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Category Archives: Registered Representatives

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So You Think That You Really Know Your Customer

Posted in Arbitration, Compliance and Supervision, Registered Representatives

If the recent National Senior Investor Initiative of the SEC and FINRA taught us anything, it was the tremendous importance to know your customers. This takes on more significance when you are working with seniors. You may ask why does “knowing your customer” take on any more significance for these clients. For one, an investor’s… 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

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

How to avoid being sued 2.0

Posted in Arbitration, Compliance and Supervision, FINRA Compliance, FINRA CRD, Public Customer Arbitrations, Registered Representatives, Securities Litigation

Over the years that I have defended financial advisors and their firms, I have frequently spoken and written about ways to avoid the risk of being sued. I prepared a guidebook a couple of years ago that detailed some common sense approaches to risk avoidance. I have updated that guidebook to take into account new… 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

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

What Is Big Brother Focused On In 2015

Posted in Broker-Dealer Regulation, Investment Adviser Regulation, Investment Company Regulation, Registered Representatives, SEC Compliance, SEC Enforcement

It is that time of year again.  The SEC Office of Compliance and Inspection (OCIE) has announced its examination priorities for 2015.  Knowing what these priorities are will help firms gauge their compliance and supervision efforts over the next year. For firms that are in the retail sector, OCIE has identified particular areas of interest. … Continue Reading

Who Wants To Speak With Me, Oh No

Posted in Breach of Fiduciary Duty, Compliance and Supervision, Conflicts of Interest, Registered Representatives

Anyone in a service industry has had that dreaded feeling.  You see your email or caller identification and realize it is “that” client trying to reach you.  The client I reference is that extremely difficult client that we all have. The natural inclination for many of us is to not take the call or respond… 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

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

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

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

Is This The Beginning Of The End To Expungment Agreements

Posted in Arbitration, Broker-Dealer Regulation, Expungement, Financial Industry Trends, FINRA CRD, Registered Representatives

A frequent tool for settlement was to make a stipulated award that included expungement of the registered representative’s U-4 a condition of settlement.  FINRA recently announced that it is “developing rule changes that would prohibit the practice of conditioning settlements on an investor’s agreement not to oppose expungement.” It should come as no shock that… Continue Reading

Fixed-Income Commissions allowed for Brokerage and Research Services

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

The Securities and Exchange Commission Division of Trading and Markets granted relief for institutional asset managers participating in a brokerage firm’s client commission arrangements.  See Carolina Capital Mkts. Inc., SEC No Action Letter, avail. 7/30/13; http://www.sec.gov/divisions/marketreg/mr-noaction/2013/carolinacapital-073113-15a.pdf. Specifically, the Staff said it would not object if instructional asset managers receive eligible third-party brokerage and research services… Continue Reading

RETIRED BROKERS MAY CONTINUE TO COLLECT COMPENSATION

Posted in Broker-Dealer Regulation, Raiding/Moving Firms, Registered Representatives

The SEC’s Division of Trading and Markets assured a broker-dealer that a retiring registered representative would not risk enforcement action if, after termination of  the employment, he or she received certain compensation from the firm without maintaining his or her status as a registered associated person.  See Packerland Brokerage Services, SEC No-Action Letter, avail. 3/18/13… Continue Reading

Is There Any Reason To Arbitrate Customer Complaints

Posted in Arbitration, Raiding/Moving Firms, Registered Representatives

On September 18, the SEC approved a FINRA proposal that essentially does away with the ability to have an industry arbitrator serve on your panel.  So the question becomes, why bother arbitrating customer complaints. Without an industry arbitrator on the panel, you have no choice but to hire an expert witness because there will be… Continue Reading