FINRA’s 2017 Examination Findings

Recently, the Financial Industry Regulatory Authority (“FINRA”) released its 2018 Regulatory and Examination Priorities Letter.   The letter details the topics that FINRA will focus on during the 2018 calendar year.  Firms should review the letter and use it as a guide in making their compliance programs more robust and audit ready for the next examination cycle.  Here, we will discuss a few of the topics that FINRA highlighted. Read More…

FINRA’S EXAMINATION FINDINGS

Recently, the Financial Industry Regulatory Authority (“FINRA”) released a report detailing its observations from its cycle examination program.  FINRA hopes the report will assist broker-dealers in strengthening their compliance with securities rules and regulations.  FINRA noted that the report does not represent a complete inventory of observations about the industry as a whole, does not imply that any issues discussed exist at any particular firms, and should not be read as creating new legal or regulatory requirements or new interpretations of existing Read More…

FINRA Rule 2210 and Social Networking Websites

FINRA Rule 2210 requires that firms retain records of communications that relate to their “business as such” under Rule 17a-4(b) of the Securities Exchange Act of 1934 (SEA).  Therefore, it is the content of the broker’s communication that determines whether it is regulated under Rule 2210.   However, how does the rule apply if the firm[…]

Regulation D Exemptions

Regulation D, established by the Securities and Exchange Commission, provides exemptions that allows companies to raise capital through the sale of unregistered securities.  Under Regulation D, companies can avoid the costs associated with a public offering.  Although companies are not required to register with the SEC under Regulation D, they are still required to provide[…]

Change to Definition of Qualified Client

The Securities and Exchange Commission (“SEC”) recently announced an upcoming change to the definition of “qualified client” as defined in Rule 205-3 under the Investment Advisers Act of 1940 (“Advisers Act”) that will become effective August 15, 2016. This applies to any Registered Investment Adviser (“RIA” or “Investment Adviser”) that earns performance based fees.

To provide some background, Section 205(a)(1) of the Advisers Act generally prohibits an investment adviser from entering into, extending, renewing, or performing any investment advisory contract that provides for performance Read More…

FINRA Rule 2273-Recruitment Practices

FINRA has long been concerned with practices used by broker-dealers and their newly registered representatives to convince clients to transfer accounts from the representative’s old firm as well as the fees that are sometimes associated with such transfers.  To address this concern, FINRA Rule 2273 requires  broker-dealers to deliver an educational disclosure to potential clients in connection with recruitment practices and account transfers. Read More…

New Anti-Money Laundering Program Requirements

Recently, the Financial Crimes Enforcement Network (“FinCEN”) adopted a final rule on Customer Due Diligence (“CDD”) Requirements for Financial Institutions.   As a result, firms will be required to address the new requirements within their AML program.  Firms must be in compliance with its provisions by May 11, 2018.

Initially, firms’ AML programs were required to meet, at a minimum, the statutorily enumerated “four pillars” that were established by the Bank Secrecy Act (BSA).  The four pillars included the following: Read More…

Pay-to-Play: Capital Acquisition Brokers

Earlier this year, FINRA began accepting applications for firms wishing to register as Capital Acquisition Brokers.  A Capital Acquisition Broker (“CAB”) is a firm that engages in a limited range of activities.  Such activities include advising companies and private equity funds on capital raising and corporate restructuring, and acting as placement agents for sales of unregistered securities to institutional investors under limited conditions.  CABs cannot carry or maintain customer accounts, handle customers’ funds or securities, accept Read More…

FINRA Rule 4530, Customer Complaints in the Social Media Era

As technology continues to advance, the Financial Industry Regulatory Authority “FINRA”) must address how certain regulations will be interpreted as it relates to social media platforms.  FINRA Rule 4530 requires firms to promptly report to FINRA, no later than 30 calendar days, after it knows or should have known that the firm or an associated person of the firm is the subject of any written customer complaint involving allegations of theft or misappropriation of funds, securities, or of forgery. Under the rule, a customer is defined as any person, other than a Read More…