Regulatory Events Reporting
Regulatory Obligations and Related Considerations
FINRA Rule 4530 (Reporting Requirements) requires firms to promptly report to FINRA, and associated persons to promptly report to firms, specified events, including, for example, violations of securities laws and FINRA rules, certain written customer complaints and certain disciplinary actions taken by the firm. Firms must also report quarterly to FINRA statistical and summary information regarding certain written customer complaints.
- Do your firm’s WSPs require associated persons to report written customer complaints, judgments, liens and other events to the firm’s compliance department?
- Does your firm provide periodic reminders or training on such requirements, and what consequences does your firm impose on those persons that do not comply?
- How does your firm monitor for red flags of unreported written customer complaints and other reportable events?
- How does your firm ensure that it accurately and timely reports to FINRA written customer complaints that associated persons reported to your firm’s compliance department?
- How does your firm determine the problem and product codes it uses for its statistical reporting of written customer complaints to FINRA?
Exam Findings and Effective Practices
- No Reporting to the Firm – Associated persons not reporting complaints, judgments, liens and other events to the firms’ compliance departments because they were not aware of firm requirements.
- Inadequate Surveillance – Firms not conducting regular email and other surveillance for unreported events.
- No Reporting to FINRA – Failing to report to FINRA written customer complaints that associated persons reported to the firms’ compliance departments.
- Incorrect Rule 4530 Product/Problem Codes – As part of the statistical reporting to FINRA, failing to use codes that correlated to the most prominent product or the most egregious problem alleged in the written customer complaints, but instead, reporting less prominent or severe codes or other codes based on the firms’ investigations or other information.
- Compliance Questionnaires – Developing detailed annual compliance questionnaires to verify the accuracy of associated persons’ disclosures, including follow-up questions (such as whether they have ever filed for bankruptcy, have any pending lawsuits, are subject to an unsatisfied judgments or liens, or received any written customer complaints).
- Email Surveillance – Conducting email surveillance targeted to identify unreported complaints (by, for example, including complaint-related words in their keyword lexicons, reviewing for unknown email addresses, and conducting random email checks).
- Review of Registered Representatives’ Financial Condition – Identifying expenses, settlements and other payments that may indicate unreported events by conducting periodic reviews of their associated persons’ financial condition, including background checks and credit reports.
- Review of Publicly Available Information – Conducting periodic searches of associated persons’ names on web forums, court filings and other publicly available databases, including reviewing for any judgments, liens and other reportable events.
- Regulatory Notice 20-17 (FINRA Revises Rule 4530 Problem Codes for Reporting Customer Complaints and for Filing Documents Online)
- Regulatory Notice 20-02 (FINRA Requests Comment on the Effectiveness and Efficiency of Its Reporting Requirements Rule)
- Regulatory Notice 15-05 (SEC Approves Consolidated FINRA Rule Regarding Background Checks on Registration Applicants)
- Regulatory Notice 13-08 (FINRA Amends Rule 4530 to Eliminate Duplicative Reporting and Provide the Option to File Required Documents Online Using a New Form)
- FINRA’s Rule 4530 Reporting Requirements
- FINRA’s Rule 4530 Reporting Codes
- FINRA Report Center – 4530 Disclosure Timeliness Report Card
Books and Records
Books and Records