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FINRA's 2018 Risk Control Assessment Survey Will Launch Early Next Week

May 9, 2018
Volume 19

  • Notices
disciplinary actions

Disciplinary Actions


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

Education and Compliance Programs

FINRA’s Board of Governors meets this week for its second meeting of the year. The Regulatory Policy Committee will review several current rulemaking and policy initiatives, including proposed amendments to the arbitration discovery guidelines and proposed amendments to the definition of and TRACE dissemination protocols for agency debt securities.

Amendments to FINRA Rule 2232 (Customer Confirmations) that require member firms to disclose additional transaction-related information to retail customers for trades in certain fixed income securities become effective on May 14, 2018. The amended rule requires a member to disclose the amount of mark-up or mark-down it applies to trades with retail customers in corporate or agency debt securities if the member also executes an offsetting principal trade in the same security on the same trading day. See the Fixed Income Confirmation Disclosure: Frequently Asked Questions (FAQ) for more information.
FINRA’s Newest E-Learning Course—Books and Records for Operations Professionals—is designed to help operations professionals understand their books and records obligations when conducting firm business. The scenarios emphasize the importance of adhering to regulatory recordkeeping and retention requirements and firm-specific guidance. As a mobile-responsive e-learning course, users have the option to take this course and complete all scenarios on their smartphone or tablet, as an alternative to using a computer.

Visit to take this course—or any of FINRA’s 100-plus e-learning courses—and to learn how to add FINRA courses directly to your firm’s learning management system. Note that many of FINRA’s e-learning courses are now available for CFP credit
Only two weeks left to register for the FINRA Annual Conference (May 21 – 23, 2018). This year’s event features more than 50 sessions and more than 150 speakers. Hear keynote addresses from FINRA President and CEO Robert Cook; The Honorable Jay Clayton, Chairman, U.S. Securities and Exchange Commission; The Honorable Preston Rutledge, Assistant Security of Labor, Employee Benefits Security Administration, U.S. Department of Labor and Brett Redfern, Director, Division of Trading and Markets, U.S. Securities and Exchange Commission.  

Download the updated conference brochure. Register today to attend in person or via live online broadcast.


FINRA's 2018 Risk Control Assessment (RCA) survey will launch early next week, at which time each firm's executive representative and their designated assistant will receive an email linking to their firm's unique RCA survey. The RCA is an important part of FINRA’s risk-based surveillance and examination programs. FINRA uses it to better understand the risks associated with the business activities in which individual member firms engage, the products and services they offer, and the kinds of clients and counterparties with which they deal. In addition, the RCA helps us identify and assess the integrity of the controls intended to manage those attendant risk exposures.


FINRA Amends Rule 3310 to Conform to FinCEN’s Final Rule on Customer Due Diligence Requirements for Financial Institutions

FINRA has filed for immediate effectiveness amendments to FINRA Rule 3310 (Anti-Money Laundering Compliance Program) to reflect the Financial Crimes Enforcement Network’s (FinCEN) adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions (CDD Rule). The implementation date is May 11, 2018. This implementation date aligns with the compliance date for FinCEN’s CDD Rule. See Regulatory Notice 18-19 for more information.

FINRA Extends Effective Date of Margin Requirements for Covered Agency Transactions

In June 2016, the SEC approved FINRA’s rule change amending FINRA Rule 4210 to establish margin requirements for Covered Agency Transactions. FINRA is extending, to March 25, 2019, the effective date of the requirements pursuant to the rule change that otherwise would have become effective on June 25, 2018. See Regulatory Notice 18-18 for more information.

New Rate for Fees Paid Under Section 31 of the Exchange Act

Effective May 22, 2018, the Section 31 fee rate applicable to specified securities transactions on the exchanges and in the over-the-counter markets will decrease from its current rate of $23.10 per million dollars in transactions to a new rate of $13.00 per million dollars in transactions. See Information Notice 5/7/18 for more information.

 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. The following disciplinary action was posted on FINRA’s website this week:

  • FINRA fined Fifth Third Securities, Inc., $4 million and required the firm to pay approximately $2 million in restitution to customers for failing to appropriately consider and accurately describe the costs and benefits of variable annuity (VA) exchanges, and for recommending exchanges without a reasonable basis to believe the exchanges were suitable.

 Upcoming Deadlines and Effective Dates

FINRA Requests for Comment

FINRA has four open requests for comment:

  • Regulatory Notice 18-16 seeks comment on proposed rule amendments that would impose additional restrictions on member firms that employ brokers with a history of significant past misconduct. These brokers, while relatively small in number, may present heightened risk of harm to investors, and any misconduct by them also may undermine confidence in the securities markets as a whole. The rule proposals would strengthen the existing controls FINRA has applied to such brokers to further promote investor protection and market integrity. The new proposals are one part of FINRA’s initiatives to confront high-risk brokers. Comments are due June 29, 2018.
  • FINRA is conducting a retrospective review of Rule 3110 (Supervision), governing annual compliance meetings to assess its effectiveness and efficiency. Regulatory Notice 18-14 outlines the general retrospective rule review process and seeks responses to several questions related to firms’ experiences with this specific rule. Comments are due June 25, 2018.
  • FINRA seeks comment on proposed rule amendments that would revise the quantitative suitability obligation under FINRA Rule 2111 (Suitability) to more effectively address instances of excessive trading in customers’ accounts. The proposed rule amendments would remove the element of control that currently must be proved to demonstrate a violation, but would not change the obligations to prove that the transactions were recommended and that the level of trading was excessive and unsuitable in light of the customer’s investment profile. See Regulatory Notice 18-13 for more information. Comments are due June 19, 2018.
  • FINRA is conducting a retrospective review of the rule governing carrying agreements to assess its effectiveness and efficiency. Regulatory Notice 18-10 outlines the general retrospective rule review process and seeks responses to several questions related to firms’ experiences with this specific rule. Comments are due May 23, 2018.

SEC Requests for Comment

  • The SEC requests comment on FINRA’s proposal to adopt rules relating to the establishment of a second Trade Reporting Facility or ‘‘TRF’’ to be operated in conjunction with Nasdaq, Inc. The second FINRA/Nasdaq Trade Reporting Facility would provide FINRA members with another mechanism for reporting over-the-counter trades in NMS stocks and complying with FINRA’s requirements with respect to back-up trade reporting arrangements. Comments are due May 17, 2018. See the Federal Register notice.
  • The SEC requests comment on FINRA’s proposal to amend FINRA Rule 6433 (Minimum Quotation Size Requirements for OTC Equity Securities) to adopt as permanent the minimum quotation sizes for OTC equity securities currently operating on a pilot basis. The comment period expires May 29, 2018. See the Federal Register notice.

Special Election to Fill a FINRA Large Firm Governor Vacancy
FINRA is conducting a special meeting of large firm members to elect one individual to fill a vacant Large Firm Governor seat on the FINRA Board of Governors. Eligible individuals who have not been nominated by FINRA’s Nominating Committee may be included on the ballot for the election of governors by following the petition procedures described in Election Notice 4/20/18. Petitions for candidacy are due June 4, 2018.

 Education and Compliance Programs

Registration for the new FINRA Disclosure Reporting, Monitoring and Registration Conference is now open. This one-day conference is designed to bring together compliance, supervision, and registration staff from broker-dealers and third-party vendors to discuss regulatory reporting requirements and industry practices related to firm registrations, including FINRA’s Membership Application Program (MAP), individual registrations, customer complaints and disclosures. Discounted rates available for the first 50 to register through July 27.

FINRA's RAD Training will conduct a Foundations of Web CRD/IARD training May 15-16 in Rockville, MD. In-person registrants for the 2018 FINRA Annual Conference (May 21 – 23) may be interested in attending this session during their trip to the DC Metro 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 Chicago, Denver, Dallas, Woodbridge, New Orleans, Kansas City, Los Angeles and Boston districts.

FINRA has several Half-Day Compliance Boot Camps coming up soon.

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

Also coming up:

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