proposed rule

FINRA Focuses Attention on BrokerCheck

Selecting a broker to invest hard-earned money can be a nerve-racking thought to many investors. With news headlines focused on the lingering results of the economic crisis and financial scandals that left many penniless, it has never been more important for investors to find a broker they can trust. Continue reading

Selecting a broker to invest hard-earned money can be a nerve-wracking process for many investors. With news headlines focused on the lingering results of the economic crisis and financial scandals that left many penniless, it has never been more important for investors to find a broker they can trust.

Luckily, there is a resource that might give them some peace of mind. In 1998, FINRA (the Financial Industry Regulatory Authority) established the website BrokerCheck as a tool for investors researching the record of a firm and its brokers. The website features professional background information on approximately 1.3 million current and former FINRA-registered brokers and 17,400 current and former FINRA-registered brokerage firms. BrokerCheck lists terminations, complaints, lawsuits and even personal bankruptcies, with the mindset that past behaviors are both telling and predictive of future behaviors.

The Dodd-Frank Act, passed in 2010 in response to the financial crisis, required regulators to make the website more user friendly and accessible. Regulators are concerned that although BrokerCheck is readily available for anyone to use, not enough people are aware of this tool. To encourage more investors to use the site, a year ago FINRA proposed a regulation that would require brokerage firms to include on their websites and social media feeds a link to FINRA’s BrokerCheck website. But many people were up in arms about this proposed rule change. After receiving dozens of comments, the filing was withdrawn in order to re-write and re-introduce it later this year with an inclusion that would require firms to describe BrokerCheck in a “prominent location”.

This renewed focus on the BrokerCheck website falls in line with FINRA’s actions to focus on prosecuting recidivist brokers, or those who have multiple complaints, disclosures and abuses on their record. A big step in curbing these behaviors that could harm the securities industry is to encourage well-informed investors.

Exam Alert: Proposed FINRA rule will clarify firms’ supervisory responsibilities for outsourced activities

On March 29, 2011, FINRA requested comment on proposed FINRA Rule 3190. The proposed rule makes it clear that when a firm outsources a function or Continue reading

On March 29, 2011, FINRA requested comment on proposed FINRA Rule 3190. The proposed rule makes it clear that when a firm outsources a function or activity to a third party, the firm is still responsible for complying with applicable securities law and FINRA and MSRB rules. This responsibility cannot be delegated to another party. Firms will also be required to have supervisory procedures in place to ensure compliance with the rule.

http://www.finra.org/Industry/Regulation/Notices/2011/P123399

Exam Alert: proposed exam for Operations Professionals will focus on basics

On March 4, 2011, FINRA filed documents with the SEC that describe the content covered by the proposed exam for Operations Professionals. The exam will focus Continue reading

On March 4, 2011, FINRA filed documents with the SEC that describe the content covered by the proposed exam for Operations Professionals. The exam will focus on ethics and basic knowledge of the securities industry regarding products, markets, and broker-dealer activities. An Operations Professional would not be held to the same standard of knowledge about a product as a product specialist or representative selling the product.

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

Analysis by the Securities Technology Monitor: http://www.securitiestechnologymonitor.com/news/-27324-1.html

Exam Alert: SEC proposes amendment requiring broker-dealers to search for missing securityholders

On March 18, 2011, the SEC proposed an amendment to Rule 17Ad-17, which currently requires transfer agents to look for Continue reading

On March 18, 2011, the SEC proposed an amendment to Rule 17Ad-17, which currently requires transfer agents to look for missing holders of securities. The amendment would extend this obligation to broker-dealers. Two database searches are required: the first one must occur three to twelve months after the securityholder becomes lost, and the second one must take place six to twelve months after the first search.

http://www.sec.gov/rules/proposed/2011/34-64099.pdf

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: SEC proposes rule to eliminate credit rating as a condition for short-form securities registration

On February 9, 2011, the SEC voted unanimously to propose an amendment to its rules that would remove credit ratings as a condition Continue reading

On February 9, 2011, the SEC voted unanimously to propose an amendment to its rules that would remove credit ratings as a condition for registration of securities using short-form registration or shelf registration. Instead of a credit rating qualification, the issuer must have issued $1 billion of non-convertible securities in the past three years. This proposed change is part of the Dodd-Frank Act reforms, which among other things require that federal agencies remove references to credit ratings from their rules. Relevant to the Series 79, the Series 24 and the Series 62.

http://www.sec.gov/news/press/2011/2011-41.htm