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FINRA Reminds Firms of Their Supervisory Responsibilities Relating to CAT

September 2, 2020
Volume 35


  • Regulatory Notice
  • Updated FAQ
  • UPC Advisories
disciplinary actions

Disciplinary Actions


Upcoming Deadlines and Effective Dates
  • FINRA Requests for Comment
  • SEC Request for Comment on FINRA Rules
  • FINRA Elections

Education and Compliance Programs

On August 31, FINRA filed a proposed rule change for immediate effectiveness, SR-FINRA-2020-027, to temporarily amend FINRA Rules 1015, 9261, 9524 and 9830 to allow hearings in connection with appeals of Membership Application Program decisions, disciplinary actions, eligibility proceedings and temporary and permanent cease and desist orders to be conducted by video conference, if warranted by the current COVID-19-related public health risks posed by an in-person hearing. The temporary amendments become operative on September 30, 2020, and expire on December 31, 2020, pending any future extensions.

Tune in to the latest episode of the FINRA Unscripted podcast. On this episode, we hear from FINRA Technology’s Ivy Ho and Greg Wolff how FINRA’s Research and Development Program is pioneering the future of how FINRA fulfills its mission. Listen to the podcast.


FINRA Reminds Firms of Their Supervisory Responsibilities Relating to CAT

FINRA has issued Regulatory Notice 20-31 as part of its continuing efforts to provide members with guidance on requirements relating to the Consolidated Audit Trail (CAT), and FINRA Rule 6800 Series (the “CAT Rules”). In particular, FINRA is reminding members of their supervisory responsibilities under the CAT Rules and FINRA’s Supervision Rule (Rule 3110). Members may wish to consider whether the practices and recommended steps described in the Notice are applicable to their own circumstances and would enhance their supervisory systems and compliance programs.

Updated FAQ

FINRA has updated two frequently asked questions related to regulatory relief due to the Coronavirus pandemic to reflect the extension of enrollment windows for FINRA-administered exams.

UPC Advisories

The following UPC Advisories were published in the last week:

  • UPC #30-20: Sanchez Energy Corp. (SNECQ, SNZYQ, SCAZQ)
  • UPC #31-20: Mood Media Corp. (MMCCQ)
  • UPC #32-20: Pyxus Intl Inc. (PYXSQ)
  • UPC #33-20: Jason Industries, Inc. (JASNQ)
  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 sanctioned Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC more than $2 million for supervisory violations related to variable annuity switches.

Upcoming Deadlines and Effective Dates

FINRA Requests for Comment

FINRA requests comment in Regulatory Notice 20-24 on two proposed changes to the TRACE reporting rules that were recommended by the Securities and Exchange Commission’s Fixed Income Market Structure Advisory Committee. The proposed changes would require firms to: (1) identify corporate bond trades where the price of the trade is based on a spread to a benchmark Treasury security that was agreed upon earlier in the day (i.e., a “delayed Treasury spot trade”) and report the time at which the spread was agreed upon; and (2) identify corporate bond trades that are a part of a larger portfolio trade. The comment period expires September 14, 2020.

FINRA requests comment in Regulatory Notice 20-29 on the practice of “pennying” in the corporate bond market. Consistent with a recommendation from the SEC’s Fixed Income Market Structure Advisory Committee (FIMSAC) and a similar request for comment published by the Municipal Securities Rulemaking Board (MSRB), FINRA is soliciting comment on how to define or identify pennying, how pennying impacts market quality and whether further regulatory action would be appropriate.
The comment period expires October 16, 2020.

SEC Request for Comment on FINRA Rules

The SEC requests comment on FINRA’s proposal to eliminate the Order Audit Trail System (‘‘OATS’’) rules in the FINRA Rule 7400 Series and FINRA Rule 4554 (Alternative Trading Systems—Recording and Reporting Requirements of Order and Execution Information for NMS Stocks) once members are effectively reporting to the Consolidated Audit Trail (‘‘CAT’’) and the CAT’s accuracy and reliability meet specified standards. The comment period expires September 22, 2020. See the Federal Register notice.

FINRA Elections

Election Notice 8/17/2020 notifies members of an upcoming election to fill two large firm seats and one small firm seat on the National Adjudicatory Council (NAC), and to announce the FINRA Nominating & Governance Committee nominees for these vacancies. Eligible individuals not nominated by the Nominating Committee who obtain the requisite number of valid petitions may be included as candidates on the ballot by following the petition procedures described in the Notice. Petitions for candidacy are due October 1, 2020.

Election Notice 9/1/2020 informs small FINRA member firms of the upcoming Small Firm Advisory Committee (SFAC) election. Two seats on the SFAC are up for election, one representing the South region and one representing the Midwest region. Any eligible candidate who wants to be included on the ballot must submit the relevant information via the candidate profile form to FINRA’s Office of the Corporate Secretary by October 1, 2020.

 Education and Compliance Programs

Be sure to watch our newly-released FINRA virtual conference panel discussing COVID-19’s impact on FINRA arbitration and mediation. Panelists include claimant’s counsel Jeff Kaplan, respondent’s counsel Beverly Jo Slaughter and FINRA arbitrator Renee Gerstman. Join the Head of FINRA Dispute Resolution Services, Rick Berry, as he discusses with panelists tips and perspectives on conducting effective Zoom arbitration hearings.

Registration is open for the 2021 FINRA Institute at Georgetown Certified Regulatory and Compliance Professional (CRCP)® Program. Week I takes place on July 18-23, 2021, and Week II takes place on November 14-19, 2021.Take advantage of our new reduced registration rates and gain your CRCP designation.

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