The Clients’ Waiver of Their Rights Under Regulation BI of the Securities and Exchange Commission

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel discusses the Securities and Exchange Commission (SEC)’s Regulation Best Interest (BI), which imposes on broker-dealers a commitment to act in the best interests of their clients. Specifically, Frankel addresses the SEC’s treatment of client waivers of the Regulation BI, which goes even further than general fiduciary law to prohibit any waiver of the broker-dealer’s conflicting interests.

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DNREC v. McGinnis Auto & Mobile Home Salvage, LLC

Docket: 139, 2019

Opinion Date: February 20, 2020

Judge: Seitz

Areas of Law: Environmental Law, Government & Administrative Law, Zoning, Planning & Land Use

McGinnis Auto & Mobile Home Salvage, LLC salvaged discarded and dilapidated mobile homes on its property in Kent County, Delaware. According to the Department of Natural Resources and Environmental Control (DNREC), a large and unsightly waste pile, possibly contaminated with asbestos, had accumulated over time. DNREC cited McGinnis for environmental violations and for operating a reclamation facility without a permit. DNREC gave McGinnis a chance to bring the property into compliance, but McGinnis failed to do so. DNREC responded by issuing a cease and desist order requiring McGinnis to remove the waste pile from the property in an environmentally responsible manner. McGinnis appealed the order to the Environmental Appeals Board, arguing that DNREC could order the illegal activity to stop, but could not order McGinnis to take affirmative action to remove the waste pile from the property. The EAB agreed with McGinnis, finding that the order exceeded the scope of its authority. The Superior Court affirmed the EAB’s decision, finding that DNREC did not have the authority under its cease and desist power to require McGinnis to remove the waste pile, direct how the waste had to be removed, or demand documentation. On appeal, DNREC contended that the EAB and Superior Court took too narrow of a view of DNREC’s cease and desist authority. The Delaware Supreme Court agreed: "it follows that the only way to cease and desist from the violation is to remove the contaminated debris from the site. ... the Secretary can require a violator to cease and desist from continuing the illegal storage of solid waste. If the violator ignores the Secretary’s order, Section 6005 provides the possible remedies for a violation of 'any order of the Secretary.' The Secretary may impose monetary penalties. The Secretary may seek injunctive relief in the Court of Chancery. And, in his discretion, the Secretary may opt for conciliation. None of the possible remedies is mandatory or inconsistent with the Secretary’s authority to enter a cease and desist order."