SEC And Finra Team Up To Host BrokerDealer Compliance Outreach Program

Posted on by admin
images (12)

Brokerdealer.com blog update profiling the SEC and Finra announced the opening of registration to attend their National Compliance Outreach Program for BrokerDealers this summer. The program will host regulators and industry professionals as they discuss ideas for compliance structures in the industry. This brokerdealer.com blog update is courtesy of  LeapRate’s article, “SEC and FINRA to hold national compliance outreach program for Broker-Deale” by Andrew Saks-McLeod, with an excerpt below.

The Securities and Exchange Commission and the Financial Industry National Regulatory Authority (FINRA) today announced the opening of registration for their 2015 National Compliance Outreach Program for Broker-Dealers. The program is intended to provide an open forum for regulators and industry professionals to discuss compliance practices and exchange ideas on effective compliance structures.

The SEC’s Office of Compliance Inspections and Examinations (OCIE), in coordination with the SEC’s Division of Trading and Markets, is sponsoring the program with FINRA. The program will be held on July 14 at the SEC’s Washington D.C. headquarters and will focus on 2015 priorities for OCIE and FINRA as well as current topics of interest including cybersecurity, anti-money laundering, and firms’ approaches to supervision and sales practices.

“This program provides an invaluable opportunity to facilitate discussions between regulators and industry participants on important issues affecting the brokerage industry, to promote compliance with federal securities laws, and to enhance investor protection,” said Kevin Goodman, National Associate Director of OCIE’s broker-dealer examination program. “Past programs have been well attended and well received, and we look forward to a candid exchange of ideas with participants at our upcoming event.”

To continue reading about this event hosted by the SEC and Finra, click here.

Industry’s Largest Firm, LPL Financial, Hit With Huge Fine

Posted on by admin
lplfinancial

Brokerdealer.com blog update profiles Finra hitting LPL Financial, the industry’s largest independent brokerdealer firm, with a huge fine. The firm reportedly failed to properly supervise sales of complex products, such as ETFs, variable annuities and non-traded REITs. In addition to paying a fine to Finra, LPL Financial will also have to pay a substantial amount of restitution to certain customers who purchased non-traditional ETFs, and may pay additional compensation to ETF purchasers following an additional review of its ETF systems and procedures. This update is courtesy of InvestmentNews’ article, “LPL Financial fined $11.7 million for ‘widespread supervisory failures‘”, with an excerpt from the article below.

The Financial Industry Regulatory Authority Inc. ordered LPL Financial to pay $11.7 million in fines and restitution for what it deemed “widespread supervisory failures” related to sales of complex products, according to a settlement letter released Wednesday.

From 2007 to as recently as April, LPL failed to properly supervise sales of certain investments, including certain exchange-traded funds, variable annuities and nontraded real estate investment trusts, and also failed to properly deliver more than 14 million trade confirmations to customers, according to Finra.

LPL, for example, did not have a system in place to monitor the length of time customers held securities in their accounts or to enforce limits on concentrations of those complex products in customer accounts, Finra said.

The systems that LPL had in place to review trading activity in customer accounts were plagued by “multiple deficiencies,” Finra said. The firm failed to generate proper anti-money laundering alerts, for instance, and did not deliver trade confirmations in 67,000 customer accounts, according to the settlement letter.

To continue reading about the industry’s largest independent broker-dealer firm’s huge fines from Finra, click here.

Finra CEO Pumps The Breaks On Massive Data-Collection Proposal

Posted on by admin
dbpix-people-richard-ketchum-tmagArticle

Brokerdealer.com blog profiles Finra CEO’s, Rich Ketchum, decision to stop working on the proposal for a massive data-collection system with concerns over secruity issues. Ketchum is expected to report to Congress tomorrow, Friday, May 1, 2015, to explain why. Since the proposal’s start it has received much resistance by others in the industry due to fear of putting the clients and risk and seems Finra is now starting to agree. This brokerdealer.com blog update is courtesy of InvestmentNews’ Mark Schoeff Jr.  and his article, “Finra CEO Rick Ketchum backs off data collection plan“, with an excerpt below.

Finra is putting the brakes on its proposal for a massive data-collection system over concerns about the security of customer information, the organization’s chief executive is expected to tell Congress on Friday.

The Financial Industry Regulatory Authority Inc. has received strong industry resistance to its so-called Comprehensive Automated Risk Data System over its potential costs and the possibility that it will expose customer data to hackers. The comment period for the proposal ended on Dec. 1 last year.

In prepared testimony, Finra chief executive Rick Ketchum said that although CARDS will not collect client names, addresses and Social Security numbers, Finra shares concerns about “bad actors” being able to obtain information that “could possibly be reengineered to identify individuals.”

The regulator is studying the potential data-security threats, Mr. Ketchum will tell the House Financial Services Committee, and is evaluating whether CARDS data can be collected through “existing data sources.”

To continue reading about what Ketchum is expected to tell Congress tomorrow, click here.

FINRA Gets “A” For Funniest Branding and Double-Speak, Says Industry Watcher

Posted on by admin
FINRA

When it comes to its own “brand positioning” and the doublespeak corporate messaging used within the collateral of securities industry self-regulator FINRA, the powers that be might be better off spending more time policing itself as opposed to the millions of dollars it spends on policing its brokerdealer constituents, particularly when it comes to beating up BDs whose advertising messages are alleged to be “inaccurate and/or misleading,” according to Forbes writer Ed Siedle.

BrokerDealer.com blog update is courtesy of Siedle’s recent piece “Finra Keeps America Laughing” with extract below from Siedle’s “Financial Watchdog” blog.

A Financial Industry Regulatory Authority (FINRA) employment advertisement from the Wall Street Journal I read in 2013 was such a hoot that I had to clip it, save it and promise myself I’d write about it someday. The newspaper ad scrap, now yellow, still is a knee-slapping, rib-tickler.

Here’s the hysterical double-speak FINRA used to describe itself in the recruitment piece (with emphasis added on only the most absurd).

“FINRA is an independent, non-government regulator for all securities firms doing business with the public in the United States. FINRA works to protect investors and maintain market integrity in a public-private partnership with the Securities and Exchange Commission, while also benefitting from the SEC’s oversight. In its role as investor guardian, FINRA is informed, but not influenced, by the industry that it regulates.”

Mama Mia!

For the entire article from Ed Siedle, click here.

Finra Focus On High-Frequency Trading; HFTs Might Need BrokerDealer License

Posted on by admin
high frequency trader

BrokerDealer.com blog update profiles the latest shoe to drop as both the US Securities & Exchange Commission (SEC) and Finra contemplate regulatory changes that could require firms engaged in high-frequency trading aka HFT to become registered brokerdealers. Below is excerpt of coverage from FT.com

US regulators have moved to close a loophole that allows some high-frequency trading firms that trade equities away from regulated exchanges to operate with light supervision.

The Securities and Exchange Commission on Wednesday proposed requiring proprietary traders to become members of the Financial Industry Regulatory Authority, a markets regulator.

The change would give authorities greater oversight for the day-to-day operations and recordkeeping for many high-speed traders and electronic market makers who dominate much of trading on US equity markets.

“Today’s proposed rules would close a regulatory gap by extending oversight to a significant portion of off-exchange trading,” said SEC chair Mary Jo White.

It is the first move by the US regulator to tighten monitoring of high-speed electronic traders, which aim to profit from rapid-fire moves in the market, following intense scrutiny on the industry a year ago. Flash Boys, a book by author Michael Lewis, alleged that high-frequency traders were among the beneficiaries to a market structure that was “rigged”. That led to calls for greater oversight of HFTs and off-exchange trading which had been building as equity trading increasingly moved to venues outside the traditional exchanges.

The SEC’s proposal would amend a rule that exempts certain brokers and dealers from membership in a national securities association. The existing rule reflected practices more than two decades ago, when equity markets were dominated by floor-based exchanges which could more easily regulate all of their members’ trading activity.

That world has largely disappeared as the emergence of high-speed technology and alternative trading venueshas helped usher in a new breed of proprietary traders that dominate trading. Although some have registered as broker-dealers at Finra, such as RGM Securities, Quantlab Securities and Tradebot Systems, there are also many that have not.

To read the entire story from FT, click here