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Tag Archives: FINRA

FINRA Sanctions Member Firm for Failure to Deliver ETF Prospectuses

Posted in Enforcement, FINRA Enforcement

FINRA recently sanctioned a broker-dealer (the “Firm”) for failure to deliver prospectuses in connection with its sale of ETFs.  FINRA also found that the Firm failed to implement a supervisory system reasonably designed to achieve compliance with securities laws and regulations governing ETF prospectus delivery.  The Firm was censured and agreed to a fine of… Read More

The Results Are In: Investors Favor Additional Regulatory Protection

Posted in Broker-Dealer Regulation, FINRA Enforcement

On November 6, 2014, FINRA released results from a survey of U.S. investors measuring the demand for additional regulatory protections. The survey polled 1,000 adults and revealed that an overwhelming majority felt that it was important to protect investors and police the markets.  Indeed, 74 percent polled would support additional regulatory protections to safeguard against broker-dealer… Read More

Additional Fees on Securities Transactions – FINRA Sees No Justification

Posted in Broker-Dealer Regulation, FINRA Enforcement

In an area of broker-dealer practices with relatively little guidance—the appropriate level of commissions or mark ups on securities trades—FINRA recently brought another in a series of cases that provides insight into the regulator’s view on additional transaction-based fees.  In this particular case, FINRA found that a broker-dealer characterized a $60.50 charge on its customer… Read More

VA Switches: FINRA Disciplinary Action Reminds Firms About the Need for Adequate Supervisory Procedures

Posted in Broker-Dealer Regulation, FINRA Enforcement

In a case involving unsuitable variable annuity (VA) transactions, FINRA found that having good procedures and discovering improper conduct are not enough.  A member firm must also ensure that it has adequate supervisory systems in place to ensure that its procedures are properly implemented.  In this case, two of the firm’s registered representatives—who were independent… Read More

FINRA Announces and Publishes Its Sweep of Order Routing Practices

Posted in Broker-Dealer Regulation, FINRA Enforcement

FINRA announced this week that it is conducting a review of its member firms’ order-routing processes and procedures and the execution quality of customer orders in exchange-listed stocks.    We previously reported in this blog that an academic paper on this subject had gotten the attention of FINRA and the SEC.  That article, by professors at… Read More

SEC Decision Regarding TIC Advertisements Offers Broader Lessons About Providing Fair and Balanced Disclosures

Posted in Broker-Dealer Regulation, FINRA Enforcement

Earlier this year, the SEC found that CapWest Securities, Inc., a defunct broker-dealer, had failed to comply with advertising rules in promoting investments that use Section 1031 of the Internal Revenue Code (“1031 Exchanges”) or tenant-in-common investments (TICs).  The SEC’s decision, recently reported by FINRA, upheld FINRA’s decision and sustained the sanctions of a censure… Read More

Pre-IPO Selling Procedures Need to Be Adequately Supervised, According to FINRA

Posted in Broker-Dealer Regulation, FINRA Enforcement

Broker-dealers selling interests in IPOs need to have adequate supervisory systems to ensure that registered representatives do not make actual sales before the securities are registered, according to a settlement of a formal disciplinary proceeding announced by FINRA yesterday. In this particular case, FINRA found that for a little  more than a year, a firm… Read More

FINRA Board of Governors Invalidates Class Action Waivers in Customer Account Agreements

Posted in FINRA Enforcement, Fund Regulation

In an April 24th ruling that will have widespread impact among financial institutions, the FINRA Board of Governors held that a broker-dealer violated FINRA rules by including a mandatory class action waiver in its customer account agreements. The Board decision reverses in part and affirms in part an earlier decision by a FINRA Hearing Panel… Read More

Securities Regulators Are Inspired by an Academic Article to Seek Information Regarding Order Routing

Posted in Broker-Dealer Regulation, Enforcement, Fund Regulation

Apparently attempting to understand how broker-dealers provide best execution in the face of incentives to trade at certain exchanges, the SEC and FINRA are asking broker-dealers for extensive transaction information regarding how they route trades to exchanges.  By collecting this data, the regulators can monitor how firms, that have an incentive to trade with the… Read More

FINRA Invites Public Comment on a Modified Regulatory Scheme for Broker-Dealers Specializing in M&A and Corporate Finance

Posted in Broker-Dealer Regulation

FINRA is seeking public comment on a much needed overhaul of the regulatory requirements for broker-dealers who specialize in M&A and corporate finance.  The overhaul would be accomplished by creating a new category of broker-dealers to be known as “Limited Corporate Financing Brokers.”  Qualifying broker-dealers would then be subject to a new set of rules… Read More

FINRA Protects Seniors by Disciplining Inadequate Supervision of VA Sales

Posted in Broker-Dealer Regulation, Enforcement, FINRA Enforcement

As baby boomers continue to age, securities regulators focus on protecting the growing population of seniors and retirees. For example, the regulators are seeking to ensure that broker-dealers’ systems and procedures for assessing the suitability of particular types of investments and the mental competence of their customers are adequate. Regulators are also focusing on suitability… Read More

FINRA Announces a Sweep to Assess BDs’ Cybersecurity

Posted in Broker-Dealer Regulation, Cybersecurity/Privacy, Enforcement, FINRA Enforcement

After announcing that cybersecurity will be one of its 2014 examination priorities, FINRA wasted no time before commencing a sweep.  FINRA announced a Targeted Examination Letter to conduct an assessment of firms’ approaches to managing cybersecurity threats. FINRA bases its concern on “the critical role information technology (IT) plays in the securities industry, the increasing… Read More

AML Enforcement Focuses on BDs Doing Business in Mexico

Posted in Anti-Money Laundering, Broker-Dealer Regulation, FINRA Enforcement

FINRA recently took formal disciplinary action against a New York-based broker-dealer that is affiliated with a Mexican broker-dealer and with a Mexican bank for inadequate anti-money laundering (AML) systems and procedures. FINRA also found that the broker-dealer failed to register 200 to 400 foreign finders who functioned as the firm’s primary points of contact with… Read More

New FINRA Supervision Rules Impact Broker-Dealers’ Insider Trading Procedures and Supervisory Controls

Posted in Broker-Dealer Regulation, Enforcement, FINRA Enforcement, Insider Trading, SEC Enforcement

Financial Industry Regulatory Authority (FINRA) rules require member firms to establish and maintain a system of written procedures to supervise the activities of its members. On December 23, 2013, the SEC approved new FINRA rules. Among other provisions, the new rules require procedures for detecting and reporting insider trading and impose heightened standards on supervisory… Read More

Another Bestseller: The SEC’s Examination Priorities for 2014

Posted in Broker-Dealer Regulation, Fund Regulation, Investment Adviser Regulation

Following closely on the heels of FINRA’s publication of its examination priorities for 2014 (see our recent client alert), OCIE’s National Exam Program (NEP) released a summary of its 2014 priorities. OCIE’s priorities represent a cross-divisional effort at the SEC and reflect the staff’s assessment of information including: data from reports filed with the SEC;… Read More

FINRA Continues Focusing on Suitability of Complex, Non-Traditional ETFs

Posted in Broker-Dealer Regulation, Enforcement, FINRA Enforcement

FINRA recently announced another settled disciplinary proceeding alleging unsuitable sales of levered and inverse exchange-traded funds (ETFs). This second such announcement in recent months involving non-traditional ETFs sends the clear message that FINRA continues to be intensely focused on the retail sale of complex structured products. In the recent consent order, two brokerage firms agreed… Read More

Broker-Dealer Cybersecurity: Protect Yourself or Pay the Price

Posted in Broker-Dealer Regulation, Cybersecurity/Privacy, Enforcement, FINRA Enforcement

In its recently issued 2014 Regulatory and Examination Priorities Letter, FINRA stated that cybersecurity remains a priority given the ongoing cybersecurity issues reported across the financial services industry, including the increasing frequency and sophistication of attacks targeting the nation’s largest financial institutions. The securities industry watchdog continues to be concerned with the integrity of firms’… Read More

A Must Read: FINRA’s 2014 Exam Priorities

Posted in Broker-Dealer Regulation, Enforcement, FINRA Enforcement, Investment Adviser Regulation

FINRA did not wait for any dust (or snow) to settle on the New Year before alerting the brokerage industry and the public about its regulatory and examination priorities for 2014. This year’s letter, issued earlier than ever before, mixes many time-honored themes, such as conflicts of interest, complex products, suitability, AML, private placements, and… Read More

Retirement Funds Rollovers: FINRA Ends 2013 By Identifying Its First 2014 Priority

Posted in Broker-Dealer Regulation, Enforcement, FINRA Enforcement, Investment Adviser Regulation

It is the end of the year, and many people are thinking about the status of their retirement accounts and planning any changes to their investments. FINRA also has retirement accounts on the brain. It is thinking about the ways member firms recommend investments in retirement accounts, and planning what to do about that. FINRA… Read More

SEC Intensifies Scrutiny of Fee-Based Accounts and Reverse Churning

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

The SEC is crunching a lot of data these days, and it apparently intends to use some of that data to identify “reverse churning.” Reverse churning is the practice of placing a client who trades infrequently in a fee-based, rather than a commission-based, account; Chair Mary Jo White recently identified this as a problem that… Read More