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Category Archives: Financial Industry Trends

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Who You Gonna Call? FINRA!

Posted in Financial Industry Trends, FINRA Compliance, FINRA Enforcement

Last month, FINRA launched a toll-free FINRA Securities Helpline for Seniors at 844-57-HELPS (844-574-3577) to provide older investors with assistance from FINRA staff related to concerns they have with their brokerage accounts and investments, such as: understanding how to review your investment portfolio or account statements; concerns about the handling of a brokerage account; and investor… Continue Reading

Why Reverse Churning Does Not Create Cream From Butter.

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Public Customer Arbitrations, Registered Representatives

For years, firms have been using wrap products to charge an annual fee based upon the value of assets under management regardless of the number of trades, as opposed to fees per trade. In other words, wrap accounts were an effective tool to avoid churning claims because the customer theoretically could trade daily and only… Continue Reading

So Who Wants To Give A Vendor Access To Your IT Systems

Posted in Books and Records, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, FINRA Enforcement

At one time or another, member firms will likely need the services of an outside vendor. This may be particularly true for smaller member firms. Outside vendors have their place, but FINRA’s Report on Cybersecurity Practices details that level of vigilance needed when it comes contracting with vendors who have access to your IT systems.… Continue Reading

The SEC Cracks Down on Anti-Whistleblower Agreements

Posted in Compliance and Supervision, Financial Industry Trends, SEC Compliance, SEC Enforcement, Whistleblowers

Around this time last year, the Securities and Exchange Commission’s Office of the Whistleblower warned lawyers that they may be disciplined for drafting contracts to incentivize whistleblowers to not bring alleged company wrongdoing to the SEC’s attention.  It appears the SEC is beginning to make good on its threat.  Last week, the SEC resolved its… Continue Reading

Cybersecurity: FINRA’s Take

Posted in Compliance and Supervision, Financial Industry Trends, FINRA Compliance, SEC Compliance

We recently highlighted the Security and Exchange Commission’s 2014 OCIE Cybersecurity Initiative.  Not to be outdone, FINRA also released its Report on Cybersecurity Practices, which provided a much more in-depth report on cybersecurity.  Therein, FINRA offered its own insights into what it expects from firms’ cybersecurity risk management practices: FINRA recommends that firms have a… Continue Reading

New Look For FINRA.org

Posted in Financial Industry Trends, FINRA Compliance, FINRA Enforcement

Earlier this week, FINRA launched its redesigned website FINRA.org.  The website boasts a cleaner and more intuitive design, making information easier to find and read for users.  Streamlined navigation also allows users to more quickly access tools and resources on this site, such as BrokerCheck, investor education, and information about registration and qualification exams.  In… Continue Reading

Do Not Fall Behind On Cybersecurity

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

Cybersecurity is more than just a trending topic.  As hacks and leaks continue to be publicized, the Securities and Exchange Commission is stepping up its game and increasing its focus on cybersecurity compliance. The SEC’s Office of Compliance and Inspections recently released an initial summary of their findings from their 2014 OCIE Cybersecurity Initiative.  The… Continue Reading

What FINRA Is Doing About Private Placements

Posted in Broker-Dealer Regulation, Financial Industry Trends, FINRA Compliance, Private Placements

FINRA recently censured and fined a broker-dealer $175,000.00 for failing to perform appropriate due diligence and supervision regarding private placements that the firm and its registered representatives offered. This penalty should serve as a wake-up call that FINRA is taking a sharp look at the due diligence that firms perform before and after offering a… Continue Reading

FINRA in 2015 – High-Risk and Recidivist Brokers

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

FINRA is planning on turning up the heat on perceived “high-risk” brokers this year, and the firms that hire them.  Continuing our discussion regarding FINRA’s 2015 Regulatory and Examinations Priorities Letter, this blog entry will discuss FINRA’s planned activities to prevent and/or stop registered representatives from engaging in actual misconduct. In an effort to protect the… Continue Reading

FINRA in 2015 – Wealth Events

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

FINRA’s 2015 Regulatory and Examinations Priorities Letter provides guidance regarding areas of focus in the “Sales Practice” for this year.  Previously, we discussed the various sales products that FINRA will be monitoring this year; and yesterday, Josh Horn discussed FINRA’s recently adopted Supervision Rules that affect the Sales Practice.  This blog entry will discuss FINRA’s focus… Continue Reading

So How Is Your Cybersecurity

Posted in Books and Records, Cyber-Security, Federal and State Criminal Activities, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement, Social Media

The SEC and FINRA have continued to designate cybersecurity as an exam priority.  Both the SEC and FINRA have also recently published the findings of their exam sweeps.  As reported by the Investment News, the results of those sweeps when it comes to cybersecurity are telling. The sweeps show that firms, much like with compliance,… Continue Reading

FINRA in 2015 – Sales Products

Posted in Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation

Earlier this month, FINRA released its 2015 Regulatory and Examinations Priorities Letter.  In the letter, FINRA lays out its 2015 priorities, which focus on three general areas: 1) Sales Practice; 2) Financial and Operational Priorities; and 3) Market Integrity.  This blog entry will discuss FINRA’s “Sales Practice” priority. FINRA is focused on various sales products… Continue Reading

Whistleblower Tips Continue to Rise in 2014

Posted in Compliance and Supervision, Dodd-Frank, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

The number of whistleblower tips to the Securities and Exchange Commission (SEC) continues to rise, according to the SEC’s 2014 Annual Report to Congress on the Dodd-Frank Whistleblower Program.  In the November 17, 2014 report, Sean X. McKessy, Chief, Office of the Whistleblower, notes that his office received 3,620 whistleblower tips in Fiscal Year 2014,… Continue Reading

Reverse-Flash: SEC and FINRA Looking to Slow High-Speed Traders?

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

High-frequency trading is the latest craze hitting the market.  Popularized by Michael Lewis’s Flash Boys, high-frequency or high-speed trading involves the use of sophisticated technological tools and computer algorithms to rapidly trade securities.  According to Bloomberg BusinessWeek, high-frequency trading has been “blamed for making stock exchanges less transparent and markets more volatile [and] has disrupted the process… Continue Reading

So Who Really Thinks They Know Their Customers

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

As the year winds down to an end, financial advisors should be mindful of next year and the years to come.  Now is as good a time as any to make sure that you know your customer.  The year-end gives you a unique opportunity to get in front of your clients and revisit the year… Continue Reading

So What Can Be Done To Avoid The Quandary Of Clients With Dementia

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

As our population ages, more and more financial advisors will have to deal with clients who have dementia or get dementia.  If a client gets dementia, your options may be limited; it may be too late.  The question all firms should consider is are there things a firm can do before its clients show the… Continue Reading

What Does The “E” in Email Mean?

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

Recent history shows that FINRA is going after brokers who alter client’s records.  This, unfortunately, reminded me of my own bad experience as a young lawyer when defending a broker. That broker had great “contemporaneous” notes of his communications with the client that made the case very defendable.  My opponent questioned the authenticity of these… Continue Reading

Cyber-Security – What Do Enforcement Actions Tell You

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

In a recent NSCP Currents article, Giselle Casella addressed what every compliance office must know about cyber-security.  One of the more compelling lessons was what can be learned from enforcement actions dealing with cyber-security.  Cyber-security enforcement actions fell into the following groupings:  Inadequate security policies and procedures; Failure to enforce policies and procedures; Failure to… Continue Reading

So Who Wants To Inherit A Book Of Business

Posted in Financial Industry Trends, Intra-Industry Arbitrations, Raiding/Moving Firms

Brokers like anyone else enjoy making money the old fashioned way  . . . . by inheriting it.  Although everyone wants to inherit business, a recent Investment News article highlighted the pitfalls associated with agreements to acquire the business of a retiring broker.  Indeed, intra-industry disputes, such as those involving the acquisition of a book… Continue Reading

Do You Need Another Reason To Take Cyber-Security Seriously

Posted in Cyber-Security, Dodd-Frank, Federal and State Criminal Activities, Financial Industry Trends

As we all know, the SEC and FINRA have made cyber-security an exam priority in 2014, but what does it mean when the audit of your regulator shows that it is susceptible to a data breach.  A recent audit of the SEC found that its cyber-security was far from perfect.  I am sure that there… Continue Reading

FINRA In The Clouds

Posted in Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement

FINRA continues to boost its surveillance capabilities by adopting new technologies like the cloud.  Reuters recently interviewed the CIO of the Financial Industry Regulatory Authority, Steven Randich, who commented on the agency’s ongoing 30-month roll-out of cloud computing.  According to Randich, by moving to the cloud, FINRA will get “dramatic processing and storage scale at… Continue Reading

I Tweet, You Tweet, We All Tweet

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, SEC Compliance, SEC Enforcement, Social Media

The SEC recently issued two interpretations that address your use of interactive social media, like Twitter, in accordance with the securities laws.   These interpretations permit your firm to now use a hyperlink to satisfy the legend requirements and, at the same time, limit your responsibility where your communications are retransmitted, like a retweet.  The major… Continue Reading

Why Should You Care About Cyber-Security

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

The short answer to this question is that the SEC and FINRA care.  Both regulators have made this issue an exam priority for the year, and it was recently a focus of an SEC roundtable.  We hear of data breaches on nearly a daily basis at retail stores, to name a common target.  But what… Continue Reading

FINRA “Sweeping” Firms for Cyber-Security

Posted in Cyber-Security, Financial Industry Trends, FINRA Compliance

We keep saying it, and we will keep saying it, cyber-security issues will not go away. Now, FINRA has notified its member firms that it will begin assessment examinations regarding controls, procedures, approaches and management of cyber-security threats.  See http://www.finra.org/Industry/Regulation/Guidance/TargetedExaminationLetters/P443219.  In particular, FINRA examiners will review business continuity plans, service provider arrangements, other third party vendor agreements, reporting lines,… Continue Reading