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The BD/IA Regulator

Providing securities regulatory, enforcement and litigation trends for broker-dealers, investment advisers and investment funds

FINRA T+2 Rules Are Approved

Posted in Broker-Dealer Regulation

In May 2017, in Regulatory Notice 17-19, FINRA announced the SEC approval of a variety of its proposed rule amendments relating to the upcoming move of the U.S. securities markets to the T+2 settlement cycle.

In order to coincide with the effective date for the revisions to SEC Rule 15c6-1(a), these amendments will become effective on September 5, 2017, and relate to the following FINRA rules:

  • Rule 2341 (Investment Company Securities);
  • Rule 11140 (Transactions in Securities ‘‘Ex-Dividend,’’ ‘‘Ex-Rights,’’ or ‘‘Ex-Warrants’’);
  • Rule 11150 (Transactions ‘‘Ex-Interest’’ in Bonds Which Are Dealt in ‘‘Flat’’);
  • Rule 11210 (Sent by Each Party);
  • Rule 11320 (Dates of Delivery) (this provision includes the definition of “Regular Way,” and refers to the new two business day delivery cycle);
  • Rule 11620 (Computation of Interest);
  • Rule 11810 (Buy-In Procedures and Requirements); and
  • Rule 11860 (COD Orders).

We previously discussed these amendments in December 2016, at the time of their proposal.

FINRA has also issued an investor alert, entitled “T+2 is Coming,” to help explain to investors the impact of the upcoming market-wide changes.

FINRA Retrospective Rule Review: Outside Business Activities and Private Securities Transactions

Posted in Broker-Dealer Regulation

The Financial Industry Regulatory Authority (“FINRA”) is conducting a retrospective review of the rules that govern outside business activities and private securities transactions to assess their effectiveness and efficiency.  FINRA posted the following release on the subject.

A retrospective review involves FINRA looking back at a significant rule after a period of time to determine whether it effectively serves its intended objective.  According to FINRA President and CEO Robert Cook, “Successful self-regulation requires continuous renewal and improvement.  Meaningful dialogue with stakeholders is essential to that process.”  FINRA invites public comment during the review process.  The comment period for this review is scheduled to expire on June 29, 2017.

If the ultimate assessment from the retrospective review is a recommendation to modify the rule, FINRA will use its ordinary rulemaking process to propose amendments to the rule based on the findings.

Currently, FINRA is conducting a retrospective review of Rule 3270, which relates to outside business activities of registered persons, and Rule 3280, which relates to private securities transactions of an associated person.  These rules govern firm employees’ business and investment activities that occur outside the scope of their employment with the firm.  While the ability of firm employees to engage in activities may help some investors, this ability may also result in risks to both the investors and the firm.  The goal of these rules is to ensure that FINRA-member firms have adequate oversight with respect to such outside activities.  Only through such oversight can member firms ensure that their associated persons are not engaging in unlawful or improper trading or in risky activities that could be wrongly perceived as firm sponsored.

FINRA is seeking input on the efficacy of the rules in addressing the problems they were intended to mitigate, potential ambiguities in the rules, challenges in compliance with the rules, the economic impact of the rules, and actions that FINRA might take to improve the rules.  In addition to comments responsive to their enumerated questions, FINRA also invites comments on any other aspects of the rules that commentators would like to address.

Complimentary Teleconference – The New Benchmark for Financial Transactions

Posted in Events

Tuesday, June 6, 2017
12:00 p.m. – 1:00 p.m. EDT
5:00 p.m. – 6:00 p.m. BST

The date for implementation of the new EU Regulation on indices used as benchmarks in financial instruments is January 1, 2018, which is rapidly approaching. The new Regulation will have a major impact on securities or other financial contracts in the EU that reference a financial benchmark (which is likely to include some customized proprietary indices).

Topics Will Include:

  • The principal features of the new Regulation and issues that need to be addressed by market participants;
  • The effect on benchmarks administered outside the EU; and
  • The relevant provisions of the Regulation and its practical implications for benchmark administrators, users and contributors.


Additional speakers to be announced.

For more information, or to register, please click here.

CLE credit is pending for California and New York.

Presidential Actions on Regulatory Rollback: The Order of the Orders

Posted in Broker-Dealer Regulation, Investment Adviser Regulation

Since his inauguration on January 20, 2017, President Trump has issued a number of presidential orders and memoranda relating to the reduction of regulation.  Among these include the “two-fer” order, a memorandum to the Department of Labor relating to the delay of its Fiduciary Duty Rule and an order to identify and reduce tax regulatory burdens.  For additional relevant orders, see our Timeline of Recent Presidential Actions.

IFLR Webinar: Fintech 2017 – Models, Charters and More

Posted in Events

Thursday, May 25, 2017
10:00 a.m. – 11:30 a.m. EDT

The webinar will discuss the current state of fintech services in the US, including state licensing requirements, bank partnership arrangements, and the potential for special purpose bank charters at both the state and federal levels.

The presenters will also discuss the benefits and potential difficulties of these arrangements. Finally, the discussion will touch on fintech enhancements to existing bank services, including distributed ledger technology. Topics Will Include:

  • An update on the state of fintech services;
  • Lending and payments models;
  • Bank partnerships;
  • State licenses;
  • Bank Charters;
  • True Lender; and
  • Madden.


CLE credit is pending for California and New York.

For more information, or to register, please click here.

FINRA Publishes New Guidance on Social Networking Websites and the Application of Rule 2210

Posted in Broker-Dealer Regulation

In Regulatory Notice 17-18, the Financial Industry Regulatory Authority, Inc. (“FINRA”) provided additional guidance, in the form of 12 FAQs, on its earlier regulatory notices relating to the use of social media and the application of FINRA Rule 2210 (Communications with the Public). Specifically, the FAQs expand on the areas of recordkeeping, third-party posts and the use of hyperlinks to third-party sites. FINRA acknowledged that the use of social media and digital communications has expanded in the time since the last regulatory notice on the use of social media by member firms, which was in Regulatory Notice 11-29 in 2011.

Read our client alert.

FINRA Observes Second Anniversary of Its Senior Helpline

Posted in FINRA Enforcement

On April 21, 2017, FINRA issued a press release marking the second anniversary of its Securities Helpline for Seniors.  The press release may be found here.

As most of our readers know, the Helpline provides a toll-free number that senior individuals and their caretakers can call to voice concerns about the handling of their brokerage and investment accounts.  The Helpline has not only been a useful resource for these individuals, but it has also helped FINRA understand the types of issues that these investors face.

The release notes a number of interesting statistics relating to the use of the Helpline in its two-year history:

Total calls to the Helpline: 9,200
Number of states from which calls were placed: 50
Average age of callers: 70
Number of matters referred to federal, state and
non-U.S. regulators:
Referrals to adult protective services: 130
Voluntary reimbursements to callers generated through the Helpline: $4.3 million

FINRA notes that the calls raised concerns about, among other issues, potential unsuitable recommendations, account churning, fraud and illegal activity involving brokerage accounts and investments.

FINRA also notes, approvingly, that many FINRA member firms have established designated points of contact to work with Helpline staff to streamline the resolution of investor issues.