Exam Alert: FINRA raises exam fees
Effective April 2, 2012, FINRA will increase the fees associated with several of its qualification examinations. The fee increases range from $5 to $25. In addition, FINRA will impose a $15 service charge for examinations taken outside of the territorial limits of the United States.
Source: FINRA Regulatory Notice 12-16
This alert applies to the Series 6, Series 7, Series 24, Series 26, Series 55, Series 62, Series 79, and Series 82.
Exam Alert: SEC approves consolidated FINRA Best Execution rule
The SEC has approved changes to FINRA's Best Execution rule that will take effect on May 31, 2012. Four new pieces of supplementary material were added to the rule that address the following topics: securities with limited quotation or pricing information, orders for securities with no U.S. market, customer instructions regarding the routing of orders, and regular and rigorous reviews of execution quality. The new rule is otherwise generally similar to the old rule.
Here is a breakdown of the new supplementary material:
1. Supplementary Material .06: Securities with Limited Quotation or Pricing Information
This material replaces the old "Three Quote Rule." The new material does not specify a minimum number of quotes that must be obtained - rather, it emphasizes that members must be diligent in complying with best execution practices when there are customer orders for securities with limited quotation or pricing information. The material requires that the member have written policies in place to ensure that they meet their best execution requirements.
2. Supplementary Material .07: Orders for Foreign Securities with No U.S. Market
This material states that in order to determine if a firm used reasonable diligence in executing orders in a given market, the firm must analyze the "facts and circumstances" of the situation. The material requires that if a firm trades in a security that does not trade in the U.S., the firm must have written policies in place to ensure best execution of customer orders. The policies must be reviewed regularly.
3. Supplementary Material .08: Customer Instructions Regarding the Routing of Orders
This material specifies that when a customer requests the firm to route their order to a specific market, the firm is not required to make a best execution determination beyond the customer's instructions. The firm must still process the customer's order promptly, however.
4. Supplementary Material .09: Regular and Rigorous Review of Execution Quality
This material codifies existing requirements for reviewing the firm's execution quality. These requirements were previously established through SEC releases and FINRA notices.
Source: FINRA Regulatory Notice 12-13
This alert applies to the Series 62, Series 55, Series 24, and Series 99.
Exam Alert: FINRA recommends heightened supervision for complex products
On January 17, 2012, FINRA highlighted the need for firms to have adequate supervisory and compliance programs in place in order for registered representatives to recommend complex products. FINRA identified several characteristics that may cause a product to be considered "complex," such as embedded derivatives or contingencies. The notice states that agents should determine suitability, consider the customer's financial sophistication, discuss the products with the customer, and consider alternative investments that could meet the customer's goals. The firm should also review the performance of the products and train the agents about the products.
Source: FINRA Regulatory Notice 12-03
This alert applies to the Series 6, Series 7, Series 24, Series 26, Series 55, Series 62, Series 79, Series 82, Series 99, Series 63, Series 65, and Series 66.
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Exam Alert: SEC gives guidance on cyber attack threat disclosure
On October 13, 2011, the Securities and Exchange Commission issued new guidelines that clarify the application of existing disclosure rules. Specifically, the SEC has identified cyber attack incidents, along with the risk of cyber attacks, as material information that must be disclosed to investors.
Source: CF Disclosure Guidance: Topic No. 2
Further reading: "SEC tells companies to disclose cyber attacks"
This alert applies to the Series 24, 26, 55, 6, 62, 63, 65, 66, 79, 82, 99, and 7.