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FINRA Released a White Paper Outlining Recent Regulatory Technology (RegTech) Developments

September 12, 2018
Volume 37

  • Regulatory Notices
disciplinary actions

Disciplinary Actions


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

Education and Compliance Programs

In the latest episode of A Few Minutes With FINRA, Chip Jones, FINRA’s Senior Vice President of Member Relations and Education, talks with Wendy Lanton, Chief Compliance Officer of Lantern Investments and Chair of the Small Firm Advisory Committee (SFAC), about the SFAC and the work it does on behalf of small firms. The two provide an overview of the committee structure, the 2018 SFAC election, and information on how small firms can get more involved and raise issues to be addressed.

The FINRA Fixed Income Conference is tomorrow in New York City. Limited space is available. Register today to hear from more than 25 speakers from various organizations, including a keynote address from Jack Brennan, chairman emeritus and senior advisor of The Vanguard Group, Inc.

Tune in to the FINRA Unscripted podcast to hear FINRA leaders review existing and emerging regulatory topics that impact the broker-dealer industry, as well as other insights into the operations of FINRA. 

Tom Gira, FINRA’s head of Market Regulation and Transparency Services, explains how the cloud and machine learning enable his team to sift through massive amounts of data to detect misconduct. But FINRA isn’t just keeping that data for itself. It is sharing it with financial firms to strengthen regulatory compliance across the industry. Listen to the podcast.

FINRA released a white paper outlining recent regulatory technology (RegTech) developments within the securities industry and potential opportunities and implications these technologies may have for broker-dealers. FINRA highlights five areas where industry participants have most prominently leveraged RegTech innovations: surveillance and monitoring, customer identification and antimoney laundering compliance, regulatory intelligence, reporting and risk management and investor risk assessment. FINRA has requested comments and feedback from interested parties by November 30, 2018.


Qualification Examinations Restructuring
FINRA has set the fee for the new Securities Industry Essentials (SIE), revised the fees for the representative-level examinations that FINRA is retaining; and revised the administration and delivery fee for the Municipal Securities Representative (Series 52) examination. The fees, which are described Regulatory Notice 18-27, are effective October 1, 2018.

In addition, FINRA published a set of frequently asked questions on the FINRA qualification and registration requirements.

FINRA Reminds Firms of Their Obligations When Effecting OTC Trades in Equity Securities on a Net Basis
FINRA issued Regulatory Notice 18-29 to remind firms of their obligations under the FINRA trade reporting rules and other applicable FINRA and Securities and Exchange Commission (SEC) rules when effecting over-the-counter (OTC) trades in equity securities on a “net” basis.

 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 filed a complaint against Timothy Tilton Ayre of Agawam, Massachusetts, charging him with securities fraud and the unlawful distribution of an unregistered cryptocurrency security called HempCoin. This case represents FINRA’s first disciplinary action involving cryptocurrencies.

 Upcoming Deadlines and Effective Dates

FINRA Requests for Comments

FINRA published five requests for comments.

FINRA is requesting comment on proposed amendments to the Discovery Guide’s Firm/Associated Persons Document Production List to require firms and associated persons, upon request, to produce documents concerning third-party insurance coverage in a customer arbitration proceeding. The proposed amendments would strictly limit the circumstances under which insurance coverage information could be presented to the arbitrators. See Regulatory Notice 18-22 for more information. Comments are due September 24, 2018.

FINRA seeks comment on proposed amendments to the NASD Rule 1010 Series (Membership Proceedings). The proposal is the result of FINRA’s retrospective review of the MAP rules and processes, and is intended to reduce unnecessary burdens on new and existing firms, while strengthening investor protections. The proposed amendments would replace the NASD Rule 1010 Series with the proposed FINRA Rule 1100 Series (New and Continuing Membership). The proposed amendments would also include additional provisions to address regulatory issues FINRA staff identified and codify existing membership-related interpretations and practices. See Regulatory Notice 18-23 for more information. Comments are due October 5, 2018.

FINRA published a Special Notice seeking comment on how it can support financial technology (fintech) innovation consistent with its mission of investor protection and market integrity. The Notice builds on an initiative FINRA launched last year to improve communication with the securities industry around fintech. In addition, FINRA requests comment on certain fintech areas, including the provision of data aggregation services, supervisory processes concerning the use of artificial intelligence, and the development of a taxonomy-based machine-readable rulebook. The Notice requests comment by October 12, 2018.

FINRA requests comment from member firms and other interested parties on enhancements to the Securities Industry Continuing Education Program (CE Program) under consideration by the Securities Industry/Regulatory Council on Continuing Education (CE Council). These enhancements include the transition of the Regulatory Element program to a more focused and shorter learning requirement administered annually. The CE Council is also gathering feedback on the current Firm Element program and supporting resources as well as on the overlap of the Firm Element program with other firm training requirements. The program enhancements that are under consideration are published on the CE Council’s website and in Regulatory Notice 18-26. Comments are due November 5, 2018.

FINRA requests comment on a proposal to expand the summary firm data relating to over-the-counter (OTC) equity trading that FINRA publishes on its website by (1) publishing on a one-month delayed basis new monthly aggregate block-size trading data for OTC trades in NMS stocks executed outside an alternative trading system (ATS); (2) publishing aggregate non-ATS volume for all firms, by eliminating the existing de minimis exception; and (3) separately identifying firms’ volume of trading on a single dealer platform (SDP), by requiring firms to use a unique market participant identifier (MPID) when reporting their SDP trades to FINRA. The proposal is described in Regulatory Notice 18-28 and comments are due November 12, 2018.

SEC Request for Comment on FINRA Rules

The SEC has requested comment on two FINRA proposed rule changes.

The SEC requests comment on FINRA’s proposal to amend FINRA Rule 7730 (Trade Reporting and Compliance Engine (TRACE)) to modify the technological connectivity options available to members for reporting transactions to TRACE. Specifically, the proposed rule change would amend Rule 7730 to remove Computer-to-Computer Interface (CTCI) as a technological means of connectivity for use in reporting transactions to TRACE. The comment period expires September 13, 2018. See the Federal Register notice.

The SEC requests comment on FINRA’s proposal to amend FINRA Rule 6710 (Definitions) to modify the dissemination protocols with respect to Agency Debt Securities. The proposal would apply a $5 million dissemination cap to all Agency Debt Securities, regardless of the rating assigned to the security. The comment period expires September 13, 2018. See the Federal Register notice.

Upcoming FINRA Elections

Three FINRA elections are approaching soon, and the nomination period is underway to fill vacancies on the Regional Committees, the Small Firm Advisory Committee (SFAC) and the National Adjudicatory Council (NAC). For the Regional Committee and SFAC elections, eligible candidates will be included on the appropriate ballot if they submit a candidate nomination and profile form to the FINRA Corporate Secretary by the following deadlines.

  • FINRA’s Regional Committees (formerly known as District Committees) for the South and West Regions each have six full-term vacancies, and the Midwest, North and New York Regions each have four full-term vacancies to fill. The candidate nomination and profile form, which must be submitted by September 28, 2018, is available in Election Notice 08/29/18.
  • Two seats on the SFAC representing the North and West Regions are up for election. Any eligible candidate wishing to have his or her name added to the ballot must submit the relevant information via the candidate profile form to the Corporate Secretary of FINRA no later than Friday, September 28, 2018. The candidate profile form is available in Election Notice 08/29/18.
  • For the NAC election, there is one small firm vacancy to be filled. Interested individuals must submit petitions to become candidates in the election; petitions are due September 26, 2018. More information is available on the petition requirements in Election Notice 08/13/18.

 Education and Compliance Programs

Join FINRA for the fourth call in a series of Securities Industry Essentials (SIE) Exam, Exam Restructuring and Registration Rule Consolidation conference calls hosted by senior leaders in FINRA’s Registration and Disclosure Department. This event will include an overview of the upcoming changes to representative-level qualification exams and registration rules, as outlined in Regulatory Notices 17-30 and 18-27, which will become effective October 1, 2018. The call will conclude with a Q and A portion. Registration is open to the public; however, spots are limited. Senior Director Joe McDonald will discuss:

  • How FINRA’s qualification exam structure is changing,
  • What is covered on the SIE exam,
  • What effect the changes will have on current registrants,
  • How to enroll for the SIE exam, and
  • An overview of the consolidated FINRA registration rules.
Conference calls will be held:
  • September 18, 2018 • 11 a.m. – 12 p.m., Eastern Time (ET) (For medium and large firms)
  • September 18, 2018 • 2 p.m. – 3 p.m., Eastern Time (ET) (For small firms)

To register for the calls or for more information about the SIE exam and exam restructuring, visit:

CRCP Small Firm Scholarship Now Accepting Applications – Deadline Extended
FINRA is offering five scholarships to industry professionals from FINRA small firms (less than 150 registered reps) to attend the FINRA Institute at Georgetown Certified Regulatory and Compliance Professional (CRCP)® program. The scholarship covers full tuition for the entire CRCP program, including room and board. FINRA has extended the deadline for scholarship applications until Monday, September 24, 2018.

For more information, including eligibility requirements, the selection process and application form, watch our video and visit our website

FINRA Market Regulation is hosting an Options Industry Conference on Monday, September 17, 2018, from 2 p.m. to 4 p.m. Senior representatives from each of the options exchanges will participate in a panel discussion of regulatory issues across the options markets. A question-and-answer session will follow. Additionally, FINRA Market Regulation Staff will be available to answer questions.

Participants can attend in-person at FINRA's office at One Liberty Plaza in New York or participate over the phone. Pre-registration is required.

Register today for Week I of the 2019 CRCP program—which takes place July 21 – 26, 2019. The FINRA Institute at Georgetown Certified Regulatory and Compliance Professional (CRCP)® Program—provides an executive educational experience that covers the theory and practical application of securities laws and regulation through intensive instruction, discussion and case studies.

Watch our latest video to learn more about the CRCP® program and get answers to the most frequently asked questions about the program. Visit FINRA's website for additional details and registration information.

This year’s FINRA Small Firm Conference, which takes place November 7 – 8 in Santa Monica, CA, features a Fireside Chat with FINRA President and CEO Robert Cook and FINRA Executive Vice President of Member Supervision Bari Havlik, and a keynote address from Mr. Cook.

Download the conference agenda and register today.

Register today for two upcoming Member Forums. The forums, designed for FINRA member firms, feature panel discussions around the future landscape of the financial services industry and provides opportunities to engage in key discussions with FINRA staff and connect with industry leaders and peers. There is no cost to attend the forums. Register today to attend a forum in your area.

District compliance events are designed for compliance and legal professionals at FINRA member firms, and offer an opportunity to hear about current regulatory issues while engaging with District Office staff. Review the list of upcoming events being held in the Boca Raton, Denver, Woodbridge, Kansas City and Atlanta districts.

Review the compliance calendar to see a complete list of events that may be in your area.

FINRA is hosting several upcoming Half-Day Compliance Boot Camps across the country, each with different areas of focus. Visit FINRA's website for more information and to register.

Upcoming Half-Day Compliance Boot Camps:

  • September 13 | Dallas, TX
  • September 18 | St. Louis, MO
  • October 3 | Stamford, CT
  • October 18 | Jericho, NY
  • October 24 | New York, NY

Also coming up:

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