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Article
Publication date: 7 September 2012

Deborah G. Heilizer, Brian L. Rubin and Andrew M. McCormick

The paper's aim is to describe a recent increase in FINRA enforcement activity and to discuss how broker‐dealers and representatives may want to prepare themselves for FINRA's…

Abstract

Purpose

The paper's aim is to describe a recent increase in FINRA enforcement activity and to discuss how broker‐dealers and representatives may want to prepare themselves for FINRA's increasing willingness to sanction members in the wake of the recent financial crisis.

Design/methodology/approach

The paper analyzes FINRA's recent enforcement record, including trends over the past several years in disciplinary actions and fines. It also discusses FINRA's top enforcement issues in 2011; advertising, short selling, auction rate securities, and suitability; and recommends increased compliance efforts in light of FINRA's growing aggressiveness.

Findings

It is important that firms and representatives understand how the priorities of this self‐regulatory organization have changed since the financial crisis, fueling this recent growth in FINRA enforcement activity.

Originality/value

The paper offers practical guidance from experienced financial services lawyers.

Details

Journal of Investment Compliance, vol. 13 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 3 July 2017

Brian Rubin and Adam Pollet

To analyze FINRA’s 2016 sanctions and cases, the issues that resulted in the most significant fines, emerging enforcement trends, and make predictions about key issues for FINRA

Abstract

Purpose

To analyze FINRA’s 2016 sanctions and cases, the issues that resulted in the most significant fines, emerging enforcement trends, and make predictions about key issues for FINRA for 2017 and beyond.

Design/methodology/approach

Discusses the sanctions and disciplinary actions in 2016 and prior years; details the top 2016 enforcement issues measured by total fines assessed, including anti-money laundering, variable annuities, trade reporting, books and records, and unregistered securities; explains current enforcement trends, including fines of $1 million or more, sanctions against compliance officers, and suitability cases; and analyzes three enforcement topics that will likely continue to receive heightened attention from FINRA in 2017 and beyond: restitution, cybersecurity, and senior investors.

Findings

The fines ordered by FINRA in 2016 reached an all-time high while the amount of restitution ordered and the number of disciplinary actions remained on par with prior years.

Practical implications

Firms and their representatives should heed the trends in both the substantial fines FINRA is ordering and the related enforcement issues in the cases FINRA has brought.

Originality/value

Expert analysis and guidance from experienced securities enforcement lawyers.

Details

Journal of Investment Compliance, vol. 18 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 8 May 2018

Daniel Nathan and Betsy Popken

To explain FINRA’s priorities for 2018, as reflected in its Annual Regulatory and Examination Priorities Letter.

Abstract

Purpose

To explain FINRA’s priorities for 2018, as reflected in its Annual Regulatory and Examination Priorities Letter.

Design/methodology/approach

Evaluates the overall tone of FINRA’s letter as self-reflective, describes most of FINRA’s priorities for 2018 as unchanged from previous years, and highlights new areas of focus for FINRA.

Findings

FINRA plans a number of organizational improvements over the next year which could facilitate positive dialogue between firms and FINRA examiners, helping to reduce the burden on broker-dealers and possibly avoid low-level enforcement action. FINRA expressed a desire to better leverage its model as a self-regulatory organization to achieve its mission. Most of FINRA’s priorities for 2018 are old standbys, including fraud, high-risk firms and brokers, cybersecurity and AML programs, product suitability vetting, and best execution surveillance. FINRA’s new areas of focus for 2018 include business continuity plans, technology governance, cryptoassets, options violations, new report cards, and new rules.

Practical implications

Despite FINRA leadership’s commitment to self-analysis and enhanced communication, FINRA continues to be highly committed to examining and addressing through enforcement action potential failures to comply with its rules. Firms facing FINRA or SEC examinations should brush up on FINRA’s old standby priorities and fine-tune their practices to ensure compliance with industry trends.

Originality/value

Practical guidance from experienced securities and financial services lawyers that summarizes FINRA’s stated approach for 2018.

Details

Journal of Investment Compliance, vol. 19 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 6 July 2015

Matthew T. Wirig

– To summarize the Financial Industry Regulatory Authority, Inc. (“FINRA”) 2015 Regulatory and Examinations Priorities Letter.

119

Abstract

Purpose

To summarize the Financial Industry Regulatory Authority, Inc. (“FINRA”) 2015 Regulatory and Examinations Priorities Letter.

Design/methodology/approach

Provides a brief summary of the general compliance and supervisory challenges described by FINRA. Highlights key sales practice concerns raised by FINRA. Briefly summarizes FINRA’s 2015 key financial and operational priorities. Summarizes FINRA market integrity focuses for 2015. Encourages firms to consider the FINRA 2015 regulatory and examination priorities alongside the Securities and Exchange Commission (the “SEC”) examination priorities for 2015 as they review their policies, procedures and business activities.

Findings

FINRA’s 2015 Regulatory and Examinations Priorities Letter focuses on: key areas FINRA has observed contributing to member firm compliance and supervisory deficiencies, its observation of an increase in firms failing to file timely responses to information requests in connection with examinations and investigations, key sales practice issues, financial and operational issues, and market integrity matters.

Practical implications

Firms should review these priorities alongside the SEC’s examination priorities for 2015. Where firms observe deficiencies in their own practices, adjustments should be made before they find themselves the subject of a FINRA or SEC investigation, examination or enforcement action.

Originality/value

Practical explanation by experienced financial services lawyer.

Details

Journal of Investment Compliance, vol. 16 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 6 July 2015

Brian Rubin and Andrew M. McCormick

– To analyze the cases and sanctions FINRA reported in 2014 and prior years to evaluate what issues may be important for broker-dealers and their representatives in the future.

140

Abstract

Purpose

To analyze the cases and sanctions FINRA reported in 2014 and prior years to evaluate what issues may be important for broker-dealers and their representatives in the future.

Design/methodology/approach

This article discusses the overall statistics for cases reported by FINRA in 2014 and then focuses on the top enforcement issues for FINRA and some of the key cases. All of this analysis includes a comparison to enforcement statistics from prior years to help identify potential trends.

Findings

This article concludes that 2014 was a blockbuster year for FINRA as the fines imposed by the regulator increased by 125 per cent. This article also finds that while FINRA is still focusing on many of the same issues as before, including advertising and trade reporting, other issues, such as anti-money laundering, received a significant spike in attention in 2014.

Originality/value

This article contains valuable information about recent FINRA enforcement activity and practical guidance from experienced securities lawyers.

Details

Journal of Investment Compliance, vol. 16 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 8 June 2012

Henry A. Davis

The purpose of this paper is to provide of selected Financial Industry Regulatory Authority (FINRA) regulatory notices and disciplinary actions issued in January, February, and…

Abstract

Purpose

The purpose of this paper is to provide of selected Financial Industry Regulatory Authority (FINRA) regulatory notices and disciplinary actions issued in January, February, and March 2012.

Design/methodology/approach

The paper provides Regulatory Notice 12‐03, January 2012, Complex Products: Heightened Supervision of Complex Products; Regulatory Notice 12‐05, January 2012, Customer Account Protection: Verification of Emailed Instructions to Transmit or Withdraw Assets from Customer Accounts; Regulatory Notice 12‐13, March 2012, Best Execution, SEC Approves Consolidated FINRA Best Execution Rule. It summarizes ten disciplinary actions for recommending unsuitable sales of unit investment trusts (UITs) and floating rate loan funds; using misleading marketing materials in the sale of a non‐traded real estate investment trust (REIT); selling interests in private placement offerings without having a reasonable basis for recommending the securities; unsuitable sales of reverse convertible securities; violating Regulation SHO (Reg SHO) and failing to properly supervise short sales of securities and marking of sale orders; misrepresenting delinquency data and inadequate supervision in connection with the issuance of residential subprime mortgage securitizations (RMBS); permitting a registered representative to publish advertisements that failed to provide a sound basis for a reader to evaluate the products and services being offered, contained exaggerated, unwarranted and misleading statements, and failed to disclose the firm's name; failing to conduct reasonable due diligence regarding securities an entity issued; failing to disclose certain conflicts of interest in research reports and research analysts' public appearances; and failing to develop and enforce written procedures reasonably designed to achieve compliance with NASD Rule 3010(d)(2) regarding the review of electronic correspondence.

Findings

The paper reveals for Regulatory Notice 12‐03 that the decision to recommend complex products to retail investors is one that a firm should make only after the firm has implemented heightened supervisory and compliance procedures; firms also should monitor the sale of these products in a manner that is reasonably designed to ensure that each product is recommended only to a customer who understands the essential features of the product and for whom the product is suitable. For Notice 12‐05 it finds that, given the rise in incidents reported to FINRA involving fraud perpetrated through compromised customer e‐mail accounts, FINRA recommends that firms reassess their specific policies and procedures for accepting and verifying instructions to withdraw or transfer customer funds that are transmitted via email or other electronic means, as well as firms' overall policies and procedures in this area. For Notice 12‐13: FINRA Rule 5310 leaves in place the general requirements of best execution, which are for a member firm, in any transaction for or with a customer or a customer of another broker‐dealer, to use “reasonable diligence” to ascertain the best market for a security and to buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions.

Originality/value

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends.

Article
Publication date: 13 June 2008

Henry A. Davis

The purpose of this paper is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices issued from January to March 2008 and a sample of…

Abstract

Purpose

The purpose of this paper is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices issued from January to March 2008 and a sample of disciplinary actions during that period. In July 2007, FINRA Regulatory Notices replaced NASD Notices to Members.

Design/methodology/approach

The paper provides excerpts from Regulatory Notice 08‐04, Delta Hedging Exception; 08‐08, Auction Rate Securities; 08‐09 Portfolio Margin Accounts; 08‐10, Options Position and Exercise Limits; 08‐12, Principal Approval of Sales Material; and 08‐13, Short Interest Reporting Requirements.

Findings

The paper reveals current regulatory trends.

Originality/value

The paper provides direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends.

Details

Journal of Investment Compliance, vol. 9 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 16 March 2010

Henry A. Davis

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) regulatory notices and disciplinary actions issued in September…

107

Abstract

Purpose

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) regulatory notices and disciplinary actions issued in September, October, and November 2009 and a sample of disciplinary actions during that period.

Design/methodology/approach

The paper provides excerpts from FINRA Regulatory Notice 09‐57, September 2009, Trade Reporting and Compliance Engine (TRACE); Regulatory Notice 09‐58, October 2009, Best Execution and Interpositioning; and Regulatory Notice 09‐66, November 2009, FINRA BrokerCheck. It also summarizes three disciplinary actions.

Findings

(09‐57) Effective March 1, 2010, firms must begin reporting transactions in Agency Debt Securities and primary market transactions and otherwise comply with all other requirements in the TRACE Rules, as amended, and amended FINRA Rule 7730. (09‐58) NASD Rule 2320(a) requires firms and their associated persons to use reasonable diligence to ascertain the best market for a security when handling transactions for or with a customer or a customer of another broker‐dealer. The amendments delete the requirement that, if a firm interposes a third party, the total costs and proceeds of the transaction must be better than the prevailing market and replace it with a specific obligation to apply the factors enumerated in Rule 2320(a) when a firm interjects a third party between the firm and the best available market. (09‐66) The primary purpose of BrokerCheck is to help investors make informed choices about the individuals and firms with which they do business.

Originality/value

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends. The FINRA staff are aware of this summary but have neither reviewed nor edited it. For further details as well as other useful information, the reader should visit www.finra.org

Details

Journal of Investment Compliance, vol. 11 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 19 July 2018

Brian Rubin and Adam Pollet

The purpose of this paper is to analyze the Financial Industry Regulatory Authority’s (FINRA) 2017 disciplinary actions, the issues that resulted in the most significant fines and…

Abstract

Purpose

The purpose of this paper is to analyze the Financial Industry Regulatory Authority’s (FINRA) 2017 disciplinary actions, the issues that resulted in the most significant fines and restitution and the emerging enforcement trends from 2017 and beyond.

Design/methodology/approach

The approach of this paper discusses the disciplinary actions in 2017 and prior years, details the top 2017 enforcement issues measured by total fines assessed, including anti-money laundering, trade reporting, electronic communications, books and records, research analysts and research reports, and explains current enforcement trends, including restitution, suitability cases and technological issues.

Findings

In 2017, restitution more than doubled from the prior year, resulting in the fourth highest total sanctions (fines combined with restitution and disgorgement) assessed by FINRA over the past 10 years.

Practical implications

Firms and their representatives should heed the trends in both the substantial restitution FINRA is ordering and the related enforcement issues in the cases FINRA has brought.

Originality/value

This paper provides expert analysis and guidance from experienced securities enforcement lawyers.

Details

Journal of Investment Compliance, vol. 19 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 3 May 2016

Amy Natterson Kroll and John Ayanian

To analyze the changes to the FINRA equity research rules and evaluate concerns that may be important to and have an impact on equity research activities following the effective…

Abstract

Purpose

To analyze the changes to the FINRA equity research rules and evaluate concerns that may be important to and have an impact on equity research activities following the effective date.

Design/methodology/approach

This article provides an overview of the changes reflected in FINRA Rule 2241 pertaining to equity research analysts and research reports, as well as changes to licensing requirements for equity research analysts. It highlights potential issues for firms and provides some commentary on how these issues should be considered in light of FINRA’s articulated position and assurances FINRA has given to the SEC.

Findings

This article concludes that firms should anticipate these changes and begin a comprehensive review of research policies and procedures, the personnel who prepare research reports and the scope of their research products so as to be compliant with Rule 2241 from its effective date. Firms should also begin an investigation of technologies used to gather, produce and disseminate research and required disclosures to ensure they meet the new requirements when they are effective.

Originality/value

This article provides insight into the new FINRA Rule 2241 and practical guidance from experienced securities lawyers.

Details

Journal of Investment Compliance, vol. 17 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

1 – 10 of 335