A common phrase to abide by in the New Year is “out with the old, in with the new.” FINRA’s 2022 Report on its Examination and Risk Monitoring Program (the “Report”), however, contains a combination of old and new priorities. We previously previewed the Report.
Old priorities, once again included, are: Anti-Money Laundering, Reg BI and Form CRS, and cybersecurity.
New risk areas include: firm short positions and fails-to-receive in municipal securities; trusted contact persons; funding portals and crowdfunding offerings, disclosure of routing information; and portfolio margin and intraday trading.
Continue reading “Exam Time: FINRA Releases its 2022 Report on its Examination and Risk Monitoring Program”
Pennsylvania has adopted legislation implementing the model regulation concerning suitability in annuity transactions adopted by the National Association of Insurance Commissioners (NAIC). This brings to 19 the total number of states adopting the NAIC suitability model. Nevada may be the next state to watch. Nevada’s Securities Administrator has indicated that she is resuming work on the state’s fiduciary rule for investment advisers and broker-dealers and expects to release the rule by November. Stay tuned.
Continue reading “Recent State Fiduciary and Best Interest Developments: Pennsylvania’s New Law; Nevada May be Next”
F. Scott Fitzgerald said “There are only the pursued, the pursuing, the busy, and the tired.” FINRA may be all of these in 2022, as FINRA CEO Robert Cook announced FINRA’s laundry list of priorities during a SIFMA Q&A last week. Below are some of the highlights from his Q&A.
Exam Time: Annual Exam and Risk Monitoring Findings
While Mr. Cook advised the “ink isn’t dry” on the 2022 priorities, he suggested broker-dealers can expect more of the same, with some new additions. New topics for examination will include: trusted contact person, disclosure of order routing, and intra-day trading.
Continue reading “Brace for Impact: It’s Going to be (Another) Busy Year for FINRA”
A three-judge panel of the Second Circuit entertained arguments on June 2, 2020, in a lawsuit seeking to vacate and set aside the Securities and Exchange Commission’s (SEC’s) Regulation Best Interest (Reg BI). By way of background and in brief summary, Reg BI requires that broker-dealers make recommendations that are in the “best interest” of the retail customer, disclose conflicts of interest, and specify the services customers are receiving and the associated costs. As previously covered in this blog, the plaintiffs initially challenged Reg BI in September 2019. Despite this pending legal challenge and brokerage firms’ strained resources due to the pandemic and quarantining, SEC Chairman Jay Clayton said on April 2, 2020, in a public statement that the June 30, 2020, compliance deadline for Reg BI would remain.
Continue reading “The Second Circuit Hears the Reg BI Challenge Oral Argument”
As the countdown to the June 30, 2020, date for compliance with Reg BI inches forward, FINRA and the SEC are providing a potpourri of support and information to help firms ensure compliance.
FINRA EFFORTS: FINRA’s northeast regional director announced in late October that FINRA will perform “preparedness reviews” of broker-dealers to determine firms’ readiness to comply with Reg BI. At its November Senior Investor Conference, FINRA President and CEO Robert Cook confirmed FINRA’s intention to perform these “stress tests.” . FINRA has emphasized that its intent is not to be punitive and fine firms for compliance violations. Rather, FINRA insists its primary goal is to assist firms in successfully implementing the nearly 1,000 pages of Reg BI’s regulations.
Continue reading “Reg BI Information Overload: The Countdown to June 2020 Continues with Planned Reg BI Stress Tests, Checklists and FAQS Courtesy of FINRA and the SEC”
In light of the significance of the final rules and commission interpretations issued by the Securities and Exchange Commission on June 5, 2019, Drinker Biddle & Reath’s Best Interest Compliance Team is publishing a series of articles on the subject. The first article, “The Final Reg BI Package: What to Know and What’s Next,” described the final package of rules and interpretations. The second article covered “Form CRS .” The third article, summarized here, will provide a more detailed analysis of strategically selected provisions of the RIA Guidance.
The Securities and Exchange Commission (SEC) Interpretation Regarding Standard of Conduct for Investment Advisers (RIA Guidance) reaffirms, interprets, clarifies, and provides guidance regarding the fiduciary duty an investment adviser owes to its clients under the Investment Advisers Act of 1940 (Advisers Act) as it has been interpreted by common law and SEC guidance. The RIA Guidance also describes the underlying responsibilities that constitute an investment adviser’s fiduciary duties: the Duty of Care and the Duty of Loyalty.
Continue reading “A Look Inside the SEC’s Final RIA Guidance and Its Discussion of “Best Interest””
The standard of care for rollover recommendations has been top of mind for broker-dealers beginning with the issuance of the Department of Labor’s (DOL’s) now vacated fiduciary rule, and more recently with the SEC’s Regulation Best Interest (Reg BI), raising the question of the extent to which the SEC standard of care for rollover recommendations differs from the DOL’s.
The standards appear to be essentially the same – a requirement to act in the customer’s best interest (keeping in mind that Reg BI will not be applicable until June 30, 2020, while the DOL rules are applicable now). However, there are two major differences:
Continue reading “Standard of Care for Rollover Advice”