January 21, 2021

Blog | MasterCompliance

  • FINRA’s Change to Rules 5122 and 5123
    On July 15, 2021, FINRA released Regulatory Notice 21-26 announcing changes to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) effective October 1, 2021. The changes will require members to file retail communications that promote or recommend private placement offerings that are subject to those rules’ filing requirements. Background As we stated in our previous blog on the topic, FINRA’s Proposed Change to Rules 5122 and 5123, while FINRA did not require retail communications be filed, many members filed them voluntarily. After reviewing the voluntary submissions, FINRA found they raised more compliance Read More....
  • FINRA’s New And Improved Fund Analyzer Tool
    FINRA has recently given us all a new and improved Fund Analyzer tool. With the recent emphasis on Share Class selection, Regulation Best Interest (Reg BI) for broker-dealers, and the fiduciary duty of Registered Investment Advisers. Firms are encouraged to train their staff on using this new tool. The new analyzer allows individuals to sort through and compare more than 30,000 products and run a wide variety of investment scenarios. The tool’s enhancements enable users to better calculate how a fund’s fees, expenses, and discounts impact the value of a fund over time. Fund Analyzer Tool Features A sample of Read More....
  • Cybersecurity Exam Observations and Effective Practices
    Cybersecurity remains one of the principal operational risks facing broker-dealers and Registered Investment Advisers. Accordingly, FINRA and the SEC’s examiners expect firms to have reasonably designed cybersecurity programs and controls consistent with the firm business model and scale of operations to ensure that sensitive data, including client information, is not lost or misused, or accessed by unauthorized users. Examiners continue to inquire into the Firm’s controls regarding firewalls, vulnerability, penetration testing, and training during office examinations. Observations According to FINRA’s 2021 report on FINRA’s Examination and Risk Monitoring Program, “FINRA recently observed an increased number of cybersecurity or technology-related incidents Read More....
  • Investment Adviser Marketing Rule
    Effective May 4, 2021, the SEC’s recently adopted amendment to rule 206(4)-1 of the Advisers Act went into effect.  The Advertising Rule, 206(4)-1, which addressed how advisers marketed their services to clients and investors, had not been updated with any substance since it was adopted in 1961.  The same is true for the “solicitation rule” adopted in 1979. The new investment adviser marketing rule amends the existing rule 206(4)-1, known as “the advertising rule,” and replaces rule 206(4)-3, the “solicitation rule.” The SEC believed it was appropriate to regulate both the investment adviser advertising and the solicitation activity of an Read More....
  • FINRA Eliminates the Order Audit Trail System (OATS) Rules
    Effective September 1, 2021, FINRA is amending its rulebook to eliminate the Order Audit Trail System (OATS) rules in the FINRA Rule 7400 Series and FINRA Rule 4554 (Alternative Trading Systems — Recording Reporting Requirements and of Order and Execution Information for NMS Stocks) (collectively referred to as the “OATS Rules”). FINRA has determined that the accuracy and reliability of the Consolidated Audit Trail (CAT) meet the standards approved by the SEC and has determined to retire OATS as of September 1, 2021. Key Points The OATS Rules will be deleted from the FINRA rulebook effective September 1, 2021. firms Read More....
  • Regulators Focus on Reg BI During 2021 Audits
    The Securities and Exchange Commission adopted a new rule under the Securities Exchange Act of 1934 that established a standard of conduct for broker-dealers and the natural persons who are associated persons of a broker-dealer. It was established to enhance the broker-dealer’s standard of conduct to retail customers beyond the existing suitability obligation. This standard of conduct takes critical principles from the underlying fiduciary obligations under the Investment Advisers Act of 1940. The SEC’s focus was regardless of whether a retail investor chooses a broker-dealer or an investment adviser, all retail investors should be entitled to a recommendation (by a Read More....