Exam Alert: Operations Professional Qualification Exam Coming in 2011

The Operations Professional Qualification Exam is coming in 2011, according to John Kalohn, Vice President of Testing at FINRA. Continue reading

The Operations Professional Qualification Exam is coming in 2011, according to John Kalohn, Vice President of Testing at FINRA.

The Operations Professional Qualification Exam is coming in 2011, according to John Kalohn, Vice President of Testing at FINRA.   As outlined at the January ARM conference in Sarasota, FINRA received over 50 “mostly positive” comment letters in response to the 2010 FINRA “Regulatory Notice 10-25” re the exam proposal.  Some commenters argued that the new registration would be “overly burdensome” and they suggested that firms could “accomplish the same goals through internal training and written supervisory procedures.”  The exam committee of 40 individuals from “a broad cross-section of FINRA members” has reviewed the comment letters and is working on completing the content outline for the exam and submitting a rule filing to the SEC.  Once the SEC gives the green light, FINRA expects to make the content outline available, “probably in mid-2011.”  Testing will begin approximately 90 days later.

According to Kalohn, the exam will be “different, not job-focused” but instead will try to assess basic financial industry knowledge as that relates to operations.  In particular, the exam will focus on professional conduct and ethical considerations, essential product and market knowledge, knowledge associated with operations activities, and the identification and escalation of “red flag” issues.  FINRA says that the exam was motivated by a request from the SEC.  “There is no question that this new registration exam is a direct result of Bernie Madoff,” says David Sobel, EVP and CCO at Abel/Noser in New York. “They want the back office to know the rules.”

Importantly, the new operations professional registration will be a requirement for those in a managerial or supervisory position and, per FINRA Regulatory Notice 05-48, it will apply to member broker-dealers and their affiliates (third party service providers).

At the January 2011 Association for Registration Management Sarasota conference, John Kalohn indicated that the new operations professional registration will require continuing education.  The CE requirement will include three general modules plus one self-selected module based on 4–7 targeted job functions.

FINRA notes that “a significant number” of operations professionals will be exempt from the new qualification examination because they will have already taken an “acceptable alternative qualifying examination (i.e. Series 6, 7, 24 and others).”

For more information, please call Jeremy Solomon at 503 968 6777 or via email: J.Solomon@SolomonExamPrep.Com.

More Info Here (PDF)

Exam Alert: FINRA to track trades in all listed US stocks

Effective July 11, 2011, FINRA will start a three-phase plan to track trades in all listed US stocks. Trades will be tracked using Continue reading

Effective July 11, 2011, FINRA will start a three-phase plan to track trades in all listed US stocks.  Trades will be tracked using the Order Audit Trail System (OATS), which is currently used in recording and reporting trades on NASDAQ and in OTC equity securities. Relevant to Series 7, Series 24 and Series 62 exams.

http://www.finra.org/Industry/Regulation/Notices/2011/P122786

Exam Alert: FINRA members prohibited from keeping assets at certain non-member institutions

On February 1, 2011, FINRA Rule 4160, Verification of Assets, was put into effect. This rule states that if the following conditions are true: Continue reading

On February 1, 2011, FINRA Rule 4160, Verification of Assets, was put into effect.  This rule states that if the following conditions are true:

1. A member keeps assets or records at a non-member institution,

2. FINRA has asked the non-member institution to verify what assets or records are being kept for the member, and

3. The non-member fails to promptly provide verification,

Then FINRA will notify the member that they are prohibited from keeping assets and records with the non-member.

http://www.finra.org/Industry/Regulation/Notices/2010/P122526

Exam Alert: FINRA to hold broker-dealers to a higher standard of customer care

Effective October 7, 2011, broker-dealers must adhere to stricter know-your-customer and suitability standards than before. The new rules require Continue reading

Effective October 7, 2011, broker-dealers must adhere to stricter know-your-customer and suitability standards than before.  The new rules require that consideration be given to a customer’s age, investment experience, time horizon, liquidity needs and risk tolerance, in addition to factors that were already required to be considered (other holdings, financial situation and needs, tax status and investment objectives).  These new requirements are similar to the fiduciary standard used by investment advisers. Relevant to the Series 7, Series 66, Series 24, Series 62 and Series 79 exam.

http://www.finra.org/Industry/Regulation/Notices/2011/P122779

Exam Alert: Flipping may only be discouraged through penalty bids

“Flipping” is when a customer sells a new issue into the secondary market at a profit shortly after the IPO. Underwriting managers may discourage this by Continue reading

“Flipping” is when a customer sells a new issue into the secondary market at a profit shortly after the IPO. Underwriting managers may discourage this by imposing penalty bids on brokers whose customers flip securities. Some firms have sought to independently recoup commissions paid to such brokers. Effective May 27, 2011, FINRA requires that flipping only be punished through penalty bids applied to the entire syndicate by the underwriting manager. Relevant to the Series 24, Series 62 and the Series 79 exams.

http://www.finra.org/Industry/Regulation/Notices/2010/P122491

Exam Alert: 30-second trade reporting requirement is in effect

Effective November 10, 2010, FINRA’s prior 90-second trade reporting requirement has been replaced with a Continue reading

Effective November 10, 2010, FINRA’s prior 90-second trade reporting requirement has been replaced with a 30-second trade reporting requirement.  This applies to OTC trades made in equity securities during the hours that FINRA trade reporting facilities are open (generally 8 AM to 8 PM Eastern Time). This change also affects trade cancellations that were subject to 90-second reporting.  Note that bonds are typically have a 15-minute trade reporting requirement.
Relevant to the Series 7, Series 62 and the Series 24 General Securities Principal exam.

http://www.finra.org/Industry/Regulation/Notices/2010/P121342

Exam Alert: Underwriters must report indications of interest and final allocations to issuers

Effective May 27, 2011, during a new issue, the underwriting manager must report indications of interest and aggregate demand for the security to Continue reading

Effective May 27, 2011, during a new issue, the underwriting manager must report indications of interest and aggregate demand for the security to the issuer.  After the settlement date of the new issue, a report of the final allocation of shares to institutional investors must be provided to the issuer, along with the aggregate sales to retail investors.  This change was made to increase transparency in the book-building process. Relevant to FINRA Series 7, Series 24, Series 62 and the Series 79 Investment Banking Exam.

http://www.finra.org/Industry/Regulation/Notices/2010/P122491

Exam Alert: FINRA prohibits “spinning”

“Spinning” is when a broker allocates IPO shares of a hot issue to favored customers, which the customers can then sell at a profit on the Continue reading

“Spinning” is when a broker allocates IPO shares of a hot issue to favored customers, which the customers can then sell at a profit on the secondary market.  Effective May 27, 2011, FINRA has prohibited spinning.  If it looks like there is a relationship between a customer and the broker-dealer, the broker-dealer cannot sell shares of new issues to that customer.  Note that certain allocations are exempt from this rule.

http://www.finra.org/Industry/Regulation/Notices/2010/P122491

Exam Alert: FINRA prohibits quid pro quo allocations

Effective May 27, 2011, FINRA member firms and associated persons may not offer or threaten to withhold shares of an allocation of a new issue in order to Continue reading

Effective May 27, 2011, FINRA member firms and associated persons may not offer or threaten to withhold shares of an allocation of a new issue in order to receive excessive compensation.  This prohibited behavior is known as a quid pro quo allocation, where the member or associated person gives preferential allocation in exchange for a kick-back. Relevant to Series 24, Series 62 and Series 79.

http://www.finra.org/Industry/Regulation/Notices/2010/P122491

Exam Alert: “Buy-in” notices must be rejected in writing by 6 PM, EST

Effective December 15, if a seller does not accept a “buy-in” notice, it must send a signed, written rejection to the buyer no later than 6:00 PM Eastern Continue reading

Effective December 15, if a seller does not accept a “buy-in” notice, the seller must send a signed, written rejection to the buyer no later than 6:00 PM, Eastern Standard Time.  If no rejection is sent, the notice is accepted.  A “buy-in” notice is sent to a seller when the seller fails to deliver securities.  It allows the buyer to repurchase the securities, with the seller making up any price difference. Relevant to: Series 7, Series 24, Series 62.

http://www.finra.org/Industry/Regulation/Notices/2010/P122271