On October 28, 2020, FINRA filed a proposed rule change to amend Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) that would require members to file retail communications concerning Private Placement offerings. Previously, Rules 5122 and 5123 required all offering documents to be filed with FINRA. However, they weren’t specific enough to include all documents that should have been considered offering documents, such as retail communications.
The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA) recently issued Frequently Asked Questions (FAQs) concerning the exemption provisions of SEC Rule 15c3-3, the Customer Protection Rule. Prior to this guidance, even if they did not meet all requirements for (k)(2)(i) or (k)(2)(ii) on the FOCUS Report, firms were choosing to file for a (k)(2)(i) if they did not have custody. To address this issue, the SEC released footnote 74 to allow these “Non-Covered Firms” to properly file for exemption under Rule 15c3-3.
In May of this year, the SEC fined Bloomberg Tradebook LLC for $5 million, censured the firm, and issued a cease and desist order for misleading customers about how their orders were routed. Specifically, the SEC found that the Firm made material misrepresentations in regard to order routing. They omitted material facts about how they handled certain customer trade orders.
Knowing firm requirements as set forth in the Investment Advisers Act is essential, and learning from the mistakes of others in this area can be a valuable and motivating tool for striving for compliance in the financial services industry. In an atmosphere where Chief Compliance Officers (CCO) are being added to disciplinary proceedings, learning and taking immediate corrective action is the name of the game. No longer is the firm the only name blasted across SEC complaints; regulators will ensure that individuals are equally held responsible. Read More…
With the rise in new regulations, small firms generally experience some of the greatest challenges evolving their business to meet these new demands. Critical focus areas constantly expand related to cybersecurity, senior investor protection, supervisory controls, succession planning, and human capital. With this in mind, small firms need to ensure that they have a solid foundation in place for their compliance program. But why is it important for small firms especially to perform occasional assessments of their compliance efforts?