Exam Alert: FINRA proposes rule requiring Operations Professionals to register

On March 4, 2011, FINRA filed a proposed rule with the SEC that would require that persons who are both “covered persons” and who perform “covered functions” Continue reading

On March 4, 2011, FINRA filed a proposed rule with the SEC that would require that persons who are both “covered persons” and who perform “covered functions” register as “Operations Professionals.”  Operations Professional is a new category of registration that is subject to FINRA’s qualifying exams and continuing education requirements.  Essentially, covered persons are those with control over what work takes place, how a member’s money is materially spent, and what material agreements the member is entered into.  The list of covered functions is fairly broad, covering many broker-dealer activities.

http://www.finra.org/Industry/Regulation/RuleFilings/2011/P123267

Exam Alert: FINRA revises its Sanction Guidelines

Effective February 9, 2011, FINRA has modified its Sanction Guidelines. These changes incorporate legal precedent from federal courts and the SEC. Continue reading

Effective February 9, 2011, FINRA has modified its Sanction Guidelines.  These changes incorporate legal precedent from federal courts and the SEC.  The degree of penalties for certain offenses have changed, such as recommending higher fines and firm suspension for “egregious” sales of unregistered securities, particularly in connection with market manipulation.  The guidelines for FINRA Rule 8210 now have three categories of violations.  Additional details may be found here: http://www.finra.org/Industry/Regulation/Notices/2011/P122910.

Exam Alert: FINRA to adopt consolidated rule on customer confirmations

On June 17, 2011, FINRA Rule 2232, Customer Confirmations, will become effective. This rule consolidates and streamlines the current Continue reading

On June 17, 2011, FINRA Rule 2232, Customer Confirmations, will become effective.  This rule consolidates and streamlines the current customer confirmation rules found in NASD and NYSE rules.  The rule requires that at or before the completion of a transaction, the customer is given a written confirmation that complies with the requirements of SEA Rule 10b-10.  The confirmation must include the settlement date and whether an equity security is callable. Relevant to the Series 7, Series 24, Series 26 and Series 62 exams.

http://www.finra.org/Industry/Regulation/Notices/2010/P122640

Exam Alert: SEC to nationalize exam program

According to the Wall Street Journal, the SEC is putting the finishing touches on a new uniform manual for its examiners. The WSJ states that the SEC expects Continue reading

According to the Wall Street Journal, the SEC is putting the finishing touches on a new uniform manual for its examiners.  The WSJ states that the SEC expects that the new manual will nationalize the agency’s examination program, allowing for uniform processes and procedures across all regional offices.  The SEC intends to distribute the manual to examiners in 30 to 60 days and to the public in 30 to 90 days (as of 2/8/11), according to the WSJ.

http://online.wsj.com/article/SB10001424052748704364004576132231587877342.html

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: Private advisers must register with the SEC

Effective July 21, 2011, investment advisers to most private funds (hedge funds and private equity funds) must register with the SEC. Previously, these Continue reading

Effective July 21, 2011, investment advisers to most private funds (hedge funds and private equity funds) must register with the SEC.  Previously, these advisers had been exempt due to the “private adviser”” exemption.  The Dodd-Frank Act replaces this exemption with narrower exemptions for certain advisers, including advisers that exclusively advise venture capital funds and private fund advisers with less than $150 million in assets under management in the United States.

http://www.sec.gov/spotlight/dodd-frank/hedgefundadvisers.shtml

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: NASAA develops list of “Best Practices”

A 2010 NASAA review of broker-dealers found that the three most common compliance problem areas were failure to follow supervisory policy, Continue reading

A 2010 NASAA review of broker-dealers found that the three most common compliance problem areas were failure to follow supervisory policy, advertising and sales literature, and suitability issues. NASAA developed a list of ten best practices and released them in October of 2010.  The recommendations focus on suitability, exception reports, supervisory procedures, and communications.  Relevant to Series 6, Series 7, Series 63, Series 65, Series 66, Series 24, Series 26, Series 62 and Series 79. The list can be found here: http://www.nasaa.org/NASAA_Newsroom/Current_NASAA_Headlines/13382.cfm.

Exam Alert: Outside business activities require prior notice

Effective December 15, 2010, registered persons must provide prior written notice to their member firms before engaging in Continue reading

Effective December 15, 2010, registered persons must provide prior written notice to their member firms before engaging in outside business activities.  The previous rule only required registered persons to provide prompt written notice.  The new rule also requires that firms review the proposed activities.  For registered persons who were engaged in outside business activities as of December 15, 2010, firms have until June 15, 2011 to review such activities. Relevant to: Series 7, Series 6, Series 24, Series 26, Series 79, Series 62.

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

Exam Alert: FINRA investigations require encrypted information

As of December 29, 2010, when providing information for a FINRA investigation via a portable media device, the information must be encrypted. This includes Continue reading

As of December 29, 2010, when providing information for a FINRA investigation via a portable media device, the information must be encrypted.  This includes information on flash drives, CDs, laptop computers, and other digital storage devices.  The encryption must meet industry standards for strong encryption and the encryption key must be provided to FINRA staff in a communication (email, fax, or letter) separate from the information. Relevant to: Series 6, Series 24, Series 26, Series 79, Series 62.