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Category Archives: FINRA Compliance

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The bait and switch is alive and well.

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

FINRA has issued an investor alert involving high-yield CD offers that are really bait for the sale of a high commission investment. Apparently, FINRA has received calls on its senior hotline making it aware of a sales practice that involves enticing a client in to the office to purchase a CD and then being sold… Continue Reading

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 FINRA Want to Regulate Your Firm’s Culture?

Posted in Compliance and Supervision, Corporate Governance, FINRA Compliance, FINRA Enforcement

FINRA released its 2016 Exam Priorities yesterday, and its top priority ventures into a very grey area.  FINRA has announced that beginning this year, it will formalize a process of assessing “firm culture”.  In doing so, FINRA appears to be focused primarily on ethics and conflicts of interest and insists that it “does not seek… Continue Reading

Who still thinks FINRA is not interested in elder investor issues

Posted in Broker-Dealer Registration, Compliance and Supervision, Federal and State Criminal Activities, FINRA Compliance, FINRA Enforcement

As you may know, FINRA, last April, launched a senior helpline to address issues pertaining to senior investors. According to recent reports, FINRA received calls on many different issues such as how to read an account statement up fraud targeted to senior investors. FINRA has reported that some of these calls resulted in follow-up calls… 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 more risk avoidance techniques

Posted in Breach of Fiduciary Duty, Compliance and Supervision, Conflicts of Interest, Financial Industry Trends, FINRA Compliance, Registered Representatives, SEC Compliance, Securities Litigation

Ernie Badway and I have prepared a series of podcasts dealing with the relationships between broker-dealer, investment advisors and their customers.  Here is the third part of that series focused on risk avoidance techniques.  Here is the link: https://soundcloud.com/fox-rothschild-llp/securities-best-practices.

Who wants some additional ideas about cybersecurity

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

A recent Investment News article highlighted issues investments advisors face regarding their cybersecurity programs when it comes to regulatory examinations. First; don’t assume that your insurance policy covers the aftermath of a cyber-event. If you think you have coverage, make sure you document that understanding so that you do not have a shock when it… 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

Who wants to hear about pitfalls in the advisor/broker-client relationship

Posted in Arbitration, Breach of Fiduciary Duty, Compliance and Supervision, Conflicts of Interest, FINRA Compliance, FINRA Enforcement, Registered Representatives, SEC Compliance, Securities Litigation

Ernie Badway and I have prepared a series of podcasts that highlights client-issues and risk avoidance techniques for broker-dealers and investment advisors.  We hope you’ll take a listen.  

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

What qualities should a CCO have; here are nine.

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

Andrew Donohue, SEC Chief of Staff, recently commented on what a person needs in order to be a competent CCO; he identified nine things. The overarching theme from this list is experience. According to Donahue, in no particular order, a CCO must: Have a “first hand knowledge” of the regulatory environment. Have a detailed understanding… 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