Sylvia Scott, Attorney Tumblr Blog

A Partner with Freeman Freeman & Smiley, LLP, Sylvia M. Scott primarily handles cases relating to financial services, regulatory law, and employment law, including litigation. Serving clients out of the Los Angeles branch, Scott has regularly represented...

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Sylvia M Scott, and the SEC and FINRA

Recognized as a leading securities law professional in Los Angeles, Sylvia M. Scott currently leads the Securities Regulation Practice Group at Freeman, Freeman & Smiley, LLP. Sylvia M. Scott has represented a wide variety of clients in regulatory matters before the U.S. Securities and Exchange Commission (SEC), FINRA and other regulatory agencies. Ms. Scott's experience as a former enforcement attorney at the SEC and FINRA enables her to effectively represent clients in these regulatory matters and provide insight into the issues under review.

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The LACBA’s 48th Annual Securities Regulation Seminar

Sylvia M. Scott leverages nearly three decades of experience in litigation and securities regulation to work with Freeman, Freeman and Smiley, LLP, in California, where she is a partner in the Los Angeles office and the head of the Securities Regulation Practice Group. As an active member of the securities regulation industry and the legal community, Sylvia M. Scott also remains connected to a number of organizations, including the Los Angeles County Bar Association (LACBA). Among its many programs and resources for members, the LACBA hosts an annual Securities Regulation Seminar, which is coordinated by its Business and Corporations Law Section. The LACBA will present its 48th Annual Securities Regulation Seminar in October 2015 at the Millennium Biltmore Hotel in Los Angeles. At the event, attendees will enjoy a comprehensive examination of the latest developments in the securities sector during presentations led by top Securities and Exchange Commission (SEC) representatives, leading private practitioners, and officials from various regulatory agencies. The LACBA states that the seminar is worth more than seven hours of continuing legal education credit, with an hour of ethics credit. During the 48th Annual Securities Regulation Seminar, participants can also engage in discussions with the new SEC Division Directors on SEC priorities. The seminar will provide an overview of a wide range of subjects, such as current trends in SEC enforcement, regulation of investment advisors, and securities offerings.

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The Super Lawyers Selection Process

Over the course of her career as a legal professional, Sylvia M. Scott has emerged as a leader in the securities sector in Los Angeles. As a partner with Freeman, Freeman & Smiley, LLP, Sylvia M. Scott has received numerous awards in recognition of her accomplishments including three consecutive Super Lawyer awards. Providing a comprehensive listing of the best industry lawyers in the United States and London, Super Lawyers adheres to a detailed selection process when choosing which lawyers to recognize. The Super Lawyers selection process begins with the creation of the candidate pool, which involves both formal and informal nominations. Super Lawyers also conducts its own research, seeking out lawyers with particular results, credentials, and honors. After finalizing the candidate pool, Super Lawyers evaluates each candidate on the basis of 12 criteria. The third step, commonly known as the “blue ribbon review,” involves peer evaluation by practice area. Finally, Super Lawyers groups candidates into four firm-sized categories and selects those candidates with the highest point totals.                            

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Ensuring Compliance and Avoiding Supervisory Liability

Sylvia M. Scott is a Freeman, Freeman & Smiley, LLP, partner with the firm’s Los Angeles office. A SuperLawyer award winner, Sylvia M. Scott provided practical advice on avoiding supervisory liability in a 2012 NSCP Currents article. With regulatory authorities such as FINRA and the SEC taking an increasingly aggressive stance, a line must be drawn between financial advisors and the legal and compliance staff who inform them. In particular, it should be explicitly stated that the latter staff members do not hold a supervisory role over the financial personnel. It also makes sense to carefully document red flags, such as employee misconduct, as they arise. Whether in a written report, email, or memorandum, state the process by which the issue will be addressed. Also make clear which direct-line supervisors will handle the monitoring of the employee’s conduct. Because red flag events are sensitive by their very nature, it makes sense to obtain legal guidance when deciding on a particular compliance path to take.

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Educational Opportunities at the NSCP

A longtime legal professional with considerable experience in the securities regulation and compliance sector, Sylvia M. Scott is a partner in the Los Angeles office of Freeman, Freeman and Smiley, LLP. Sylvia M. Scott also belongs to the National Society of Compliance Professional (NCSP), a professional organization for individuals in the regulation and compliance sector. The NCSP offers a full range of educational opportunities for members, including face-to-face meetings, webinars, and resource modules. Every year, the NSCP organizes face-to-face meetings for compliance professionals in regions across the United States. The meetings are led by longtime industry professionals who conduct workshops specific to private funds, investment companies, broker-dealers, investment advisors, and more. The NSCP also records an extensive series of webinars, which members can access on the website at any time. Through its Essential Compliance Resource Modules (ECT) program, the NSCP provides valuable resources for compliance officers in a diverse array of fields.

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Understanding the SEC’s OCIE Directives and Maintaining Compliance

An attorney with Freeman, Freeman & Smiley, LLP, Sylvia M. Scott leads the firm’s Securities Regulation Practice Group and has written extensively on securities and regulatory compliance issues. Sylvia M. Scott authored the September/October 2011 NSCP Currents article “With Hedge Funds a Priority of the SEC’s Examination Program, Advisers Need to Know How to Avoid Becoming an ‘Enforcement Referral’.” Directed at hedge fund advisers, the article focuses on ways of complying with directives and avoiding unwanted enforcement scrutiny from the SEC’s Office of Compliance, Inspections, and Examinations (OCIE). The OCIE maintains a staff of former industry professionals, accountants, lawyers, and MBAs and focuses on vetting registered investment firms and advisers. Accountability was strengthened through a mid-2011 requirement that hedge fund advisers register with state regulators or the SEC. Having undergone significant reforms, the SEC’s enforcement program undertakes analysis of documents obtained from registered advisers and pursues investigative testimony. Fully understanding the OCIE’s risk-based examination selection process is critical in setting in place optimal compliance procedures.

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Sylvia M. Scott: Changes to Securities and Exchange Commission’s and FINRA's Enforcement Programs Require Financial Firms to Reexamine Their Own Compliance Protocols

Sylvia M. Scott, a partner at Freeman, Freeman & Smiley, LLP, discusses the need for firms to reevaluate and, if necessary, change their compliance programs to avoid regulatory action. A former senior enforcement counsel and manager with the SEC and NASD (nka FINRA), Ms. Scott possesses extensive experience in the area of securities regulations. In a rapidly shifting regulatory landscape, the SEC and FINRA continue to heighten their scrutiny of firms' compliance programs. Changes to regulatory procedures include everything from more comprehensive examinations to the creation of specialized units to concentrate on areas it deems of special investigative and regulatory importance. In the wake of such a regulatory sea change, it is important for firms to examine their compliance programs to make certain they are robust and continue to be effective. This reexamination should ensure compliance requirements are current with the latest regulations and that all staff receive proper training on the requirements. Additionally, to the extent a firm falls under the ambit of one of the SEC’s specialized units, firms should customize compliance measures to dovetail with the unit’s focus. Furthermore, a solid protocol should include a set of formalized procedures for handling examinations and investigations if and when they occur. By establishing a vigorous compliance program, firms can limit the potential for regulatory violations and help minimize any possible sanctions.

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Sylvia M. Scott: Three Tips for Avoiding Supervisory Liability

Freeman, Freeman & Smiley, LLP Partner Sylvia M. Scott, a former SEC and NASD (FINRA) regulator, represents clients in securities regulatory matters, as well as securities industry employment matters. Ms. Scott, who has previously written on how the SEC and FINRA determine whether a supervisor is accountable for employee misconduct, offers the following tips: - Create clear and concise written supervisory procedures (WSPs). Investigators rely heavily on WSPs when determining liability. - When red flags occur, document them and your response to them. Chief compliance officers, direct line supervisors, and employees responsible for flagged actions should all be made aware of red flags, and their awareness should be documented. - When your job duties are expanded, check to see whether they include supervisory responsibilities. If they do, any violations in your area may cause you to incur liability. - Training: Make sure you are continuing to receive adequate training and support to enable you to do your job. - Escalate: Unresolved compliance issues should be escalated up the chain of command. - Alternative Products: If your firm sells alternative products (Reg D offerings, private placements, etc.): 1) make sure your firm has a rigorous and ongoing due diligence program; and 2) consider creating a short, “plain language” disclosure form for each customer to sign that spells out that they under the product is high risk and that the investor could lose all of his/her money.

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The National Society of Compliance Professionals

By Sylvia M. Scott, JD The National Society of Compliance Professionals (NSCP) is a nonprofit association based in Cornwall Bridge, Connecticut, for compliance officers attached to or affiliated with securities-related enterprises, such as brokerages, investment firms, bank and insurance firms, law and accounting firms, and hedge funds. Founded in 1987, the NSCP mission has been to keep apace of all regulatory changes promulgated by the Securities and Exchange Commission (SEC) and FINRA. The NSCP offers members Webinars, discounts on continuing education, access to learning materials, and a training program leading to licensure as a Certified Securities Compliance Professional (CSCP). NSCP members also receive subscriptions to NSCP Currents, a bimonthly journal on developments in the financial services industry, and NSCP Hotline Memo, a biweekly summary of advocacy and legislative initiatives specific to financial services. About the Author: Sylvia M. Scott is an attorney in southern California, serving as a Partner and head of the Securities Regulation Practice Group at Freeman, Freeman and Smiley, LLP, one of the leading commerce-related law firms in Los Angeles. As a faculty member of the National Association of Compliance Professionals since 2005, Sylvia Scott has contributed articles to NSCP Currents and has been a presenter at NSCP conferences on a broad range of regulatory matters impacting the securities industry.

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Sylvia M. Scott: Creating a Strong Compliance Program

A partner at Freeman, Freeman & Smiley, LLP, in Los Angeles, Sylvia M. Scott also serves as head of its Securities Regulation Practice Group. Responsible for defending brokers and advisers, Ms. Scott (formerly a regulator with the SEC and FINRA) understands the importance of identifying potential compliance problems before they become enforcement referrals.  Virtually every investigation or examination by FINRA and the SEC considers the issue of supervision and the adequacy of a firm’s written supervisory and compliance procedures (“WSPs”). If the regulators believe that the misconduct at issue could have been prevented or detected with a “reasonable” supervisory system or “reasonable” supervision, then the supervisory and compliance staff will be evaluated to determine whether they should be held accountable for the alleged deficiencies.  In view of the aggressive stance taken by the regulators these days with regard to supervisory liability, adopting a plan for minimizing one’s regulatory exposure should be of paramount importance to firms. The following are some tips for avoiding supervisory liability: 1. Clear & Concise WSPs Regarding Reporting Lines: Make sure the WSPs: 1) clearly identify the direct line supervisors of all financial advisers; 2) state that it is not the firm’s intention to make legal and compliance staff the supervisors of financial advisers; and (b) clearly state that legal and compliance staff do not themselves have the responsibility, ability or authority to effect the conduct of financial advisers (or define the limited areas where they do have any such authority).  2. Document Red Flags & How They are to be Handled: Document in a memorandum, report and/or email significant issues regarding potential employee misconduct, including how the issue is to be handled going forward and which direct line supervisors will be responsible for implementing and monitoring the employees conduct. Note well: Documenting this type of event is always a sensitive undertaking and should be approached with appropriate caution and legal guidance. 3. Training: Make sure the staff compliance staff receives adequate training and support to enable them to do their jobs. Of course, meaningful training for advisers is also critical. In this ever-changing regulatory landscape, this is a particularly important area.  4. Communication with Supervisors: CCOs should make sure that the direct line supervisor of any employee whose conduct has raised red flags is aware of the issues and is implementing a plan to respond to the red flags. This must be documented. 5. Heightened Supervision: Heightened Supervision Plans must be documented and should include: 1) the details of the plan; 2) assigned supervisory responsibilities for implementation of the plan; 3) how the plan will be monitored and by whom. 6. Escalate: Unresolved compliance issues should be escalated up the chain of command. There should be clarity around who is making decisions relating to the matter.  7. Carefully Evaluate Expansion of the CCO Role: Carefully evaluate the assignment of any new responsibilities and whether they entail any supervisory responsibilities. Individuals who take on supervisory duties may unwittingly assume liability if violations occur in their areas. This is what occurred, according to the administrative law judge, in the Urban case.  8. Role on Committees: Carefully evaluate the ramifications of undertaking roles on firm committees. If you serve on firm committees and/or the board of directors, make sure that it is clarified in writing that your role is advisory in nature and nothing more. This was a factor identified in the Urban case which contributed to the administrative law judge’s determination that Mr. Urban was a “supervisor.” 9. Ensure Sufficiency of Compliance Resources: If you must wear multiple hats, be realistic about whether you can actually discharge all of your compliance responsibilities. The cost of a regulatory action (and any related private actions) can be significant and put a small firm out of business.  10. Alternative Products: If your firm sells alternative products (Reg D offerings, private placements, etc.), among other things: 1) make sure your firm has a rigorous and ongoing due diligence program; and 2) consider creating a short, “plain language” disclosure form for each customer to sign that spells out that they understand the product is high risk and that the investor could lose all of his/her money. This area has resulted in a plethora of supervision cases by FINRA and the SEC. While much of this is easier said than done when trying to run a business in this challenging economy, through planning and smart management it can be done.