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The aim is to provide details of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in March, April and May 2012.

The paper provides Regulatory Notice 12‐17, April 2012, “Telemarketing: SEC Approves Consolidated Telemarketing Rule,” and Regulatory Notice 12‐25, May 2012, “Suitability: Additional Guidance on FINRA's New Suitability Rule”.

Notice 12‐17: FINRA Rule 3230 (Telemarketing) updates exiting NASD and NYSE rules that require member firms to maintain and consult do‐not‐call lists, limit the hours of telephone solicitations and prohibit members from using deceptive and abusive acts and practices in connection with telemarketing, and adopts provisions that are substantially similar to Federal Trade Commission (FTC) rules that prohibit deceptive and other abusive telemarketing acts or practices. Notice 12‐25: The new FINRA Rule 2111 requires, in part, that a broker‐dealer or associated person “have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the [firm] or associated person to ascertain the customer's investment profile.” In general, the new rule retains the core features of the previous NASD suitability rule, codifies several important interpretations of the predecessor rule and imposes a few new or modified obligations.

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

The purpose of this paper is to explain two new FINRA rules: Rule 2090 (Know Your Customer) and Rule 2111 (Suitability).

The paper explains the two rules, the expanded requirements in the new suitability rule, and an expansion in the list of factors an associated person is required to consider as part of a customer's investment profile before making a recommendation.

FINRA's new suitability rule is notable for three reasons: the revised rule covers investment strategies and explicit recommendations to hold securities; it expands the necessary factors for making a suitability determination; and it includes definitions for three specific suitability evaluations.

Prior to the effective dates of the new rules, most likely in the Fall of 2011, firms may want to consider whether to develop additional procedures to gather customer “investment profile” information and whether to memorialize that information in written form.

This paper provides practical guidance from experienced financial services lawyers.

The purpose of this paper is to interpret Financial Industry Regulatory Authority (FINRA) Regulatory Notice 13-31, which provides practical advice to member firms about how FINRA will be examining for compliance with the rule, some findings about failures to comply and a set of best practices for compliance.

The paper explains the three suitability obligations set forth in Rule 2111, the mechanics of FINRA's suitability examinations, overall findings from FINRA's recent suitability examinations, and some measures and practices FINRA has highlighted that could bolster a firm's suitability-focused supervisory and compliance procedures.

The Notice provides a wealth of information on the types of approaches, systems, procedures and practices that member firms have been using and that FINRA has determined to be most effective in ensuring compliance with the suitability rule.

Although other ways to comply with the rule certainly exist, member firms should review the Notice and consider incorporating the practices discussed or practices likely to achieve similar outcomes.

The paper provides practical guidance from experienced financial services lawyers.

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued from April to June 2009 and a sample of disciplinary actions during that period.

The paper provides excerpts from Regulatory Notice 09‐22, Personal Securities Transactions; 09‐25, Suitability and “Know Your Customer”; 09‐27, Member Public Offerings; 09‐30, Credit Default Swaps; 09‐34, Investment Company Securities; 09‐35, Municipal Securities.

Notice 09‐22: Sound supervisory practices require that a member firm monitor personal securities transactions outside of the firm by or for its associated persons. Notice 09‐25: Suitability obligations and know‐your customer obligations are critical to protecting investors. Notice 09‐27: The offering of securities by a member firm or a control entity of the firm in a private placement raises conflicts of interest and has been an area of regulatory concern in recent years. Notice 09‐30: Regulatory authorities are adopting measures to address system risk arising from credit default swaps (CDS), including risks to the financial system arising from the lack of a central clearing counterparty to clear and settle CDS; the SEC has approved a rule establishing an interim pilot program on margin requirements for CDS transactions. Notice 09‐34: As part of the process to develop a new consolidated rulebook, FINRA is requesting comment on a proposed rule regarding the distribution and sale of investment company securities. Notice 09‐35: FINRA recommends that firms engaged in municipal securities business review and, if necessary, modify their policies and procedures in light of changes to the Municipal Securities Rulemaking Board's (MSRB) Electronic Municipal Market Access system (EMMA) that take effect July 1, 2009, and changes to MSRB rules that went into effect June 1, 2009. FINRA also encourages firms to review the overall adequacy and effectiveness of their current policies and procedures for municipal securities activities generally, particularly those relating to the disclosure of material information, the suitability of recommendations to retail customers, and the general supervision of their municipal securities activities.

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

The purpose of this paper is to provide selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in June, July, and August 2012.

The paper provides FINRA Regulatory Notice 12‐40, SEC Approves New FINRA Rule 5123 Regarding Private Placements of Securities; Regulatory Notice 12‐44, SEC Approves Amendments to FINRA Rule 4210 (Margin Requirements); Regulatory Notice 12‐55, Guidance on FINRA's Suitability Rule; and Regulatory Notice 13‐13, Trading and Quotation Halts in OTC Equity Securities; Trade Reporting Notice of April 17, 2013: Reduction of Reporting Times for Agency Pass‐Through Mortgage‐Backed Securities Traded TBA.

Notice 12‐40: FINRA Rule 5123 is part of a multi‐pronged approach to enhance oversight and investor protection in private placements; the rule will provide FINRA with more timely and complete information about the private placement activities of firms on behalf of other issuers. Notice 12‐44: The SEC approved amendments to FINRA Rule 4210 (Margin Requirements) related to option spread strategies, maintenance margin requirements for non‐margin eligible equity securities, free‐riding, “exempt accounts” and stress testing in portfolio margin accounts. Notice 12‐55: This Notice addresses two issues discussed in Regulatory Notice 12‐25: the scope of the terms “customer” and “investment strategy.” Notice 12‐25 provided guidance in a “frequently asked questions” format in FINRA Rule 2111 (Suitability). Notice 13‐13: The SEC approved amendments to FINRA Rule 6440, which provides authority for FINRA to initiate trading and quotation halts in OTC equity securities in circumstances where it is necessary to protect investors and the public; the rule provides authority to impose foreign regulatory halts, derivative halts and extraordinary event halts. Trade Reporting Notice of April 17, 2013: FINRA reminds firms of the coming reduction in reporting periods for the timely reporting of transactions in agency pass‐through mortgage‐backed securities traded TBA (to be announced) for good delivery and products not traded for good delivery.

These FINRA notices are selected to provide a useful indication of regulatory trends.

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in April, May, and June 2010.

The paper provides excerpts from FINRA Regulatory Notice 10‐18, Master Accounts and Sub‐Accounts; 10‐22, Regulation D Offerings; 10‐23, Trade Reporting and Compliance Engine (TRACE); 10‐24, Trade Reporting; 10‐27, Customer Complaint Reporting; and 10‐30, Trading‐Pause Pilot Program; provides summaries of selected disciplinary actions.

(10‐18) If a firm has notice that the sub‐accounts of a master account have different beneficial ownership (but does not know the identities of the beneficial owners) or the firm is privy to facts and/or circumstances that would reasonably raise the issue as to whether the sub‐accounts, in fact, may have separate beneficial owners, then the firm must inquire further and satisfy itself as to the beneficial ownership of each such sub‐account. (10‐22) A broker‐dealer has a duty – enforceable under federal securities laws and FINRA rules – to conduct a reasonable investigation of securities that it recommends, including those sold in a Regulation D offering. (10‐23) On February 22, 2010, the SEC approved the second major proposed expansion of TRACE to include Asset‐backed Securities as TRACE‐Eligible Securities, to require the reporting of Asset‐backed Securities transactions and to establish reporting fees. (10‐27) Starting on July 1, 2010, the beginning of the third calendar quarter, firms must use revised and new product codes to report statistical information regarding written customer complaints relating to annuities and life settlement products. (10‐30) On June 10, 2010, FINRA began a pilot program in which it will halt trading otherwise than on an exchange with respect to securities included in the S&P 500® Index where the primary listing market has issued a trading pause due to extraordinary market volatility. Selected disciplinary actions: FINRA announced that it has settled charges with two additional firms relating to the sale of auction rate securities (ARS) that became illiquid when auctions froze in February 2008. FINRA announced that it has fined five broker‐dealers a total of $385,000 for the illegal sale of more than 8 billion shares of penny stock on behalf of their customers.

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

Identifies fundamental errors, both mathematical and methodological, in the purported $17 billion annual benefit from the U.S. Department of Labor’s Conflict of Interest Rule, commonly known as the Fiduciary Rule.

Examines the methodologies and data used by the Council of Economic Advisers (CEA) in calculating the estimated $17 billion benefit of the Fiduciary Rule, and then recalculates the benefit according to the CEA’s stated methodologies and data descriptions. The approach is non-partisan, the review apolitical.

The article concludes that the estimated $17 benefit from the DOL’s Fiduciary Rule was grossly exaggerated and that other data suggests the Rule may not provide meaningful new protections for investors.

From the perspective of staunch fiduciary advocates, the calculation of the benefit to IRA investors from the DOL’s Fiduciary Rule is examined. The current measures that protect individual investors are also noted. The information may provide a turning point in the discussion of the Rule’s delay and potential rescission. It may also provide relevant points for the DOL to consider as it carries out its task of re-evaluating the Rule.

In the late 1990s, the market for private equity securities (hereinafter “private equity market”) was booming. From quarter to quarter, the number of venture capital deals and the amount invested rose dramatically. Certainly, much of this attention and excitement resulted from the extraordinary market gains experienced by some investors in private equity securities (hereinafter “private equities”). For example, in a book published in 2000, Randall E. Stross described a private equity investment that grew in value by 100,000 percent in less than two years. Today, the extraordinary gains of the late 1990s have subsided. Indeed, some commentators now describe market conditions as a “brutal hit.” The number of deals and the dollars invested are down, and as one commentator put it, there has been an “exodus of momentum investors.” Nonetheless, private equities remain an important alternative investment. Private equities also remain an important compliance area for broker‐dealers and investment advisers. This article reviews some of the compliance issues that could arise in the current environment. Specifically, it focuses on the types of issues that are likely to arise during an examination by the staff of the Securities and Exchange Commission (“SEC” or “Commission”). The article begins with a quick summary of the circumstances under which SEC examiners review broker‐dealers’ and investment advisers’ activities in the private equity market. Next it reviews recent SEC enforcement actions involving private equities and some of the compliance lessons that can be drawn from the cases. Finally, it discusses an examination initiative relating to private equities that the SEC currently has underway. It concludes that private equities remain an important compliance area and an important focus of the SEC’s examination program.

The purpose of this paper is to provide selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in June, July, and August 2012.

The paper provides FINRA Regulatory Notice 12‐29, Communications with the Public, and Notice 12‐38, Short Interest Reporting.

Notice 12‐29: the SEC has approved FINRA's proposed rule changes to adopt a new set of communication rules that become effective February 4, 2013. They address communications in three categories: institutional communication, retail communication, and correspondence. Among other things, the rules cover approval, review and recordkeeping requirements; content standards; and guidelines for public appearances. Notice 12‐38: the SEC approved amendments to FINRA Rule 4560 to codify the requirement that member firms report only “gross” short interest existing in each proprietary and customer account (rather than net positions across accounts) and clarify that member firms' short interest reports must reflect only those short interest positions that settled.

These FINRA notices are selected to provide a useful indication of regulatory trends.