The Broker-Dealer group at K&L Gates LLP is a key component of the firm’s core Financial Services practice. The attorneys in this group advise a broad range of broker-dealers including international, national and regional firms, broker-dealer affiliates of banks, hedge funds, insurance companies and investment advisers. Many of the lawyers in the Broker-Dealer group also practice in other specialties such as Investment Management, Securities Enforcement, Hedge Funds, Internal Investigations and Litigation. Thus, although we regularly provide advice to clients who are engaged solely in broker-dealer activities, we also provide comprehensive legal services to diversified financial services companies that offer investment management and brokerage as part of their business. The lawyers in the Broker-Dealer group include former senior SEC and NASD (now FINRA) officials, two former state securities commissioners, and practitioners who have worked in-house at well-known securities firms. Collectively, our lawyers have appeared before every state securities commission in the United States.

• advertising, research and communications
• with the public
• best execution
• books and records
• commissions and mark-ups
• cross-border issues
• development of new securities products
• and services
• distribution of mutual funds and variable
• insurance products
• gifts and entertainment
• net capital and customer protection rules
• public and private offerings
• registration and SRO memberships
• sales and trading practices
• securities lending and credit activities
• supervisory policies and procedures

Regulatory Inquiries and Investigations
Our Broker-Dealer lawyers routinely assist clients with inquiries from the SEC, SROs and state regulators, including routine and cause examinations and regulatory sweeps. When a client is the subject of a broad investigation, or one with serious potential regulatory, reputational or economic risks, we coordinate with our Securities Enforcement and Litigation colleagues to draw on their depth of experience in defending all such investigations and any related enforcement proceedings, civil litigation or arbitrations.

Due Diligence
We periodically assist our Corporate and Transactional colleagues by performing due diligence in connection with mergers and acquisitions involving broker-dealers. Among other things, we assess the strength of the target firm’s supervisory system and management, its compliance with applicable regulatory requirements and suggest changes when improvements are necessary. We also handle all necessary filings with the SROs and state and federal regulators.

Information Barriers
K&L Gates advises broker-dealers on information barrier policies and procedures and performs reviews of such barriers. Representative clients range from integrated firms having active investment banking, research and trading operations to specialized research and trading boutiques. Our services include drafting control room policies and procedures to address, among other things, compliance with (i) mandatory obligations prescribed by the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA), (ii) requirements to separate investment banking from research and trading, (iii) Regulation M, and (iv) aggregation principles under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934.

Internal Audits and Supervisory Reviews
Our Broker-Dealer lawyers are often called upon to conduct audits or investigations of a client’s compliance with SEC, SRO or state regulatory obligations. These audits or investigations are performed for clients to assess their compliance with industry best practices, or for those who may have received some indication of possible noncompliance as a result of a regulatory inquiry, customer complaint or internal discovery of potential misconduct by a firm employee. Our Broker-Dealer lawyers are very experienced in conducting these types of audits and investigations and, where noncompliance is discovered, in assisting clients with correcting deficiencies and determining whether and when to approach the regulators about those deficiencies.

Our Broker-Dealer lawyers also assist clients in designing effective supervisory systems and drafting Compliance and Supervisory Procedures Manuals. We also assist with the internal inspections, annual evaluations and certifications required by FINRA Rules 3010, 3012 and 3013.

Distribution and Structuring
K&L Gates represents broker-dealers on a variety of distribution and structuring issues raised in the front and back office contexts. Representation includes advice in the public offering context for issuers of mutual fund and variable annuity products, as well as sponsors of mutual fund wrap products. In the private offering context, we represent placement agents of private equity, venture capital and hedge fund interests in initial private offerings and resales in Rule 144A financings.

Status Issues
K&L Gates has advised numerous clients on U.S. state and federal registration obligations and exemptions and exclusions from U.S. state or federal broker-dealer registration. Our London office advises on the scope of UK financial services authorization requirements for brokerage and corporate finance business done in the United Kingdom. K&L Gates has also advised clients on the nuances of jurisdictional issues raised in cross-border activities.

Formation, Registration and Continuing Membership
In the United States, K&L Gates represents clients seeking to enter or continue in the broker-dealer business. With our Corporate colleagues, we oversee the creation of the broker-dealers. We then manage the broker-dealer registration and SRO membership application process. K&L Gates’ representation in this area includes drafting business plans, supervisory procedures and service, employment, and vendor agreements. SRO membership requires the filing of numerous operational documents. We draft and comment on these operational documents and other processes to secure SRO membership, including making continuing education assessments, advising clients on net capital, disclosure and other ongoing requirements, and working with clients and regulators to facilitate and expedite the registration, membership application and authorization processes. Our services also include representing broker-dealers before SROs in the continuing membership context in the case of material changes in business or direct and indirect changes of control. In the United Kingdom, our lawyers can assist clients with all aspects of their FSA authorization application.

Clearing – Prime Brokerage
K&L Gates represents both clearing and introducing firms, and prime brokers. We negotiate clearing agreements and advise clearing and introducing firms about clearing issues. We also advise prime brokers about contractual and regulatory issues.

Bank/Broker-Dealer Activities (U.S.)
K&L Gates regularly advises commercial banking clients on structuring their securities activities within prescribed exceptions for traditional bank securities activities. We also advise our banking clients and their affiliated broker-dealers on activities that are required to be “pushed out” to a registered broker-dealer. Our advice includes establishing policies and procedures to comply with requirements of Regulation R of the SEC and federal banking regulators, such as drafting networking arrangements, reviewing compensation structures and structuring trading operations.

Anti-Money Laundering
K&L Gates has established an interdisciplinary and international Anti-Money Laundering practice group. We provide broker-dealers and other financial institutions comprehensive and diverse services relating to all aspects of anti-money laundering rules and regulations, including drafting AML policies and procedures and providing annual independent testing of AML programs.

Electronic Trading Systems
K&L Gates regularly advises clients on issues relating to ATSs, ECNs, and other electronic trading systems. We advise clients on whether their trading systems qualify as ATSs or ECNs, the regulatory requirements applicable to these systems, and various related structural and business options. We have assisted clients in seeking registration as an ATS, and have assisted other clients interested in acquiring existing ATSs or ECNs. We also advise clients on bulletin board, proprietary and other trading systems.

Foreign Corrupt Practices Act
The geometric increase in the volume of cross-border business brings with it the challenge of clients successfully competing for their strategic share in countries that do not have a commercial and legal culture supportive of the rule of law in the conduct of business affairs. K&L Gates advises transnational clients on the Foreign Corrupt Practices Act of 1977. Our lawyers have been active in successfully responding to Department of Justice investigations arising from transactions around the globe.

Related Practice Areas

Securities Enforcement
Our broker-dealer practice is complemented by K&L Gates' securities enforcement practice which includes more than 40 lawyers who represent clients in regulatory and self-regulatory enforcement investigations and proceedings.  In the U.S. our securities enforcement practice is one of the largest of any law firm.  This group includes a dozen lawyers with first-hand knowledge of the enforcement practice gained through service on the staffs of regulators like the SEC, NASD, NYSE and CFTC. 

In the U.K., K&L Gates' securities enforcement lawyers represent parties who are subject to FSA and Stock Exchange investigations or disciplinary proceedings.  With a growing capability in London, we look forward to meeting head-on the recent increase in FSA enforcement actions.  Because the mere initiation of an enforcement action can severely damage a person's reputation and business prospects, our Securities Enforcement Group recognizes the importance of convincing a regulator at the earliest stage possible that an enforcement action is not appropriate.  If enforcement action cannot be avoided, our enforcement lawyers are well prepared to litigate on a client's behalf — in court, in administrative proceedings, and, if necessary, on appeal.

See the Securities Enforcement practice area.

Securities Litigation
K&L Gates regularly represents brokerage firms and other financial institutions in litigation and arbitration.  We have participated for our clients in many of the major class actions involving the brokerage industry in recent years.  We also have an extensive practice in representing broker-dealers in disputes with their customers.

See the  Commercial Litigation and Class Action Litigation Defense practice areas.

Investment Management
K&L Gates represents a number of large and small investment advisers, as well as broker-dealers, concerning the investment adviser aspect of their business.  The following is a list of some of the areas in which we have represented investment advisers: structuring of the investment adviser organization for business and regulatory purposes; preparation of U.S. federal and state registration documents; compliance with U.K. financial promotion rules; compliance with the U.S. Investment Advisers Act, including the brochure rule; advertising requirements and U.S. rules applicable to performance fees; U.K. authorization requirements; establishing due diligence and compliance procedures and manuals; negotiating clearing agreements; conducting "legal audits" of investment advisers; and, in the U.S., advising investment advisers, broker-dealers and their affiliates regarding the applicability of ERISA to their operations.  We also represent investment advisers in mergers and acquisitions of investment advisory businesses, both in the U.S. and in the U.K.

See the Investment Management and Hedge Funds practice area. 

Private Equity
K&L Gates’ Private Equity Group regularly represents a full range of domestic and foreign private funds in all aspects of their organization, funding, operations and extraordinary transactions.  We represent a large number of hedge funds, venture capital funds, offshore mutual funds, domestic and offshore equity and debt funds, arbitrage funds, real estate funds, and various other private funds.  We have significant experience working with private fund sponsors, advisors, distributors, key investors and similar private fund participants, as well as distributors, custodians, administrators and other service providers to private funds

See the Private Equity and Venture Capital practice area.

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