1017 Material Change Determination

1017 Material Change Determination

When a member intends to add a line of business, FINRA has shown that this type of expansion is often a significant event that impacts the firm’s supervisory and compliance infrastructure, personnel, and finances. When such an impact occurs, FINRA staff is required to verify that the member continues to meet each of the membership criteria identified in Rule 1014. However, FINRA recognizes that any proposed new business line’s characterization as a “material change in business operations” ultimately depends on assessing all relevant facts and circumstances. Certain proposed new business lines, such as market-making, underwriting, and acting as a dealer Read more about 1017 Material Change Determination[…]

1017 Change in Membership

1017 Change in Membership

The Firm should review areas of its business to determine if any current or future changes to the Firm’s business may warrant a change in membership application (a.k.a. “CMA” or “1017”). FINRA requires firms to file a continuing membership application (CMA) whenever they seek to expand their operations activities, and for other business events, as indicated in NASD Rule 1017(a) (Continuance in Membership Application or CMA). Firms also must file an application whenever they seek to modify or remove restrictions previously imposed in a membership agreement (a membership agreement change). Failure to comply with this requirement may provide a basis Read more about 1017 Change in Membership[…]

Personal Trade Reviews

Personal Trade Reviews

Citigroup Global Markets Inc. was recently censured and fined $350,000.00 ([PDF] FINRA Case #2019064316401) for failing to have a supervisory system to ensure statements were reviewed timely, as well as not ensuring they were receiving paper statements for accounts at custodians for which they did not have a direct feed. Although this particular incident was a BD fine, this information should be helpful for RIAs as well. An RIA should be conducting personal trade reviews as a part of their Code of Ethics. Considerations The review and supervision of outside brokerage accounts isn’t news; however, it’s important to take a Read more about Personal Trade Reviews[…]

FINRA's New Supplemental Liquidity Schedule (SLS)

FINRA’s New Supplemental Liquidity Schedule (SLS)

FINRA has established a new Supplemental Liquidity Schedule (SLS). The new SLS, which members subject to the requirement will need to file as a supplement to the FOCUS Report, is designed to improve FINRA’s ability to monitor for events that signal an adverse change in the liquidity risk of the members with the largest customer and counterparty exposures. This new requirement will become effective on March 1, 2022. For members subject to the requirement, the first SLS must be completed as of the end of March 2022 and will be due by May 4, 2022. FINRA Rule 4524 FINRA Rule Read more about FINRA’s New Supplemental Liquidity Schedule (SLS)[…]

Supervising Vendors

Supervising Vendors

FINRA recently released Regulatory Notice 21-29 regarding a broker-dealer’s obligation to supervise certain activities and functions of third-party vendors. This is nothing new, but we are seeing a big increase in utilizing outsourced vendors, including CRMs, Electronic Storage, Work Flow software, and IT vendors. Although the following is based on FINRA guidance for BDs, RIAs have similar responsibilities for supervising vendors, so we hope that RIA firms will glean some valuable information from this guidance as well. The level of supervision can vary depending on the vendor, access, and the critical nature of their service. Firms are encouraged to pull Read more about Supervising Vendors[…]

FINRA’s Annual Meeting and Elections

FINRA’s Annual Meeting and Elections

FINRA will conduct its Annual Meeting of firms on Wednesday, September 1, 2021, at 10:00 a.m. Eastern Time in the FINRA Visitors Center at 1735 K Street, NW, Washington, D.C. The purpose of the meeting is to elect individuals to fill one small firm seat, one mid-size firm seat and one large firm seat on the FINRA Board of Governors.

It is important that all eligible firms be represented by proxy or in person at the Annual Meeting. Firms are urged to submit a proxy using one of the methods described below. For a proxy to be considered valid, it must be signed by the executive representative of the firm eligible to vote in the election.

Firms that are members of FINRA as of the close of business on Friday, July 30, 2021 (the Annual Meeting record date), are eligible to vote.

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