In November 2021, FINRA adopted changes to the Regulatory Element component of its Continuing Education (“CE”) rules which, in part, now requires registrants to complete annual CE as opposed to the previous three-year cycle.

The compliance date for the new Marketing Rule is November 4, 2022 (“Compliance Date”). Effective on the Compliance Date, investment advisers may no longer choose to comply with the previous advertising and cash solicitation rules. The SEC staff will be withdrawing certain staff statements related to previous advertising and cash solicitation rules effective on the Compliance Date. Advertisements distributed after the Compliance Date will be subject to the new Marketing Rule. Recently, the SEC published a Risk Alert addressing examinations focusing on the new Marketing Rule.

An AWC was issued, and the Firm was censured and fined $55,000 for failing to timely report to Trade Reporting and Compliance Engine (TRACE) transactions in TRACE-eligible corporate debt securities. It was found that reports were late due to several issues at the Firm. These issues included delays related to manually reporting trades involved with foreign affiliates and operational errors. Additionally, the Firms personnel caused delays such as untimely matching of tickets in the Firm’s system and making amendments to trade terms outside of the 15-minute reporting time frame.

The Firm was censured, fined $550,000 and ordered to pay $456,155, plus interest, in restitution to customers. The Firm failed to establish, maintain, and enforce a supervisory system and WSPs designed to achieve compliance with FINRA and the Municipal Securities Rulemaking Board (MSRB) rules related to the firms registered representatives’ recommendations of high yield corporate and municipal bonds. FINRA found the Firm’s policies and procedures did not address suitability factors that should be considered when recommending high-yield bonds.

The 2022 Report on FINRA’s Examination and Risk Monitoring Program was released, providing information to firms that may help update and improve compliance programs. The report covers topics FINRA deems important based on 2021 firm examinations. For each section, FINRA identified relevant rules, key considerations for compliance programs, findings from recent exams, effective practices and helpful resources for firms when reviewing their own procedures and controls related to compliance. FINRA has also identified new topics for firms to monitor for 2022.

On February 9th, 2022, the SEC voted to propose cybersecurity risk management rules for registered investment advisors, registered investment companies and funds. There were also proposed amendments made related to rules that govern investment advisers and fund disclosures.

On December 17th, 2021, the Securities and Exchange Commission (“SEC”) released an order stating that employees of J.P. Morgan Securities, a JPMorgan Chase & Co. (“JP Morgan”) broker-dealer subsidiary, were often engaging in business communications on personal devices. Employees utilized un-captured applications such as WhatsApp and personal email addresses for business communications. The firm did not preserve these un-captured communications, therefore violating book-and-record-keeping requirements. JPMorgan has admitted to the SEC’s findings and understands that it was unlawful, claiming to have adjusted their policies to accommodate for these errors.

An AWC was issued and the Firm was censured and fined $10,000, neither admitting nor denying FINRA’s findings. FINRA discovered the Firm allowed an unregistered individual to operate as a principal and identify as the CEO. The unregistered individual held decision making responsibilities involving employee status and compensation and took part in the Firm’s securities business.

On November 19, 2020, the Securities and Exchange Commission (“SEC”) issued a Risk Alert noting deficiencies in Investment Adviser Compliance Programs with regard to Rule 206(4)-7 under the Investment Adviser Act of 1940 (“Advisers Act”). Rule 206(4)-7 makes it unlawful for an investment adviser registered with the SEC to provide investment advice unless the adviser adopted and implemented written policies and procedures reasonably designed to prevent violations of the Advisers Act by the adviser or any of its supervised persons.

On November 9, 2020, the Securities and Exchange Commission (“SEC”) released its observations from the Office of Compliance Inspections and Examinations (“OCIE”) related to the supervision and compliance of registered investment advisers with multiple branch offices. OCIE conducted a series of examinations that focused on SEC-registered investment advisers operating from numerous branch offices and with operations geographically dispersed from the advisers’ primary or main office.

The Securities and Exchange Commission (“SEC”) filed a complaint in the U.S. District Court for the Northern District of New York in Buffalo against Cygnus Capital Management and the estate of Richard Ventrilla (“Ventrilla”) alleging that they had defrauded 22 investors of $989,000.

As Summer has turned to Fall and you are getting around to that “To Do” list that may have hit the back burner all summer, it’s time to focus on your year-end compliance priorities. Plenty of people use a pen and paper, calendar, or online diary without any issues. And yet, a new to do list seems to emerge daily with important items being left behind.

On September 4, 2019, the  Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert related to principal trading and agency cross transactions under Section 206(3) of the Advisers Act. These topics were identified in recent examinations of investment advisers.

The Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) released its 2019 examination priorities. The protection of retail investors, including seniors and those saving for retirement, remain a priority.

On Friday December 14, 2018, the Securities and Exchange Commission (“SEC”) published a Risk Alert advising Registered Investment Advisers (“RIAs”) of their obligation to revise written policies and procedures related to electronic messaging utilized by their personnel as a recent examination conducted by the Office of Compliance Inspections and Examinations (“OCIE”) identified shortfalls.

The Securities and Exchange Commission (“SEC”) settled charges against Voya Financial Advisors Inc. (VFA”), a dual FINRA member broker-dealer and SEC registered investment adviser for its failure in adopting written policies and procedures designed to protect customer information and protect customers from the risk of identity theft.

Earlier today FINRA issued Regulatory Notice 18-31 to provide member firms with information relative to the recent guidance issued by staff of the SEC’s Division of Trading and Markets with respect to the use of third-party record keeping services to preserve records pursuant to SEA Section 17(a) and SEA Rule 171-4.

On Friday July 6, 2018 FINRA published Regulatory Notice 18-20 with respect to its efforts to ascertain the extent in which its members or its associated persons, or affiliates currently engages or intends to engage, in any activities related to digital assets such as cryptocurrencies, virtual coins and tokens.

At the 2018 FINRA Conference this past May, panelists introduced a new version of Web CRD that is going to be unveiled in the coming months. This updated version of the CRD portal provides user friendly tools to make navigating CRD more efficient for both compliance firms and representatives alike.

A few years ago, (see Asgard Regulatory Brief – Late Disclosure Review May 15, 2015), FINRA had conducted a retrospective review related to judgements and liens that were not reported under Question 14M of the Form U4. At that time many firms received Disclosure Review inquiries related to potential unreported bankruptcies, judgements or liens that went back as long as fifteen years.