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FINRA Releases its Report on Use of 2019 Fine Monies

June 10, 2020
Volume 23


  • Regulatory Notice
  • Updated FAQ
disciplinary actions

Disciplinary Actions


Upcoming Deadlines and Effective Dates
  • FINRA Requests for Comment
  • Board of Governors Election
  • Annual Entitlement User Accounts Certification

Education and Compliance Programs

Artificial Intelligence in the securities industry. FINRA’s Office of Financial Innovation has released a report reviewing the use of Artificial Intelligence (AI) in the securities industry, including the varied applications of the technology, their associated challenges, and the measures taken by broker-dealers to address those challenges. The report is intended to be an initial contribution to an ongoing dialogue with market participants about the use of AI in the securities industry. Accordingly, FINRA welcomes comments on all areas covered by the paper.

Tune in to the latest episode of the FINRA Unscripted podcast. On this episode, we are joined again by Greg Ruppert, the new Executive Vice President of FINRA’s National Cause and Financial Crimes Detection Programs (NCFC), to hear about FINRA’s new COVID-19 Task Force. Listen to the podcast.

FINRA announces new Chief Human Resources Officer. FINRA announced that it has named Rainia L. Washington as Executive Vice President – Chief Human Resources Officer. In this role, she will lead FINRA’s People Solutions team, overseeing the organization’s talent recruitment, training and development, diversity and inclusion, compensation and benefits, and employee relations.

This week, the FINRA Board of Governors will meet virtually for its June 2020 meeting. Among several important topics of discussion, including impacts of COVID-19 and regulatory policy items, the Board will review FINRA’s 2019 Annual Financial Report.

FINRA recently released its Report on Use of 2019 Fine Monies. The report describes how FINRA used the money from fines issued in 2019, in accordance with its Financial Guiding Principles. As detailed in the report, FINRA issued $39.5 million in fines in 2019. FINRA’s Board determined that there were $71.1 million in fines-eligible expenditures in 2019. Because the total of fines-eligible expenditures exceeded the amount of fines issued, the balance of $31.6 million was funded from FINRA’s reserves.


FINRA Revises Rule 4530 Problem Codes for Reporting Customer Complaints and for Filing Documents Online

FINRA is adding two new Rule 4530 Problem Codes related to SEC Regulation Best Interest (Reg BI) and Form CRS, and making related amendments to the existing Rule 4530 Problem Code related to suitability. Starting on July 18, 2020, firms can use new Problem Code 16–Reg BI and new Problem Code 17–Form CRS, when applicable, to report customer complaint information and required documents filed under Rules 4530(f) and (g). In addition, FINRA is retiring Rule 4530 Problem Code 69–DOL Fiduciary Rule and making other non-substantive stylistic changes to the Problem Codes. See Regulatory Notice 20-17 for more details.

FINRA Updates FAQs to Clarify That Members’ Securities Transactions in Federal Reserve Bank of New York Operations Must be Trade Reported to FINRA

FINRA updated its TRACE FAQ to clarify that members’ transactions in any TRACE-Eligible Security, including U.S. Treasury Securities, corporates and agencies, with the Federal Reserve Bank of New York must be reported to TRACE within the timeframes specified by Rule 6730 (Transaction Reporting). In addition, FINRA added a new equity trade reporting FAQ to clarify that any OTC transaction with the Federal Reserve Bank of New York in ETF shares in the secondary market must be reported to FINRA for dissemination purposes in accordance with the trade reporting rules. For additional information, see TRACE FAQs 3.3.1, 3.5.34,,, and equity trade reporting FAQ 106.7

  Disciplinary Actions

FINRA publishes disciplinary actions to remind registered representatives and firms of specific conduct that violates FINRA rules and may result in disciplinary action. FINRA posted the following disciplinary item on the website this week:

  • FINRA announced that it has ordered Merrill Lynch, Pierce, Fenner & Smith Inc. to pay $7.2 million in restitution to customers overcharged for mutual funds.

 Upcoming Deadlines and Effective Dates

FINRA Requests for Comment

FINRA’s Capital Acquisition Broker (CAB) rules provide a simplified rulebook for broker-dealers that engage only in limited capital advisory, corporate restructuring and private placement activities. FINRA is requesting comment on proposed amendments to the CAB rules, as described in Regulatory Notice 20-04, to make them more useful to CABs without reducing investor protection. The comment period has been extended to June 30, 2020.

FINRA is requesting comment on a proposal to implement the recommendations of the CE Council regarding enhancements to the continuing education requirements for securities industry professionals. The proposal, described in Regulatory Notice 20-05, would change the: (1) Regulatory Element to provide annual training, make the content more relevant, incorporate diverse instructional formats, publicize the learning topics in advance and enhance the related management systems; (2) Firm Element to expressly recognize other training requirements, improve the guidance and resources available to firms and establish a content catalog; and (3) Continuing Education Program to enable individuals who terminate their registrations the option of maintaining their qualification by completing continuing education. The comment period has been extended to June 30, 2020.

FINRA is inviting member firms that participate, or plan to participate, in the security-based swap (SBS) market to provide views and information with regard to broker-dealer SBS activities, including the application of FINRA rules to those activities. Any other interested party is also invited to submit views and information. For more information, including how to make a submission, please visit the FINRA website. FINRA would appreciate receiving responses by July 31, 2020.

Upcoming FINRA Board of Governors Election

The annual meeting of FINRA firms will take place on or about Friday, August 7, 2020, to elect one Large Firm Governor and one Small Firm Governor to the FINRA Board of Governors. Election Notice 5/8/20 announced the FINRA Nominating & Governance Committee nominees to fill these vacancies, and informed individuals not nominated by the Nominating Committee of the procedures for being included as an additional candidate on the ballot for these elections.
Petitions for candidacy are due June 22, 2020.

Annual Entitlement User Accounts Certification

FINRA's Annual User Accounts Certification Process is underway and will conclude July 20, 2020. During this period, Super Account Administrators (SAAs) for organizations with more than one user and/or administrator account must certify that individuals have the appropriate level of access to FINRA systems required to perform their job responsibilities or remove access if no longer required. This year, organizations with only an SAA account and no other users or administrators have the option to certify but are not required. For detailed information, refer to the Annual Entitlement User Accounts Certification Process page.


 Education and Compliance Programs

FINRA's new virtual conference panels provide a unique opportunity to hear the most up-to-date compliance information directly from industry and regulatory leaders right from the comfort of your home. Watch the latest panel on Financial Crimes, Trends and Responses in the Midst of the Pandemic. Join FINRA staff, law enforcement and industry panelists as they outline essential controls, new tactics, and helpful tools firms have put into place to detect, monitor, and respond to financial crimes in this current environment.

Registration is open for the 2020 Small Firm Conference. The event will be held on November 11–12 in Santa Monica, California, and will bring together FINRA staff and industry peers for in-depth discussions on small firms' practices. Register early to receive discounted registration rates!

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