RNR Securities LLC was fined $15,000 for failing to inspect its Office of Supervisory Jurisdiction (“OSJ”) properly. RNR Securities’ written reports concerning inspections of its OSJ branch and non-OSJ branch failed to evidence proper testing of RNR Securities’ policies and procedures. The report did not describe how the review was performed nor how RNR Securities determined that there were no issues or concerns.

Firm Fined Wealthforge Securities, LLC. Wealthforge Securities, LLC (“Wealthforge”) was censured, fined $100,000 and required to provide training to all personnel related to FINRA Rule 2210 for providing misleading statements to retail customers. The Firm was found to have distributed communications to retail customers that violated content standards of FINRA Rule 2210.

In February 2021, FINRA replaced two of their prior publications - the Report on FINRA Examinations Findings and Observations and the Risk Monitoring and Examination Priorities Letter - with the Risk Monitoring and Examination Activities Report. This new report was released to inform member firms’ of relevant practices to incorporate into their compliance programs and provide insight to improve ongoing regulatory operations.

On February 1st, 2021 the Securities and Exchange Commission (“SEC”) charged three individuals with defrauding hundreds of retail investors out of more than $11 million dollars through fraudulent and unregistered digital asset securities offerings. According to the SEC’s complaint filed in U.S District Court for the Eastern District of New York, from December 2017 through May 2018 Kristijan Krstic and John DeMarr falsely claimed Start Options was “the largest Bitcoin exchange in euro volume and liquidity.”

Since the start of the pandemic, has your firm adopted digital communication and collaboration platforms? If yes, have policies and procedures been implemented to prevent mistakes and misbehaviors? I pose the above question to those Compliance Officers who have been overseeing compliance at a FINRA-registered firm from their home office.

The Financial Crimes Enforcement Network (“FinCEN”) released two announcements of note in January. One involves a proposed rule involving digital transactions. The rule is aimed at tightening gaps for potential money laundering due to the increase in popularity of virtual currency. The second announcement involved an enforcement action against Capital One (“the Bank”).

FINRA’s Board of Governors met via zoom on December 9, 2020. The Board approved three proposed rulemaking amendments and also approved FINRA’s 2021 proposed budget. One of the proposed amendments that was approved was to further enhance the Continuing Education Program (“CE”). The amendment applies to FINRA Rules 1210 and 1240, strengthening FINRA’s CE program.

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.

BGC Financial, L.P. On August 13, 2020, BGC Financial, L.P was censured, required to update its Written Supervisory Procedures (“WSP”) and fined $100,000. The Firm consented to the sanctions and to the entry of findings that it reported transactions to the Trade Reporting and Compliance Engine (“TRACE”) with an incorrect time of trade execution, therefore reporting transactions to TRACE that the Firm was not required to report.

FINRA released a regulatory notice warning all member firms of a phishing attempt from an organization trying to impersonate FINRA. Phishing is a cybercrime where targets are contacted by email by someone pretending to be a legitimate organization to lure individuals into responding with sensitive data.

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.

The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) has observed an increase in credential stuffing attacks. What is Credential Stuffing? Bad actors target client accounts via compromised login credentials. This can result in a loss of customer assets and unauthorized disclosure of personal information.

On September 1, 2020 the Securities and Exchange Commission (“SEC”) filed an emergency action charging investment adviser Matthew O. Clason with stealing thousands of dollars from an advisory client. Clason was an investment adviser representative of a registered investment adviser as well as a registered representative of a broker-dealer.

Firms Fined. Exane, Inc. was fined$50,000 for failing to establish management controls and supervisory procedures to manage the financial and regulatory risks of the business. The firm’s credit limit controls were not automated nor applied on a pre-trade basis to prevent order entries that exceeded the pre-set capital thresholds for each customer.

The Securities and Exchange Commission (“SEC”) amended the accredited investor definition, allowing more investors to qualify to participate in private offerings. Formerly, to qualify as an “Accredited Investor,” an individual had to have a net worth greater than $1 million, annual income exceeding $200,000 for the past two years or $300,000 combined income (if married.)

Pursuant to FINRA Rule 3110, member firms are charged with the responsibility of implementing and enforcing a written Anti-Money Laundering Compliance Program (“AMLCP”) in efforts to combat money laundering and terrorist financing activities. Within the AMLCP, policies and procedures are to provide guidance to Associated Persons of the firm to monitor, detect, and identify red flags that propose a threat to the Firm’s business.

FINRA Rule 3220 sets strict limits on the gifts and gratuities that financial professionals can give or receive. Gifts and gratuities are subject to a $100 per year, per person limitation. This includes whether or not there was a pre-existing relationship between the associated person and the recipient and whether the associated person paid for the gift out of their own personal bank account without reimbursement from the firm.

The Securities and Exchange Commission (SEC) filed an asset freeze to stop Lisa McElhone and Joseph W. LaForte’s fraudulent scheme worth $500 million. The scheme involved raising investor funds via unregistered securities offerings for Complete Business Solutions Group. Complete Business Solutions is a cash advance company that conducts business as Par Funding.

COVID-19 has impacted the world’s operations tremendously. From volatile markets, to business loan grief, and overwhelming cyber threats, member firms have been forced to a new work environment, remote. Though the world entirely has been forced to a pause, FINRA has notified member firms they have used this time of uncertainty to crack down rule and regulation enforcement to protect investors.