Cryptocurrency (also spelled crypto currency) is everyone’s new favorite hot topic. Even if you’ve done no research into the topic, you’ve probably heard of the most (in)famous cryptocurrency: Bitcoin. But what are cryptocurrencies? And how are they affecting the securities industry?
Cybersecurity programs remain a significant priority for financial services industry regulators, including the SEC, FINRA, and state securities regulatory agencies. As mentioned in FINRA’s 2018 Annual Regulatory and Examination Priorities Letter, member firms need to have cybersecurity programs in place and such programs must capable of protecting sensitive information, including personally identifiable information of clients, from both internal and external threats. Over the past couple of years, awareness of cybersecurity risk has increased dramatically. However, as awareness increases, so does the sophistication of cybersecurity threats. And even a robust cybersecurity program can be compromised by something as simple as an employee opening an email attachment that contains malware. So, what can a firm do to combat phishing and spearphishing attacks, ransomware attacks, fraudulent third-party wires, etc.?
[Continued from Crowdfunding: Funding Portal Registration – Part I]
Funding Portal Registration Process
Firms seeking to register as funding portals must do so via completion of an application process with FINRA. The registration process for a funding portal is similar to, but much less comprehensive and exhaustive, the New Member Registration process completed by applicants wishing to become broker-dealers.
Title III of the Jumpstart Our Business Startups (JOBS) Act, enacted in 2012, provides guidance and regulation relating to securities offered or sold through crowdfunding activities. In 2015, the Securities and Exchange Commission (SEC) added onto this initial act by creating a new ruleset that implemented a regulatory framework for intermediaries that facilitate such crowdfunding transactions. This includes regulations for a relatively new intermediary: the funding portal. Securities Act Section 4(a)(6) (otherwise known as “Regulation CF”) requires that intermediaries in crowdfunding transactions be registered with the SEC as either a broker-dealer or a funding portal.
Per the Bank Secrecy Act (BSA) and FINRA Rule 3310, FINRA member firms are required to establish Anti-Money Laundering (AML) compliance programs. To assist its smaller member firms with fulfilling these responsibilities, FINRA publishes the “Anti-Money Laundering Template for Small Firms”, which provides instructions, relevant rules, text examples, relevant websites, and other resources that can be used to develop an AML plan for a small firm.
Last spring, FINRA began a review of its rules regarding Outside Business Activities (OBAs) and Private Securities Transactions (PSTs). The review was meant to evaluate the efficiency and efficacy of FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of an Associated Person). FINRA concluded that while Rules 3270 and 3280 are fulfilling their intended purposes, they could benefit from changes to make the rules more contemporary and present-day and to better align the goal of protecting investors with the reality of the current regulatory landscape and business practices. Based on its findings, FINRA has proposed a new rule governing OBAs and PSTs, meant to replace the current rules and reduce unnecessary burdens on member firms.
The Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and Exchange Commission (“SEC”) continues another year of exam priorities for its Registered Investment Advisors (“RIA”) and Broker-Dealers. OCIE are the “eyes and ears” of the SEC, and its exams are used by the SEC to inform rule-making initiatives, identify and monitor risks, improve industry practices, and pursue misconduct. Read More…
FINRA has updated the form that firms must use to file offering documents and information pursuant to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) (Filer Form). The updated Filer Form, which became available in the FINRA Firm Gateway in May of 2017, includes new and updated questions that will facilitate review of the filed material and eliminates other questions. Read More…