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FINRA’s Board of Governors Met on December 12-13

December 26, 2018
Volume 52

  • Regulatory Notices
disciplinary actions

Disciplinary Actions


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

Education and Compliance Programs

FINRA recently published its Report on Selected Cybersecurity Practices - 2018, a detailed review of effective information-security controls at securities firms. The report represents the newest initiative in FINRA’s ongoing effort to help broker-dealers – including small firms – further develop their cybersecurity programs.

“Securities firms rate cybersecurity as one of their top operational risks, and our new report addresses areas that firms tend to find most challenging,” said David M. Kelley, Surveillance Director, Member Supervision in FINRA’s Kansas City office, referring to the report’s five main topics:

  • Cybersecurity controls in branch offices;
  • Methods of limiting phishing attacks;
  • Identifying and mitigating insider threats;
  • Elements of a strong penetration-testing program; and
  • Establishing and maintaining controls on mobile devices.

The new report builds on a 2015 cybersecurity report by FINRA that covered the main elements of a comprehensive cybersecurity program and provided guidance to firms seeking to improve their programs.

A podcast and video based on the 2018 cybersecurity report – plus other tools and resources for firms – are available at’s cybersecurity topic page.

FINRA’s Board of Governors met on Dec. 12-13. The Board approved two rule proposals—both related to dispute resolution—and approved the organization’s 2019 budget. FINRA will publish additional information related to its finances throughout next year. For more information about the discussions that took place during the meeting, please watch the December 2018 Board Report video or read FINRA President and CEO Robert Cook’s email.

FINRA Announces Regional Committee, SFAC, and NAC Election Results and Appointments. FINRA’s annual Regional Committee, Small Firm Advisory Committee (SFAC) and National Adjudicatory Council (NAC) elections concluded in November. Additionally, the FINRA Board of Governors (FINRA Board) recently appointed individuals to fill a number of additional vacancies on the NAC and SFAC. This Notice lists the individuals recently elected and appointed to the SFAC, NAC and Regional Committees.

In an effort to help residents in afflicted communities rebuild their financial lives, and recognizing the critical resources and support that public libraries offer in many of these communities, the FINRA Investor Education Foundation (FINRA Foundation) rolled out a new grant program this year to ensure that libraries can offer residents even greater assistance when disasters strike. Under the program, eligible libraries receive $5,000 for collection development related to personal finance, plus communications support and staff training to give library patrons the information and resources they need to make critical money decisions when faced with lost income, displacement or costly repairs following a disaster. This year, 16 libraries in eight states each received a $5,000 grant to expand their personal finance collections and educate consumers about financial fraud.

“We created this initiative to address the needs of underserved communities where household income falls below the state median,” said Gerri Walsh, President of the FINRA Foundation. “Too often, a natural disaster can turn into a financial calamity, especially for economically vulnerable families. Our own research underscores the importance of strategies to equip consumers with the tools and information needed to manage their financial lives, especially during times of crisis.”

FINRA has made available a new MSRB Markup/Markdown Analysis Report in the Report Center. The MSRB Markup/Markdown Analysis Report is built on logic developed to pair purchase transactions and sales transactions reported to RTRS. It calculates markups and markdowns and allows firms to refine the analysis based on a number of filters, including rating and length to maturity.

The report, a monthly compliance tool, provides an analysis of the markup, markdown and customer-to-customer pairs identified during the month. This report and supporting transaction details are designed to support firms' fair pricing and disclosure compliance procedures and reviews. The report mirrors the TRACE Markup/Markdown Analysis Report launched earlier this year.

The recording of FINRA's November 27 Small Firm Report, a conference call series dedicated to the unique regulatory challenges faced by small firms, is now available. If you were unable to join the live event, or would like to listen again, you can register for access to a recording of the call.


Information Notice: 2019 Holiday Margins Extension Schedule

FINRA published an Information Notice to assist firms with making accurate submissions in connection with requests for Federal Reserve Board Regulation T, SEA Rule 15c3-3 and FINRA Rule 4210 extensions of time to reduce filing errors that may result from extension requests submitted around holidays when exchanges or banks are closed. The schedule included in this Notice specifies the due dates for filing requests of extensions of time prior to the holiday when the exchanges or banks are closed in 2019.

FINRA Announces Updates of the Interpretations of Financial and Operational Rules

Regulatory Notice 18-42 describes updates to the imbedded text of Securities Exchange Act (SEA) financial responsibility and reporting rules in the Interpretations of Financial and Operational Rules to reflect the effectiveness of certain amendments the Securities and Exchange Commission (SEC) adopted. The updated imbedded text relates to SEA Rules 15c3-1g and 17a-5.

Optional One-Day Extension for Customer and PAB Reserve Formula Computations and Required Deposits Around the December 2018 Month-End Holidays

FINRA published Regulatory Notice 18-41 to notify member firms of an optional one-day extension for making the deposit of amounts required to be reserved pursuant to SEA Rule 15c3-3, based on the customer and PAB reserve formula computations required under SEA Rule 15c3-3(e)(3) and computed by firms as of Friday, December 21 and Friday, December 28, 2018. The extension is based upon discussions with staff of the SEC Division of Trading and Markets and is similar to extensions previously announced in 2007 and 2012.

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

  • UPC #35-18 Dell Technologies, Inc. Class C Common Stock (When Issued)
 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 fined Morgan Stanley Smith Barney LLC $10 million for anti-money laundering (AML) program and supervisory failures that spanned a period of more than five years. Morgan Stanley’s AML program failed to meet the requirements of the Bank Secrecy Act and failed to establish and maintain a supervisory system reasonably designed to comply with Section 5 of the Securities Act of 1933.
  • FINRA has fined Merrill Lynch, Pierce, Fenner & Smith Inc. for improperly selling shares in initial public offerings (IPOs) to industry insiders, including its employees’ immediate family members and customers who were brokers at other brokerage firms. Merrill Lynch will pay a $5.5 million fine, and disgorge $490,530 it earned as revenue from the sales.
  • Monthly Disciplinary Actions - December 2018

 Upcoming Deadlines and Effective Dates

SEC Requests for Comment on FINRA Rule

The SEC requests comment on FINRA’s proposal to amend paragraph (a)(3) of FINRA Rule 4512 (Customer Account Information) to permit the use of electronic signatures and to clarify the scope of the rule. The comment period expires January 9, 2019. See the Federal Register notice.

 Education and Compliance Programs

The CTCI migration conference call has been re-scheduled to Wednesday, Jan. 30 2019, 2-3 p.m. Eastern Time, to discuss the upcoming migration. Effective Feb. 3, 2020, FIX will be the only protocol supported for reporting trades to FINRA's TRACE and ORF platforms.

Register for the call to learn:

  • The steps that firms will need to take to successfully complete the migration;
  • Where to find documentation;
  • About network and application testing for direct connections as well as for firms reporting via a service bureau; and
  • Where to get support.

The call will be in listen-only mode. Questions may be submitted before or during the call to [email protected].

Please note: registration is required for all participants, including those who had registered for the call that was postponed. Signing up to participate is quick and easy. There are a limited number of lines available for this call. Please register as soon as possible and plan to share a phone line with others at your firm to help FINRA maximize participation.

Only three weeks left to register for the FINRA RegTech Conference—a forum for regulators, thought leaders and industry practitioners to learn more about the use of RegTech tools, and related opportunities and challenges.

The conference takes place January 17 in New York City and features FINRA President and CEO Robert Cook; The Honorable Hester M. Peirce, Commissioner, U.S. Securities and Exchange Commission; FINRA Chief Legal Officer Bob Colby and Andrew Gray, Managing Director and Group Chief Risk Officer, Depository Trust & Clearing Corporation. Download the conference brochure, which includes the full agenda and session descriptions.

Registration is now open for the Compliance Outreach Program for Municipal Advisors—which takes place February 7, 2019, in San Francisco, CA. This free one-day program is designed to provide an open forum for municipal advisory industry professionals to discuss current compliance practices with regulators and promote a more effective compliance structure for regulatory obligations of municipal advisors. The program is sponsored by the SEC's Office of Compliance Inspections and Examinations (OCIE), in coordination with the SEC's Office of Municipal Securities, FINRA and the MSRB.

Register today to attend in person or via live audio webcast.

Register early for the Annual Conference, which takes place May 15-17, 2019, in Washington, DC. Reduced rates are available for the first 500 in-person registrants before March 29, 2019. Register today.

Mark your calendar as FINRA’s Small Firm Conference returns October 23 – 24, 2019 in Santa Monica, CA. This conference features in-depth discussion on small firms’ practices and tips for complying with FINRA rules.

Discounted rates available—register early to secure your seat

Register today for the 2019 FINRA Institute at Georgetown Certified Regulatory and Compliance Professional (CRCP)® program— comprised of two weeklong residential courses, which are delivered at Georgetown University's McDonough School of Business in Washington, DC. This 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.

  • Week I • July 21 – 26, 2019
  • Week II • November 17 – 22, 2019

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.

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