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September 19, 2018
Volume 38

  • Regulatory Notices
  • UPC Advisory
disciplinary actions

Disciplinary Actions


Upcoming Deadlines and Effective Dates
  • FINRA Requests for Comment
  • Upcoming FINRA Elections

Education and Compliance Programs

On Monday, Oct. 1, FINRA will implement significant changes to CRD, which will impact firms. The update will incorporate consolidated registration and qualification rule changes, the new Securities Industry Essentials (SIE) exam, revisions to the representative-level qualification exams, changes to how related information is displayed in CRD, as well as supporting changes to Forms U4 and U5. As a result, any pending (in-process) Forms U4/U5 filings not submitted by 11 p.m., ET, Fri., Sept. 28, will become invalidated and converted to “read-only.” Users who still need to submit any invalidated filings will have to recreate them; firms are advised to plan accordingly.

Please be sure to review the following resources:

FINRA issued an Investor Alert warning investors to beware of potential investment scams touting stocks and other investments promising huge financial gains in the wake of Hurricane Florence. The Investor Alert, Beware of Stock Fraud in the Wake of Hurricane Florence, explains how investors can spot and protect themselves from investment scams associated with the clean-up or rebuilding of devastated areas.

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.

Register today for an upcoming Member Forum in your region to engage in key discussions with FINRA staff and industry peers around the future landscape of the financial services industry. Both events will feature a fireside chat with FINRA President and CEO Robert Cook and FINRA Senior Vice President of Member Relations and Education Chip Jones.

There is no cost to attend the forums. Register today to attend a forum in your area.


SEC Staff Issues Guidance on Third-Party Recordkeeping Services
Regulatory Notice 18-31 provides firms with information regarding recent guidance issued by staff of the SEC’s Division of Trading and Markets regarding the use of recordkeeping services provided by third parties to preserve records pursuant to SEA Section 17(a) and SEA Rule 17a-4.

Enhancements to the REX System and Updates to Data and Other Requirements Applicable to Requests for Extensions of Time Under Regulation T and SEA Rule 15c3-3
Effective on December 3, 2018, FINRA will update the Regulatory Extension (REX) system to improve the process for requesting extensions of time required under SEA Rule 15c3-3 and FINRA Rule 4210. Specifically, the changes will provide firms the ability to submit SEA Rule 15c3-3(d)(4) extension of time requests via a batch file process and add functionality to enhance the process by which firms request extensions of time under FINRA Rule 4230(a), SEA Rule 15c3-3(d), (m) and (h), and file the reports required under FINRA Rule 4230(b). Further, effective on February 25, 2019, firms will no longer be required to submit a customer’s complete Social Security or tax identification number, and shall instead submit the last four digits of such numbers when requesting extensions of time under Rule 4230(a). In addition, FINRA is updating certain validation identifiers and validation criteria that will affect the extension timeframes available to meet Regulation T calls. See Regulatory Notice 18-30.

UPC Advisory
The following UPC Advisory was posted in the past week:

  • UPC #28-18 Quadrant 4 Systems Corp (QFORQ)
 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:

 Upcoming Deadlines and Effective Dates

FINRA Requests for Comments

FINRA published six 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.

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.

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

The FINRA Disclosure Reporting, Monitoring and Registration Conference is only three weeks away. Register today to stay current on regulatory reporting requirements, get the latest on developments to our registration and disclosure systems and to hear directly from FINRA staff and industry leaders.

The conference brochure is now available for the FINRA Small Firm Conference, which takes place November 7 – 8 in Santa Monica, CA. This year’s conference features a Fireside Chat with FINRA President and CEO Robert Cook, FINRA Executive Vice President of Member Supervision Bari Havlik, and FINRA Senior Vice President of Member Relations Chip Jones.

Download the conference brochure, which includes the full agenda and session descriptions. Register today

Equities & Fixed Income Small Firm Compliance Workshop
Tuesday, October 23, 2018
2 p.m. to 4 p.m. ET

FINRA Market Regulation is hosting a free two-hour compliance workshop to discuss regulatory issues impacting small firms that trade in the equities and fixed income markets. Topics include compliance-related areas of concern within the equities and fixed income industries, and changes in FINRA processes, particularly as they relate to small firms. FINRA Market Regulation staff, representing different practice areas, 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 for the workshop.

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.

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, Woodbridge and Kansas City 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:

  • October 3 | Stamford, CT
  • October 18 | Jericho, NY
  • October 24 | New York, NY

Also coming up:

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