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In recent years, FINRA has enacted new rules regarding private placement transactions of FINRA member firms – FINRA Rule 5122 (Private Placements of Securities Issued by Members) and FINRA Rule 5123 (Private Placement of Securities).  Each of these rules has its own filing requirements, as well as specified exemptions from such filings.  We previously touched on FINRA Rule 5122 and member private offerings.  In this entry, we will focus on FINRA Rule 5123 and the filing requirements of private placement offerings in general. FINRA Rule 5123 Under Rule 5123, each firm that sells a security in a private placement offering, subject to Read More....

Does your firm accept custody of physical stock certificates? If so, do you know that your firm is required to register with the Securities Information Center (“SIC”)?  The SIC has operated the Securities and Exchange Commission’s Lost and Stolen Securities Program since 1977.  This program has provided an effective way for firms to deal with lost, stolen, missing, and counterfeit physical securities. SEC Rule 17f-1 requires firms to report any missing, stolen, lost, or counterfeit securities to SIC.  In order to file reports or make inquiries regarding securities with SIC, your firm must first apply for a FINS number (Financial Read More....

Recent U.S. natural disasters, especially Hurricane Sandy in 2012, underscore the importance of having a business continuity plan (“BCP”) that adequately addresses weather-related events. These natural disasters, though tragic, have taught financial services firms several valuable lessons on planning for hurricanes, blizzards, floods, earthquakes, tornadoes, wild fires, and other natural disasters. We share some observations and lessons learned to help broker-dealers and investment advisers prepare for future natural disasters. Weather-Related Business Disruptions Here are some general recommendations and considerations related to weather-related business disruptions: Make sure your firm’s BCP addresses the weather-related risks most likely to affect your firm. For Read More....

In recent years, FINRA has enacted new rules regarding private placement transactions of FINRA member firms – FINRA Rule 5122 (Private Placements of Securities Issued by Members) and FINRA Rule 5123 (Private Placement of Securities).  Each of these rules has its own filing requirements, as well as specified exemptions from such filings.  In this entry, we will focus on FINRA Rule 5122 and the treatment of member private offerings. FINRA Rule 5122 The offering of securities by a member firm or a control entity of the firm in a private placement can raise conflicts of interest and has been an Read More....

No less than once every four years, FINRA member firms are subject to comprehensive examinations, or cycle examinations. These exams determine compliance with applicable securities laws, rules and regulations of FINRA, the Securities Exchange Commission (“SEC”), and the Municipal Securities Rulemaking Board (“MSRB”). A combination of the departments of Sales Practice and of Risk Oversight and Operational Regulation known as “Member Regulation” oversees these cycle examinations. FINRA assesses a firm’s business activities and associated risks to determine whether a firm’s cycle examination will be conducted every one, two, three, or four years. When it’s time for examination, a firm’s Regulatory Read More....

In December 2014, FINRA published a report on its review of its gifts, gratuities and non-cash compensation rules.  The report concluded that the rules could benefit from some updating to better align the investor protection benefits and the economic impacts of the rules. To that end, FINRA has recently proposed amendments to the gifts, gratuities and non-cash compensation rules to as described in FINRA Regulatory Notice 16-29.  Below as some of the highlights of the proposed rule changes. Gifts and Gratuities FINRA Rule 3220 prohibits any member or person associated with a member, directly or indirectly, from giving anything of Read More....