By Alan Wolper on Posted in Compliance,Fiduciary Rule,FINRA,Reverse churningA couple of years ago, I blogged about the concept of “reverse churning,” i.e., putting a customer who trades only infrequently into a fee-based account, thus costing the customer a lot more than it would have cost that customer to be in a commission-based account. The reason this became a topic was, at the time,… Continue Reading
By Alan Wolper on Posted in Compliance,FINRA,Outside business activities,Rule 3270As I have discussed before, there are some rule violations that are going to happen no matter what FINRA says about them, no matter how many Enforcement cases it brings, and no matter what BDs do to “detect and prevent” such violations. A prime example of such is outside business activities, or OBAs. The rule… Continue Reading
By Alan Wolper on Posted in Compliance,Enforcement,FINRA,SupervisionAs promised, FINRA has released its first Report outlining common findings from its examinations, in an effort to help member firms comply with the rules and, presumably, avoid problems that other firms encountered. A noble idea, especially for an entity not exactly known (at least lately) for its proactive measures to assist BDs with their… Continue Reading
By Alan Wolper on Posted in Compliance,FINRAA client of mine bought a BD, thereby requiring him to go through the CMA process. It was a very small firm, with fewer than ten registered reps. He was a newly minted 24, so he had other, more experienced principals on board to handle all supervisory responsibilities. His job, as outlined in the firm’s… Continue Reading
By Alan Wolper on Posted in Compliance,FINRA,FintechI read recently that in the not-too-distant future, the practice of law by actual human beings will become a rarity, as computers will take over those jobs, because they will be able to do the work better, cheaper and faster. Speaking as a lawyer, I find that to be a somewhat troubling prospect. I mean,… Continue Reading
By Alan Wolper on Posted in AML,Compliance,EnforcementMany of my clients chafe at the AML rule, given the cost of compliance and the even higher cost of defending an Enforcement action if the regulators conclude that red flags were somehow missed, or spotted but not dealt with adequately, or soon enough, or both, or spotting the red flags, responding to them, but… Continue Reading
By Michael Gross on Posted in Compliance,FINRA,Rule 2165,Senior InvestorsA few weeks ago, I posted a blog about FINRA’s new rule concerning senior investors. My take was largely that the rule made sense, but only to the extent that it provides protections for BDs that encounter the need to share otherwise confidential information about a customer due to concerns about the customer’s health, particularly… Continue Reading
By Alan Wolper on Posted in annuities,Compliance,SupervisionBack in December, the State of Massachusetts filed a Complaint against LPL and one of its big producers alleging that the producer, Roger Zullo, defrauded his clients and lied to his supervisors in connection with the sale of variable annuities. What struck me when I read the Complaint, and what has still stuck with me,… Continue Reading
By Alan Wolper on Posted in Compliance,Culture,FINRA,Senior InvestorsIn the blog I posted yesterday, I discussed a late Xmas present that the 10th Circuit gave everyone who is subject to the SEC’s jurisdiction. Today, let’s talk about FINRA’s New Year’s gift to its member firms: the annual Regulatory and Examination Priorities Letter, which was released this week. As is typically the case with… Continue Reading
By Alan Wolper on Posted in AML,Compliance,Disciplinary Process,Enforcement,FINRA,SEC,SupervisionIf you’re reading this, then you undoubtedly already know that FINRA and SEC are, simply, AML crazy. Rightly or wrongly, they are both focusing more than ever on broker-dealers’ fulfillment of their supervisory obligation to be sensitive to the laundry list of red flags first articulated in a Notice to Members back in 2002 that… Continue Reading
By Alan Wolper on Posted in Compliance,Culture,Disciplinary Process,Enforcement,FINRA,SupervisionEarlier this year, as part of its 2016 Examination Priorities, FINRA spent a lot time discussing the “culture of compliance” at broker-dealers, the notion that firms need to create an atmosphere where compliance with rules and regulations is more than just lip service, but, rather, where it is a priority established by firm management –… Continue Reading
By Alan Wolper on Posted in Compensation,Compliance,Disclosure,FINRA,Hiring practices,Rule 2272Two years ago, FINRA first proposed to the SEC a rule that would require brokers to disclose to clients not only when they receive compensation (including signing bonuses and other payments) to switch from one broker-dealer to another, but, worse, the amount of that compensation. The industry was seriously not pleased with the rule. FINRA,… Continue Reading
By Alan Wolper on Posted in AML,CCO,CCO liability,Compliance,Culture,FINRA,Senior Investors,SIFMAThe Rick Ketchum Show. Today’s sessions opened with what was likely the highlight of the entire conference, Rick Ketchum’s swan song “conversation” with Ira Hammerman, GC of SIFMA, before he toddles off into retirement. Granted, these interviews never remotely approach Sixty Minutes intensity, but this year’s featured even more coddling than ever: What would you… Continue Reading
By Alan Wolper on Posted in Compliance,Conflict of Interest,Culture,Examination,Fiduciary Standard,FINRABy now you have probably read FINRA’s recent “Targeted Exam Letter” entitled “Establishing, Communicating and Implementing Cultural Values.” In case you haven’t, it is clear that FINRA is following up on the promise it made in January in the 2016 Regulatory & Examination Priorities Letter to “formalize [its] assessment of firm culture while continuing [its]… Continue Reading
By Blaine Doyle on Posted in Compliance,Defenses,Disciplinary Process,FINRAIn Homer’s epic poem the Odyssey, Odysseus and the crew of his ship are faced with the impossible choice of either sailing closer to Charybdis, a whirlpool capable of sinking their entire ship, or, alternatively, to Scylla, a sea monster just as deadly. Odysseus’ dilemma sprang to mind as I listened to a presentation last… Continue Reading
By Heidi VonderHeide on Posted in Compliance,Expungement,FINRA,Senior Investors,Suitability,SupervisionYesterday, FINRA released its annual Examination Priorities Letter in which it set forth the top issues that would guide its examinations in the coming year. Running 13 pages in length (while complaining about having to be so “brief”), FINRA set forth some of the “many areas of potential concern” it expects to encounter this year.… Continue Reading
By Alan Wolper on Posted in Compliance,Conflict of Interest,Examination,FINRA,SupervisionI posted several blogs this summer about our victory over the SEC in the Robare case (which, naturally, has been appealed by the SEC’s unhappy Division of Enforcement). One of the key elements in our ability to prevail in that matter was my client’s extensive use of outside securities consultants to assist in the preparation and… Continue Reading
By Heidi VonderHeide on Posted in Compliance,Disciplinary Process,Enforcement,FINRA,Statutory DisqualificationFans of this blog (or, at least, readers of this blog who are fans of Jeopardy) will no doubt remember Alan’s prior post, published a few weeks ago, and discussing a recent case that FINRA’s Department of Enforcement brought against one of our clients. From the very beginning, we, as her counsel, were both bewildered… Continue Reading
By Nathan Lamb on Posted in Compliance,Disciplinary Process,Enforcement,SEC,SupervisionYesterday, the SEC held its 2015 “National Compliance Outreach Program for Broker-Dealers.” The program was designed to “provide[] an open forum for regulators and industry professionals to share strong compliance practices and promote the exchange of ideas to develop an effective compliance structure.” In the spirit of this cooperation, SEC Chairwoman White opened the conference… Continue Reading
