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Category Archives: FINRA Enforcement

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FINRA Publishes FAQs on New Measures to Prevent the Financial Exploitation of Seniors

Posted in Broker-Dealer Regulation, FINRA Enforcement

In January 2018, FINRA issued guidance on the provisions of Rule 2165 and the amendments to Rule 4512, which were approved in February 2017. The new requirements are aimed at preventing the financial exploitation of seniors, and are scheduled to take effect on February 5, 2018. The new FAQs principally reiterate prior guidance clarifying the… Read More

FINRA Issues Report on Its Examination Findings

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

In December 2017, FINRA issued a report highlighting several key findings from its recent examinations of broker-dealer members.  The report is available here. The report focuses on several observations from recent examinations that FINRA believed would be worth highlighting to members.  Of course, the report cannot list all of FINRA’s concerns; however, FINRA selected these… Read More

NASAA Survey Finds Seniors Are Most Vulnerable to Financial Fraud

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

On August 21, 2017, the North American Securities Administrators Association (“NASAA”) released a survey on senior citizens and financial exploitation. The survey of the state securities regulators highlighted, among other things, the need for the securities regulators to take a stronger role in prevention and detection. The survey was conducted internally among NASAA’s membership of… Read More

FINRA Fines Broker-Dealers for Sales of Non-Traditional ETFs

Posted in Broker-Dealer Regulation, FINRA Enforcement

In August 2017, FINRA entered into a consent agreement with a Georgia-based broker-dealer arising from improper practices and procedures relating to its sales of leveraged ETFs.1  The sales included ETFs that were leveraged, inverse, or both inverse and leveraged, and that were sold to retail accounts.  The action reflects FINRA’s continuing concerns about the procedures… Read More

FINRA Publishes “Frequently Asked Questions” on New Pricing Disclosure Rules for Securities Confirmations

Posted in Broker-Dealer Regulation, FINRA Enforcement

On July 12, 2017, FINRA issued guidance on its recent amendments to Rule 2232. The new requirements, which are scheduled to take effect on May 14, 2018, apply to transactions with retail (and not institutional, as defined in Rule 4512(c)) customers in corporate and agency debt securities. Beginning on the effective date, FINRA will require… Read More

FINRA Revises Its Sanction Guidelines

Posted in FINRA Enforcement

In April 2017, FINRA announced that it had revised its sanction guidelines for violations of its rules. The new revisions, among other things: contain a new factor requiring that the exercise of undue influence over a customer, such as an elderly investor, be considered when adjudicating violations; introduce three new sanction guidelines: “Systemic Supervisory Failures,”… Read More

SEC Approves FINRA’s Rules to Protect Seniors from Financial Exploitation

Posted in Broker-Dealer Regulation, FINRA Enforcement

On March 30, 2017, the SEC approved the adoption of new FINRA Rule 2165 (Financial Exploitation of Specified Adults) (see our related blog post about the proposal).  Among other things, Rule 2165 permits brokers to place holds on disbursements of funds or securities from the accounts of “specified adult” customers.  Specified adults include those 65… Read More

FINRA’s Engagement Initiative

Posted in FINRA Enforcement

In our capacity as advisers to financial institutions, we carefully monitor FINRA’s rulemaking and enforcement activities with a view to thinking about how these affect market participants and their activities.  FINRA’s March 2017 announcement of its engagement initiative provides an opportunity for the industry to consider FINRA’s activities on a much broader level. FINRA’s special… Read More

FINRA Issues 2017 Examination Priorities Letter

Posted in Broker-Dealer Regulation, FINRA Enforcement

Introduction Consistent with prior practice, with the arrival of the new year, FINRA has published its key examination priorities.  The letter may be found at the following link: http://www.finra.org/sites/default/files/2017-regulatory-and-examination-priorities-letter.pdf. As in prior years, the letter covers a broad array of topics.  This year’s topics include: Hiring and monitoring the activities of “high-risk and recidivist brokers;”… Read More

FINRA Fine Addresses Broker Compensation and Conflicts of Interest

Posted in Broker-Dealer Regulation, FINRA Enforcement

A recent enforcement action by FINRA underscores the regulator’s continuing concern regarding how financial advisers are paid to sell investment products.  In a case announced on November 28, 2016, a member firm settled charges brought by FINRA and agreed to pay a fine of $1,750,000.  The FINRA case includes a wide range of allegations involving… Read More

The SEC and FINRA Preview 2017 Enforcement Priorities at SIFMA’s C&L New York Regional Seminar

Posted in Cybersecurity/Privacy, FINRA Enforcement, SEC Enforcement

On November 2, 2016, several representatives from the SEC and FINRA spoke at SIFMA’s C&L New York Regional Seminar, including from the SEC, Stephanie Avakian, Deputy Director, Division of Enforcement, and from FINRA, Susan Axelrod, Executive Vice President, Regulatory Operations, and Susan Schroeder, Senior Vice President, Enforcement.  At a general session on enforcement during the… Read More

Inside FINRA’s “Cross-Selling Sweep”

Posted in Broker-Dealer Regulation, FINRA Enforcement

In response to recent highly-publicized scrutiny of bank cross-selling practices, FINRA announced in October 2016 that it is conducting a sweep of broker-dealers to determine the extent to which they are: promoting bank products of affiliated or parent companies to broker-dealer retail customers; and adding different features to broker-dealer retail customer accounts such as securities-based… Read More

FINRA Proposes Rules to Protect Seniors from Financial Exploitation

Posted in Broker-Dealer Regulation, FINRA Enforcement

In October 2016, FINRA filed with the SEC proposed rules designed to help brokers protect seniors and other vulnerable adults from financial exploitation. The proposal would amend existing customer account information rules to require brokers to attempt to obtain the name and contact information for a “trusted contact person” upon opening an account. Brokers would… Read More

FINRA Rule 2210 – Communications with the Public

Posted in Events, FINRA Enforcement

Thursday, October 20, 2016 12:00 p.m. – 1:00 p.m. EDT The FINRA communications rule governs all aspects of communications by member firms. FINRA is in the process of amending Rule 2210. In this teleconference, we will discuss: Upcoming amendments to Rule 2210; The scope of Rule 2210; FINRA enforcement actions relating to communications; and Social… Read More

FINRA Announces Sweep of Broker-Dealers that Sell Non-Traded BDCs

Posted in Broker-Dealer Regulation, FINRA Enforcement

In a notice published on its website on August 4, 2016, FINRA announced that it is conducting an inquiry with respect to non-traded business development companies (BDCs).  FINRA asked that the member broker-dealers send the following documents and information by September 9, 2016: A list of each BDC offered by the member firm with information… Read More

FINRA Sanctions Investment Firm Following Unsuitable Sales of Nontraditional ETFs

Posted in FINRA Enforcement

On June 7, 2016, FINRA settled proceedings against a New York-based investment firm for alleged violations of its suitability and related rules, namely NASD Rule 2310¹ and FINRA Rules 2111² and 2010. According to FINRA, the firm allegedly failed to, among other things: establish, maintain, and enforce a reasonably designed supervisory system and written supervisory… Read More

Massachusetts Securities Division Searches for Rogue Brokers

Posted in Broker-Dealer Regulation, FINRA Enforcement

According to news reports, the Massachusetts Securities Division (the “Division”) recently sent a “sweep letter” to firms asking broker-dealers to report information about their hiring policies and procedures. The Division, led by Secretary of the Commonwealth William Galvin, sent this letter to firms in which more than 15% of their representatives have at least one… Read More

FINRA Proposes Initial Round of Amendments to Communications Rules

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

In May 2016, FINRA filed with the SEC proposed revisions to its communications rules that include a few substantive revisions to existing rules, ease some burdensome filing requirements, and leave the door open for future changes. The rules to be revised include: FINRA Rule 2210 (Communications with the Public); FINRA Rule 2214 (Requirements for the… Read More

“It’s Not a Culture War” – Yet?

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

On May 23, 2016, at FINRA’s annual conference in Washington, D.C., Richard Ketchum, FINRA’s chairman and CEO, delivered a speech that shed a little light on FINRA’s recent sweep letter relating to firm culture (see our recent blog post for more information regarding the sweep letter). According to Mr. Ketchum, FINRA remains principally in a… Read More

“Tell Us About Your Culture” – FINRA Commences Sweep

Posted in FINRA Enforcement

In its January 2016 annual exam priorities letter, FINRA announced that it would examine the “compliance culture” at member firms. In furtherance of that goal, in February 2016, FINRA issued a “sweep letter” to members requesting information that is designed to inform FINRA about how member firms establish, communicate and implement cultural values. In announcing… Read More

FINRA Reminds Members of Obligations in Offerings Subject to a Contingency

Posted in FINRA Enforcement

On February 8, 2016, FINRA released Regulatory Notice 16-08 relating to the contingency offering requirements of Rules 10b-9 and 15c2-4 under the Exchange Act. The Notice arises from FINRA’s review of various private placement offering documents in connection with FINRA Rule 5123’s filing requirement for certain offerings. FINRA observed that broker-dealers have not always complied… Read More

FINRA’s 2016 Priorities Letter: Objective and Subjective Issues

Posted in FINRA Enforcement

2016 has arrived and, with the new year, FINRA has published its agenda of key examination priorities. This year’s 13-page Regulatory and Examination Priorities Letter sets forth both long-standing and new items for firms to evaluate in preparing for an examination. Not surprisingly, the letter is broad, and covers a wide range of areas; we… Read More

FINRA’s Securities Helpline for Seniors™ Provides Guidance to Broker-Dealers

Posted in FINRA Enforcement

In April 2015, the Financial Industry Regulatory Authority (“FINRA”) launched its Securities Helpline for Seniors™ (the “Helpline”). The Helpline seeks to enhance investor protection by serving as a resource to seniors making investment decisions. FINRA reports that, since its launch, the Helpline has fielded over 2,500 calls. The Helpline has received calls from persons ranging… Read More