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Category Archives: FINRA Compliance

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The Uniform Fiduciary Duty Standard – It Seems Like Déjà vu All Over Again

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Dodd-Frank, FINRA Compliance, FINRA Enforcement

Although it has been many years since Yogi Berra uttered this famous line, it seems like he must have been thinking about the debate regarding the adoption of a uniform fiduciary duty standard.  All kidding aside, one SEC commissioner recently expressed his doubts regarding the SEC proposing such a rule for those who give retail… 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

What Do FINRA’s Enforcement Statistics Mean

Posted in Broker-Dealer Regulation, FINRA Compliance, FINRA Enforcement, Registered Representatives, Uncategorized

At the halfway point of the year, the Sutherland Asbill firm has issued its report on FINRA’s fines to date.  That report reflects that, although fines are on a record pace this year, the number of actions by FINRA is behind pace.  So what does this mean?  The first step is to look at the… Continue Reading

Cybersecurity Threats Abound and FINRA Asks Questions

Posted in Cyber-Security, FINRA Compliance, FINRA Enforcement

FINRA has sent targeted sweep letters to almost 20 broker-dealers conerning their approaches to managing cybersecurity risks.  http://www.finra.org/Industry/Regulation/Guidance/TargetedExaminationLetters/P443219; and http://www.sec.gov/News/Testimony/Detail/Testimony/1370540757488#.UvVcWJUo61s. Among other questions, the survey asks the firms about their approaches to information technology; risk assessment; business continuity plans in case of cyber-attack; organization structures and reporting lines; and processes for sharing and obtaining information… Continue Reading

Should You Feel Better That FINRA Vetted Its Arbitrators

Posted in Arbitration, FINRA Compliance, FINRA Enforcement, Intra-Industry Arbitrations, Public Customer Arbitrations, Raiding/Moving Firms

As a result of a couple high profile awards that were overturned because of issues with the arbitrators, FINRA has vetted its pool of arbitrators and has instituted new procedures to review arbitrators. Should you feel any better that this has happened? Having defended broker-dealers and registered representatives over 16 years, I have, at times,… Continue Reading

What Are You Doing About Cyber-Security

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

It was apparently not enough that the SEC and FINRA made cyber-security an exam priority for 2014, but the Department of the Treasury has now focused on this pervasive issue.  In recent comments, Treasury Secretary Lew has urged financial firms to step it up when protecting against cyber-attacks.  Stories of cyber-attacks are becoming so common… Continue Reading

Should You Even Care About A Uniform Fiduciary Duty

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, Dodd-Frank, FINRA Compliance, SEC Compliance, Uncategorized

In an Investment News article written by Mark Schoeff, he reported that the push for a uniform fiduciary standard for broker-dealers and investment advisors has become a bit stagnant. In fact, it was reported that the prospects for such a uniform rules have waned over the years notwithstanding the general consensus that there should be such a… 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


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

FINRA announced several new regulatory and examination priorities, including the creation of a dedicated enforcement team to prosecute “recidivist brokers.” Recidivist brokers have been the subject of “a pattern of complaints or disclosures” involving sales practice abuses.  FINRA will examine firms that hire these brokers and expect to review the firm’s due diligence conducted in… Continue Reading


Posted in Expungement, FINRA Compliance, FINRA CRD

A senator wrote to FINRAand the SEC raising concerns about the high rate that broker-dealers have complaints expunged from their records.  See http://www.markey.senate.gove/documents/2013-10-25_FINRA.pdf; http://www.markey.senate.gove/documents/2013-10-25_SEC.pdf. In the letter to FINRA, the senator said the high expungement rate means that BrokerCheck is not providing investors with accurate information, and “rogue brokers” continue to operate their businesses.  The… 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

Do You Really Want To Be A Dual Registrant

Posted in Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, FINRA Compliance, Registered Representatives, SEC Compliance, SEC Enforcement

One of the priorities of the SEC National Examination Program is dual registrants; entities that provide both brokerage and investment advisory services.  The focus of the program on dual registrants begs the question why a firm would want to be one.  The answer to that question should be an obvious.  Being a dual registrant allows… Continue Reading

Broker-Dealers Must Now Investigate Potential Registered Representatives

Posted in FINRA Compliance, FINRA CRD, Registered Representatives

FINRA approved new rules to require member firms to verify the accuracy of information provided on a prospective applicant’s Form U4.  See http://www.finra.org/Newsroom/NewsReleases/2014/P493588. The new FINRA rules will now force firms to adopt new written procedures to verify information from public sources of available criminal, bankruptcy, and litigation records.   FINRA also stated that it will review public… Continue Reading

Is “Big Brother” Such A Bad Thing

Posted in Broker-Dealer Regulation, Corporate Governance, FINRA Compliance, FINRA CRD, FINRA Enforcement, Ponzi Schemes, Registered Representatives

FINRA recently announced a change to the supervision rule to require hiring firms to conduct background checks on new employees.  This rule change raises the question; what have member firms been doing all along.  In this day and age of instant information, having a new registered representative complete his/her U-4 should have only been a… Continue Reading

Data breaches and third-party vendors; what do you need to know.

Posted in FINRA Compliance, SEC Compliance, Securities Fraud, Securities Litigation, Uncategorized

I recently blogged about the pervasive nature of data breaches and the particular risks presented to this industry.  Many firms may think that they are secure because they used a vendor to build a secure environment, but history tells us that is not the case.  Cyber-attacks do not always come from a direct hit, but… 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

Who Wants To Know Something About FINRA’s New Written Procedures Rule?

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

New FINRA Rule 3110 (effective December 1, 2014) sets out various written procedures and requirements for member firms.  You should pay particular attention to these rules because they suggest those areas of focus in any upcoming examination.  Among other things, new FINRA Rule 3110.06 provides for the review of correspondence and internal communications.  Importantly, this… Continue Reading

What Do You Need To Know About FINRA’s New Supervision Rules

Posted in Broker-Dealer Regulation, FINRA Compliance, Registered Representatives

Effective December 1, 2014, there will be new rules for broker-dealer supervision.  With these changes, FINRA is placing more burdens on a firm’s supervisory system.    With respect to “supervisory systems”, Rule 3110 covers the following:  Establishing and maintaining written procedures and designating principals responsible for supervision. Designating offices of supervisory jurisdiction. Designating OSJ/non-OSJ branch principals…. Continue Reading

E-Mail Guidance from FINRA …. What took you so long?

Posted in Broker-Dealer Regulation, FINRA Compliance

FINRA amended its supervisory rules to include new Rules 3110 and 3120.   See http://www.finra.org/Industry/Regulation/Notices/2014/P465941.  Those Rules replace FINRA Rules 3010 and 3012 and add some additional requirements.  FINRA provided some additional guidance concerning  electronic communications, including customer correspondence and internal communications.  FINRA will now permit member firms to use a “lexicon-based” screening tool or system for email reviews.  Nonetheless, supervisors are still… Continue Reading

What To Make Out Of FINRA’s Proposed Rule On Bonus Disclosures

Posted in Broker-Dealer Regulation, Conflicts of Interest, FINRA Compliance, SEC Compliance

Bonuses and other forms of compensation are frequently used by one firm to attract talent away from another firm.  FINRA has now proposed a rule that would require brokers who receive in excess of $100,000 to disclose that payment to their customers.  Does this make any sense?  FINRA’s rationale for the rule is that it… Continue Reading

Should You Breath Easy Because FINRA Enforcement Actions And Fines Decreased In 2013

Posted in Broker-Dealer Regulation, Conflicts of Interest, FINRA Compliance

The Sutherland Asbill firm recently released its report regarding FINRA enforcement actions. In all, the report reflects that enforcement actions and fines decreased over the past year.  So what does this all mean? According to the firm, this could be a reflection of the larger financial crisis cases having worked their way through the system…. 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

FINRA Issues 2014 Regulatory and Examination Priorities

Posted in FINRA Compliance, FINRA Enforcement

Just yesterday, FINRA issued its annual regulatory and examinations priorities letter.   In keeping with its tradition, FINRA’s list keeps getting longer with each passing year, and it does not seem that FINRA has deleted anything from prior years.  Nonetheless, we will be discussing this letter in more detail in later posts but wanted to let everyone know that… Continue Reading