite new 'growth' agendas, recordkeeping clearly remains a regulatory priority. Learn more: https://ow.ly/Co7y50WpeeP #FINRA #recordkeeping #compliance

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40% out of ~70,000 active Tricolor loans were allegedly promised to multiple creditors: And federal investigators are now probing for potential VIN fabrications or duplicate pledges to inflate the value of Tricolor’s portfolio. Leaving the asset-backed securities holders (who have shelled out more than $2B to Tricolor in the last two years, frantically looking for clarity. Wow. Talk about a house of cards. (Data source: Bloomberg)

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FINRA is probing broker-dealers involved in taking small foreign companies public, the latest effort by a regulator to crack down on pump-and-dump schemes. Context: Tiny companies listed in the US with primary operations overseas are more prone to extreme price spikes and collapses, sometimes fueled by touts on social media. 💥 Broker-dealers serving as underwriters are key gatekeepers to US public markets. Their role in taking a company public is essentially them vouching for the viability of a company. 💥 Finra, through a market-wide examination letter, wants to know about how broker-dealers performed due diligence and other information. 💥 The U.S. Securities and Exchange Commission, even during the shutdown, is on alert about "hanky panky," as SEC Chair Paul Atkins said on TV yesterday. 💥 The regulator has suspended trading in *nine* tiny companies in the past month, citing unusual trading patterns and ties to social media. One of them -- suspended before the shutdown -- surged almost 1,000% at one point. 💥 To put the suspensions in perspective, the SEC suspended a total of two companies in 2024.

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Direct indexing enables precise tax-loss harvesting at the individual stock level while maintaining broad market exposure. Our recent article dives deeper into this strategy and covers who may benefit from enhanced direct indexing. https://lnkd.in/e97MKEVD

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SEC and FINRA are probing over 200 DATs for insider trading - suspicious price action before Treasury announcements. Digital Asset Treasury companies (DATs) are created in secret, funded via PIPE deals, and pumped before public launch. I will explain how DATs work. 👇 📍How are DATs created? There are 3 core playbooks: 1. Reverse Merger First, find a dying public company. No revenue. Trading on fumes. Few shareholders. Then? Cut a deal. Take control. Merge in. You become the surviving entity. This is what TRON did with SRM Entertainment. This is how Janover became DeFi Development Corp. Rebrand. Clean the books. Replace the board. Now you’re a public company - with zero scrutiny and infinite narrative. 2. SPAC Can’t find a dead shell? No problem. Buy a SPAC. It’s already public, already clean. Merge in, get listing, and raise capital on day one. You’ll still need an SEC review - but the shortcut is clear. 3. Silent Takeover Want speed? Buy 51% of microcap - directly from insiders or on open markets. No proxy vote. No merger filings. Just a board shakeup and a brand pivot. Over 30 companies in 2025 have followed one of these 3 models. More are lining up - because infrastructure is already in place. 📍How DATs Funded? These aren’t tech startups raising from VCs. They're capital markets machines. Built to turn stock price hype into crypto. Once the public shell is secured, insiders inject capital through 3 ways: 1. PIPEs Institutional investors buy equity at a discount, behind closed doors. It’s fast. Quiet. And massive. TRON raised $100M this way. Strive Asset Management? $750M. Forward Industries pulled in $1.65B in Solana plays alone. These are not seed rounds. They’re weapons to flood treasuries with liquid capital. 2. Convertible Notes Don’t want dilution today? Borrow now, convert later - if shares go up. GameStop raised $2.7B this way to buy Bitcoin. Nano Labs prepped $500M for BNB. It's debt disguised as capital - if stock rips, so do conversions. 3. ATM Programs Once the stock trades above NAV, go full throttle. Sell shares on open market. Buy crypto immediately. Repeat. Forward’s ATM program? $4 billion. Metaplanet, Trump Media, GameStop - all running this playbook. It's reflexive loop: raise -> buy -> hype -> raise again. Insiders are the ones wiring money in, then dumping out. Now that you’ve seen how they’re funded… You’ll understand why early leaks matter. Why every “treasury” announcement should come with a timestamped wallet and SEC filing. Where it leaks: - Legal firms drafting docs. - Exchanges prepping listings. - Advisors whispering to funds. Worst of all: ROADSHOWS. Roadshow is where pump begins. SharpLink stock was flat - until day 2 of its roadshow. Spiked 1,000% before deal closed. That’s privileged information leaking - exactly when insiders play. If you don't know who created it, who funded it, and who front-ran it: You're the exit liquidity. Disagree? 👇

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Klaros is a small firm. We don't add people often, but what can I say? Business is strong. So, hot on the heels of adding Valerie Song (Senior Director, Licensing) and Sepideh Rowland (Partner, BSA/AML) to the team, I’m excited to announce that Roman Goldstein has joined us as a Senior Director, further strengthening our growing licensing practice. Roman’s superpower—translating between regulatorese and techspeak to enable safe, responsible, and scalable innovation—is exactly what Klaros clients need. He can decode complex regulations into plain English, explain regulators' unwritten expectations, and develop “new ways of conducting the very old business of banking,” especially through trust banks. That superpower will come in handy in our bank licensing practice, which is where Roman will be working initially. Putting together an application for a banking license, especially for the non-traditional applicant Klaros works with, is a multidisciplinary effort. It requires expertise in bank products and services, financial management, compliance, all kinds of risk management, and good common horse sense—to say nothing of a deep understanding of the competitive landscape, the regulatory environment, the specific regulatory and supervisory concerns associated with each client’s business model, and the tools available to mitigate those concerns.  These are hard, complex projects in which much of the craft lies in developing mutual understanding by articulating relevant issues and solutions in language that makes sense to innovators and regulators alike. Roman joins us from the staff of the Federal Reserve Board of Governors, where, as Lead Innovation Policy Analyst, he reviewed banks’ plans to engage in novel activities, reviewed foreign bank licensing applications, and developed supervisory policy for BaaS, open banking, and crypto. Before that, he served as an associate general counsel for Coinbase, where he advised the cryptocurrency company on compliance with banking and securities laws. In that capacity, he secured regulatory approvals worth $275M in revenue per year, including first-of-their-kind product approvals, and oversaw licensing for Coinbase Custody Trust Company. Roman has also been a banking lawyer in private practice with Sullivan & Cromwell and spent twelve years at the Office of the Comptroller of the Currency, where he was a banking lawyer, a bank examiner specializing in treasury and market risk, and special assistant to the chief counsel, overseeing regulatory approvals for novel securitization and asset management activities. Want to chat about risks and opportunities for your business in light of the current environment’s implications for bank licensing, innovation, regulation, or related topics? We’d love to hear from you. Send us a note at hello@klaros.com.

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Brett Bernstein, CFP®, CEO & Co-founder of XML Financial Group, explains some of the biggest concerns and questions he is hearing from clients lately 👉 https://lnkd.in/eW-m9zUi He also dives into where he is seeing market opportunities, how he is thinking about diversification, and reasons to be cautiously optimistic moving forward. #FinancialAdvice #MarketInsights #InvestmentStrategy #Diversification

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If you don't I will - Private Credit Bank loans to the private credit sector are making headlines, with regulators warning of systemic risks if economic conditions deteriorate. But behind the headlines, a fundamental shift is underway: banks are retreating from lending to SMEs, and private credit is stepping in to fill the gap. Banks, constrained by tighter regulations and risk management policies, are increasingly focusing on large, well-established corporates, leaving many smaller businesses underserved. Private credit funds—backed by experienced institutional investors—are now a vital source of flexible, tailored financing for SMEs and mid-market companies. In the UK alone, private credit managers are supporting around 2,000 firms with an estimated £100 billion in funding. Private lenders often provide faster, more bespoke solutions than banks, helping growth companies access capital when they need it most. While private credit typically comes at a higher cost, the flexibility and speed are crucial for businesses unable to meet banks’ rigid criteria. This has enabled many SMEs to expand, innovate, and compete, driving broader economic growth. Due diligence and risk management are central to private credit. Leading funds conduct rigorous assessments of borrowers, monitor covenants closely, and diversify portfolios to manage risk. Despite the growth and complexity of the sector, default rates have remained relatively low—recent data puts US private credit defaults at around 5.7%, while European forecasts suggest a 4.25% default rate by late 2025, with expectations for further moderation as markets stabilize. Many experts expect defaults to remain below long-term averages, especially as interest rates ease. Importantly, capital for private credit typically comes from seasoned institutional investors—pension funds, insurance companies, and family offices—seeking attractive, risk-adjusted returns and willing to support SME lending through specialized funds. As the landscape evolves, policymakers are working to improve SME access to finance, with initiatives like the Bank Referral Scheme and enhanced data sharing to help level the playing field. But for now, private credit is proving to be a critical engine for SME growth—helping the companies that need it most, while banks don't help the real economy and only focus on the largest players. #PrivateCredit #SMEs #AlternativeLending #FinancialInnovation #RiskManagement #BusinessGrowth #Regulation #Investing #BankingTrends Banks’ links to private credit could pose systemic risk, says Boston Fed - https://on.ft.com/3FjOQns via @FT

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FINRA has fined an online brokerage firm for not properly overseeing how social media financial influencers "finfluencers" promoted its services. These finfluencers were paid to create content encouraging people to use the brokerage platform. However, some of their posts were misleading, imbalanced, or made claims that couldn't be verified. FINRA has increased their focus on firm's social media and has found that the firm didn’t review or keep records of all influencer communications and lacked a solid system to monitor their content. Among the 15 firms and 1300 communications monitored, 70% were out of compliance. Firms working with influencers now face increased pressure to ensure content is accurate, fair, and properly supervised.   At Softek Compliance, our team of experts continue to work closely and collaboratively with our clients, helping to ensure that they not only understand the changes, but that they continue to stay compliant. To view a complete list of our services, click here: SOFTEK | COMPLIANCE SERVICES | USA   #SoftekCompliance #FINRA #RiskManagement #Compliance  

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