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Category Archives: FINRA Enforcement

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How can a phone call save your career

Posted in Cyber-Security, Financial Industry Trends, FINRA CRD, FINRA Enforcement

A 17-year veteran advisor recently agreed to a lifetime ban for falsifying the signatures of a client on 10 documents transferring money out of the client’s accounts over a period of two months. Part of this transfer also involved 17 unauthorized trades in the client’s non-discretionary accounts. So how could a phone call have saved… 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

So who really thinks the SEC is not focused on elder investors

Posted in Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

If there is any question that the SEC is focused on elder investor issues, look no further than its recent program announcement. The SEC initiated a program designed to examine retirement planning guidance. Under this program, the SEC intends to explore whether the compensation advisers receive presents a conflict of interests and, if so, how… Continue Reading

Does FINRA Really Want To Make It Easier To Communicate With The Public

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

In FINRA Notice to Members 15-16, FINRA has solicited comments to its proposal that would make communications with the public a bit easier. FINRA proposes to change Rule 2210 (communication with the public), 2214 (requirements for the use of investment analysis tools), and 2213 (requirements for the use of bond mutual fund volatility ratings). All… Continue Reading

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

What The Heck Is A Senior Designation

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

That is one of the questions FINRA sought to answer in its recent National Seminar Investor Initiative. FINRA confirmed that many representatives use such designations, but some of them are bogus or no better than a certificate you find as a prize in a cereal box. The problem is that some representatives use these bogus… 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

Is This A Preview of FINRA’s Approach to Rule 3110(e)

Posted in Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA CRD, FINRA Enforcement, Raiding/Moving Firms, Registered Representatives

In a recent Acceptance, Waiver and Consent (“AWC”) a broker dealer was censured and fined for, among other things, the failure to conduct an adequate pre-hire investigation of a registered representative. The importance of this AWC is that it may signal FINRA’s mindset for what firms must do under Rule 3110(e). Under Rule 3110(e), FINRA… 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

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

What Are You Doing About The New Supervision Rules

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

FINRA noted in its exam priorities that it will be focusing on firms’ compliance with the new supervision rules (FINRA Rules 3110, 3120, 3150 and 3170).  These rules became effective on December 1, 2014. Now that two months have passed since their effective date, firms should have taken the changes into account in their written… 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

Are You Charging Your Customers Too Much

Posted in Books and Records, Breach of Fiduciary Duty, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, SEC Compliance, SEC Enforcement

If you are not asking that question, FINRA may as its recent $350,000 fine levied against a major brokerage house indicates.  In that instance, FINRA found that the brokerage charged 20,000 customers a total of $2.4 million too much for certain transaction fees. For its part, the SEC is going after private equity firms because… 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

Why You Need To Think Twice About That New Hire

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

Starting July 1, member firms are required to have written procedures to verify the accuracy and completeness of the information in a registered representative’s U-4 within 30 days of the U-4 being filed with FINRA.  The question that arises is whether the expense of this new type of “investigation” is worth it. In short, member… 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

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

Look Before You Tweet

Posted in Compliance and Supervision, Conflicts of Interest, FINRA Compliance, FINRA Enforcement, Registered Representatives, Social Media

FINRA recently sanction a registered representative for tweets made some time ago.  The offending tweets referenced a stock that he did not disclose that he owned and were otherwise biased and not backed up by facts.  The registered representative was fined $15,000 and given a ten day suspension.  In the larger scheme of things, a… Continue Reading

Forget Including A Bar Of Whistleblower Tips In Settlement Agreements

Posted in Broker-Dealer Regulation, FINRA Compliance, FINRA Enforcement, Public Customer Arbitrations, Registered Representatives, Whistleblowers

FINRA recently warned that firms could face disciplinary action if they enter into settlement agreements that bar customers or former employees from reporting wrongdoing at the firm.  Although FINRA recognized that confidentiality provisions were acceptable, it noted that they have to be written in such a way to authorize the individual to contact FINRA or… Continue Reading

Personal Email For Firm Business – Don’t Do That

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

As firm clients demand more and more access to their registered representatives, member firms must do more to make sure that their brokers do not run afoul of the firm communication written supervisory procedures.  One firm recently failed that test, resulting in a FINRA fine and censure.  In that matter, FINRA found that the member… Continue Reading

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