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Guidance
- Rule 4111 Annual Calculation Reports
- UPC Advisories
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Disciplinary Actions
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Upcoming Deadlines and Effective Dates
- Election Notice
- FINRA Request for Comment
- SEC Request for Comment
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Education and Compliance Programs
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FINRA published the report of independent counsel Lowenstein Sandler LLP’s review on the arbitrator selection process. FINRA’s Audit Committee in February engaged Lowenstein to provide an independent review and analysis in connection with a Fulton County, Georgia Superior Court decision vacating an arbitration award in favor of respondent Wells Fargo Clearing Services, LLC. The review found no evidence of an improper agreement to remove certain arbitrators from arbitration cases. FINRA also said it would promptly implement the report’s recommendations to provide greater transparency to the arbitrator selection process.
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On the latest episode of FINRA Unscripted, Meredith Cordisco, associate general counsel with the Office of General Counsel, Scott Gilbert, vice president covering the large diversified firm group and alternative net capital group within Member Supervision, and Nicole McCafferty, senior director with the National Cause and Financial Crimes Detection Program, discuss how FINRA is examining around the new Regulation Best Interest regulations and explore some of the common problem areas and effective practices when it comes to complying with all that is now required. Listen to the podcast.
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FINRA published the Report on Use of 2021 Fine Monies, which describes the capital initiatives, strategic expenditures and other activities funded by fine monies.
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July 1 marks the 20th anniversary of FINRA’s Trade Reporting and Compliance Engine (TRACE), FINRA’s real-time, over-the-counter price dissemination service for the fixed-income market. Stephanie Dumont, executive vice president of Market Regulation and Transparency Services, and Ola Persson, senior vice president of Transparency Services, reflected on the history, impact and future of the platform.
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Guidance
Rule 4111 Annual Calculation Reports
The report of the annual calculation of whether your firm has met the Rule 4111 Preliminary Criteria for Identification as of the June 1, 2022, Evaluation Date will be available in the new Rule 4111 Compliance Tool on July 11, 2022. To access the Compliance Tool, a firm’s Super Account Administrator (SAA) can assign eligible users the “Firm View Rule 4111 Compliance Tool” entitlement in the FINRA Account Management System located in the FINRA Gateway. The entitlement for the tool is located under Registrations, in the CRD section. If a firm’s SAA does not grant this entitlement to any of its users, the firm will be unable to access the tool.
As explained in Rule 4111 FAQ 8.1, the tool will provide, as they are issued, reports of: (1) the annual calculation of whether the member firm met the Preliminary Criteria for Identification, including its Preliminary Identification Metrics, as of the Evaluation Date for a given year; and (2) interim calculations as of an Evaluation Date for that given year. A description of the terms used in the reports can be found in the Rule 4111 Compliance Tool Glossary. A recording of FINRA’s May 26, 2022, virtual demonstration of the Rule 4111 Compliance Tool is available on FINRA.org.
For questions regarding this resource or entitlement questions, please contact the FINRA Call Center at (301) 869-6699 or send an email to the Compliance Tools team. For more information about Rule 4111, see FINRA Regulatory Notice 21-34, Information Notice 2/1/2022, and the Protecting Investors From Misconduct Key Topic page.
UPC Advisories
The following UPC Advisories were published in the last week:
- UPC #15-22 Mallinckrodt PLC (MNKKQ)
- UPC #16-22 Cypress Environmental Partners, L.P. (CELPQ)
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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 sanctioned National Securities Corporation approximately $9 million, including disgorgement of $4.77 million in net profits the firm received for underwriting 10 public offerings in which NSC attempted to artificially influence the market for the offered securities. FINRA also ordered NSC to pay more than $625,000 in restitution for failing to disclose material information to customers who purchased GPB Capital Holdings, LLC private placements. In addition, FINRA imposed a $3.6 million fine for this misconduct and various other supervisory and operational violations.
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Upcoming Deadlines and Effective Dates
FINRA Election
FINRA firms will elect one Small Firm Governor to the FINRA Board of Governors at FINRA’s annual meeting in August. As announced in Election Notice 5/16/22, any eligible individuals who obtain the requisite number of valid petitions will be certified as candidates and included on the ballot. Petitions for candidacy are due June 30, 2022.
FINRA Request for Comment
FINRA is soliciting comment on a proposal to establish a new trade reporting requirement for transactions in over-the-counter options on securities with terms that are identical or substantially similar to listed options. FINRA is proposing to require firms to report this information to FINRA on a daily basis (end-of-day) for regulatory purposes only. Comments are due September 20, 2022. See Regulatory Notice 22-14.
SEC Request for Comment
The SEC requests comment on FINRA’s proposal to amend Rule 8312 (FINRA BrokerCheck Disclosure) to release information on BrokerCheck® as to whether a particular member firm or former member firm is currently designated as a “Restricted Firm” pursuant to Rule 4111 (Restricted Firm Obligations) and Rule 9561 (Procedures for Regulating Activities Under Rule 4111). Comments are due July 8, 2022. See the Federal Register notice.
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Education and Compliance Programs
Week I of the 2022 FINRA Institute at Georgetown CRCP® Program is sold out and Week II has limited spots available. Reserve your spot now and join us in Washington, D.C., on November 13-18. View the Week II detailed schedule for a look at what sessions are being held and the participating faculty.
Thinking ahead and want to reserve your spot for next year? Registration for 2023 Week I is now open.
Register for all of FINRA’s upcoming events:
- FINRA Institute at Georgetown Certified Regulatory and Compliance Professional® Program
- Week I | July 17 – 22, 2022 | Washington, DC | Sold Out
- Week II | November 13 – 18, 2022 | Washington, DC
- Advertising Regulation Conference | October 20 – 21, 2022 | Washington, DC and Virtual
- Small Firm Conference | November 9 – 10, 2022 | Santa Monica, CA and Virtual
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