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Category Archives: Broker-Dealer Regulation

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Are regulations regarding elder investors inevitable

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation, Registered Representatives, SEC Compliance, SEC Enforcement, Securities Litigation

With the exception of those of you who have literally been asleep for the last few years, you are well-versed in the attention FINRA and the SEC are giving to issues surrounding elder investors. Among other things, there is a real focus on elder abuse. Some commentators believe that all of this attention may inevitably… Continue Reading

Why system passwords are not as easy as 123

Posted in Books and Records, Broker-Dealer Regulation, Cyber-Security, Financial Industry Trends, FINRA Compliance, Registered Representatives, SEC Compliance, SEC Enforcement

As we all know, cybersecurity remains a top priority for the SEC and FINRA. Unfortunately, a recent Investment News article would suggest that firms do not take it as seriously, or, at least, firm employees do not. A recent study of passwords by SplashData demonstrates that advisers and firm employees are not taking to heart… Continue Reading

SEC Exam Priorities; It Seems Like Deja Vu All Over Again

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Conflicts of Interest, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation, SEC Compliance, SEC Enforcement

Those famous words of the immortal Yogi Berra hold true when it comes to the SEC exam priorities for 2016. Among those at the top of the list are two familiar friends; protecting retail investors and investors saving for retirement. It is clear that the SEC is looking in particular toward how retail firms are… Continue Reading

So, I guess it is all about supervision and risk management after all

Posted in Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, FINRA Compliance, FINRA Enforcement

Other than the non-defined “culture”, FINRA’s 2016 exam priorities are also focused on supervision and risk management. At least these categories are a bit more defined so that you are not left guessing what FINRA means. Under these broad topics, FINRA is focused on four primary areas, which include: Management of conflicts of interest, including… Continue Reading

Culture . . . . We Don’t Need No Stinking Culture

Posted in Broker-Dealer Regulation, FINRA Compliance, FINRA Enforcement

Well, guess what? FINRA does not agree with this statement to such a degree that culture is now part of FINRA’s exam priorities for 2016. While the exam priorities acknowledge that “FINRA does not seek to dictate firm culture”, it is an important consideration when assessing a firm’s culture of compliance. After all, such a… Continue Reading

Why does the SEC care about elder clients

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation, Registered Representatives, SEC Compliance, SEC Enforcement

     The SEC is conducting an exam sweep that focuses on retirement advice being given to clients of investment advisors and broker-dealers. Some commentators see this as a turf war between the SEC and the Department of Labor (DOL) because the sweep focuses on things that may come under the DOL’s jurisdiction. Whether the exam… Continue Reading

Ten New Year resolutions that will help your firm

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, Financial Industry Trends, FINRA Compliance, Public Customer Arbitrations, Registered Representatives, SEC Compliance, Securities Fraud, Securities Litigation

Most people say that New Year resolutions are only as good as the paper on which they are written. Notwithstanding that ringing endorsement, I will give it a shot. Here are some things that you should be resolved to doing in the New Year: Read the SEC and FINRA exam priority letters that each issue… Continue Reading

So what does the expedited release of a Form U-5 mean for you

Posted in Books and Records, Broker-Dealer Registration, Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA CRD, FINRA Enforcement

As of December 12, 2015, FINRA will release Form U-5s within three business days of a member firm’s submission, instead of the fifteen days currently provided for under Rule 8312. The current version of the rule was meant to provide the departing registered representative ample opportunity to comment on the disclosure either though a Form… Continue Reading

Who wants to know three key parts of a data security program

Posted in Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, Financial Industry Trends, FINRA Compliance, SEC Compliance

Any data security program has to have three critical components. Those key components are the following: First; risk assessment. You must test, retest, and retest your systems (including your staff) for gaps and vulnerabilities. Hackers are very sophisticated. Do what you can to stay ahead of the curve on understanding the risks to your systems… Continue Reading

How can your clients be part of your data security program

Posted in Books and Records, Broker-Dealer Regulation, Cyber-Security, Financial Industry Trends, FINRA Compliance, SEC Compliance, SEC Enforcement

In order to have sound cyber-security protocols, you need to do more than just physically protecting your systems and having written supervisory programs. Specifically, you need to fully engage your clients to be part of the protocol. Their participation can make your program work that much better than without them. How so? For one, every… Continue Reading

Cybersecurity and regulatory enforcement; what are you doing

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, Cyber-Security, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

No one likes being a victim, let alone being a victim twice. But that is what you may face if you have a data breach. If your firm had a vulnerability that a hacker exposed, your regulator may come after you regardless if there is any client harm. After all, your system had a gap… Continue Reading

A Recidivist; Here We Go Again

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA CRD, FINRA Enforcement, Securities Litigation

One area of focus for FINRA has been on recidivist registered representatives. A recidivist is an associated person who has repeated rule violations or customer complaints of a specific nature. FINRA has used a risk-based approach in order to be proactive to identify the bad behavior that these undesirable registered representatives tend to display. In… Continue Reading

Why elder issues are not just about your clients

Posted in Books and Records, Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, Cyber-Security, FINRA Compliance, Ponzi Schemes, Registered Representatives, SEC Compliance, SEC Enforcement, Securities Fraud, Securities Litigation

The SEC and FINRA have made it very clear that they are focused on senior customers and elder abuse. Granted, firms must be focused on the elder customers, but, at the same time, must also focus on the fact that many advisors are included in the graying generation. What are firms to do about that?… Continue Reading

Who wants more reasons to focus on data security

Posted in Books and Records, Broker-Dealer Regulation, Collateral Consequences, Compliance and Supervision, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, Investment Adviser Regulation, Investment Company Regulation, Registered Representatives, SEC Compliance, SEC Enforcement, Social Media

The SEC recently issued an investor bulletin regarding one of our favorite topics; data security of customer accounts. The primary areas of the SEC’s focus were: Have a strong password, keep it secure and change it often. Use a two-step verification process if the firm offers it. Use different passwords for different on-line accounts. Avoid… Continue Reading

Why The SEC Does Not Want The Free Lunch

Posted in Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

It is no secret that some firms try to use the “free lunch” seminars to attract elder clients to high-fee investment products. The SEC recently noted that it will be, through the examination process, targeting firms who frequently sponsor these lunches that target the elderly as new clients. Although the SEC noted that there is… Continue Reading

Do you want to know 5 things that lead to a culture of compliance

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, Financial Industry Trends, FINRA Compliance, Registered Representatives, SEC Compliance, SEC Enforcement

In a recent blog, Michael Volkov noted five ingredients to ensure a culture of compliance. Why should you care? It is quite simple, firms that do not promote a culture of compliance are bound to find themselves face to face with their regulator, and not at a holiday party sharing cocktail weenies. So what are… Continue Reading

So who wants to know what FINRA has proposed to do about elder clients

Posted in Broker-Dealer Regulation, FINRA Compliance

I have blogged in the past about the thorny issues confronted by broker-dealers and financial advisors when it comes to dealing with elder clients. FINRA has, for one, proposed rulemaking to address one important situation. Under the proposed rulemaking, a firm will be able to place a temporary hold (although it will have no duty… Continue Reading

What an amended FINRA Rule 8312 may mean to you.

Posted in Books and Records, Broker-Dealer Registration, Broker-Dealer Regulation, FINRA Compliance, FINRA CRD, FINRA Enforcement

FINRA has released for comment its proposed amendment to Rule 8312, otherwise known as the BrokerCheck Disclosure rule. As it currently stands, FINRA waits for 15 days before it releases information reported on Form U5. This delay was meant to give a registered representative adequate time to comment. FINRA has proposed to change the waiting… Continue Reading

Why therapeutic neglect and an 8210 request do not go hand in hand

Posted in Books and Records, Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement

In first of a series of articles on FINRA enforcement and the disciplinary process, Scott Matasar gave some sage advice on dealing with an 8210 request. The biggest take away is that ignoring the request or providing a half-assed response is not the way to make friends at FINRA. First, ignoring an 8210 request will… Continue Reading

What do you need to know about the latest FINRA sweep exam

Posted in Books and Records, Broker-Dealer Regulation, Conflicts of Interest, FINRA Compliance, FINRA Enforcement

FINRA recently sent out targeted exam letters focused compensation practices. The intent of this targeted exam is to assess how firms identify, mitigate and manage conflicts of interest when it comes to compensation paid to registered representatives. This limited examination is designed for information gathering purposes and to determine best practices around the sale of… Continue Reading

Who wants some advice regarding cyber-threats?

Posted in Books and Records, Broker-Dealer Regulation, Collateral Consequences, Compliance and Supervision, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, Investment Adviser Regulation, Investment Company Regulation, SEC Compliance

A recent article in Onwallstreet.com highlighted certain areas of focus for investment advisors/broker-dealers when it comes to addressing cyber-threats. The article focused on four areas of particular significance. First, a firm must have a robust risk assessment approach to cyber-security. After all, a firm cannot develop and deploy cybersecurity policies and procedures unless and until… Continue Reading

FINRA Election Results: Shaken, not Stirred

Posted in Broker-Dealer Regulation, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation

The FINRA Board of Governors election results are in.  There were three vacancies among the 10 seats reserved for industry representatives:  one Large, one Mid-Size, and one Small Firm Governor.  John Thiel, head of Merrill Lynch Wealth Management, who ran unopposed, won the Large Firm Governor Seat.  Joe Romano, president of Romano Wealth Management, won… Continue Reading

FINRA Board Shake-up Coming?

Posted in Broker-Dealer Regulation, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation

Later this month, on July 30th, FINRA will hold its annual meeting in Washington, D.C., during which it will conduct an election for three open seats on its Board of Governors.  On FINRA’s 24-member Board of Governors, there are 10 seats that are reserved for industry representatives from small, medium and large firms.  Of those… Continue Reading