Financial Regulatory Forum

FINRA’s new suitability rule looms, with expanded customer-information requirements

By Nick Paraskeva

NEW YORK, June 27 (Thomson Reuters Accelus) - FINRA’s new suitability rule expanding customer information requirements and applying them to more transactions the is set to go into effect July 9, after delays requested by firms to get more time to adapt.

The rules will require a broker dealer or their associated persons to have a “reasonable basis” to believe a recommended transaction is suitable for the customer, based on information obtained through “reasonable diligence” to understand a customer’s investment profile.” (more…)

FINRA’s know-your-customer and suitability rules require brokerage changes, new strategies

By Morris Simkin, Thomson Reuters Accelus contributing author

NEW YORK, June 25 (Thomson Reuters Accelus) - Know-Your-Customer Rule (FINRA Rule 2090) and a new Suitability Rule (FINRA Rule 2111). When these rules are read together, the information required of a customer is materially expanded, even in the case of institutional investors. These new rules, effective July 9, 2012, are quite complex; FINRA has issued three regulatory notices to explain them. These new rules are discussed below together with implications for brokerage firms. (more…)

Client funds, net capital among hot topics for SEC 2012 exam program

By Nick Paraskeva, Thomson Reuters Accelus contributing author

NEW YORK, May 18 (Thomson Reuters Accelus) –  The SEC has new priorities in its 2012 exam program, including verifying firms’ holding of client funds and their net capital calculations.

The changes follow the collapse of MF Global, which revealed that client funds were missing despite regulations requiring that they be segregated. The revisions also reflect top findings found during the 2011 exam program, and follow major reforms to the SEC’s exam office. (more…)

U.S. compliance officers need clarity on status as ‘supervisors,’ industry professionals say

By Stuart Gittleman

NEW YORK, May 8 (Thomson Reuters Accelus) – The U.S. Securities and Exchange Commission’s dismissal of failure-to-supervise proceedings against a broker-dealer’s general counsel did little to ease compliance officers’ concerns over their potential for acting in a supervisory capacity, according to leading industry professionals.

In January the SEC in a one-one split dismissed charges against the lawyer, Theodore Urban, for failing to prevent, detect and stop a stock fraud conducted by a registered representative at the broker, Ferris Baker Watts, and a customer of the firm. (more…)

U.S. budget squeeze could push investment advisers into FINRA oversight -trade group (Complinet)

By Ted Knutson,  Complinet

It is “possible” a budget squeeze could push the Securities and Exchange Commission into calling for a self-regulatory organization for investment advisers, David Tittsworth, executive director at Investment Adviser Association, told Complinet.

Tittsworth suggested that the need to outsource regulatory oversight could be avoided by assessing advisers a fee to pay for the cost of their examinations by the SEC. The most likely candidate for fulfilling an oversight function would be the brokerage industry self-regulatory organization, the Financial Industry Regulatory Authority, Tittsworth added. As Complinet has reported, FINRA chairman Richard Ketchum has repeatedly said his organization is prepared to meet the challenge. (more…)

PREVIEW-FINRA faces calls to lift veil on finances, pay

By Joseph A. Giannone

NEW YORK, Aug 10 (Reuters) – Wall Street regulator FINRA, which demands disclosure and openness from brokers, is under pressure to lift the veil on its own affairs.

The Financial Industry Regulatory Authority, a private corporation that regulates the nation’s 4,700 brokerages, will learns at its annual meeting on Thursday how many support a dissident’s call for more transparency.

(more…)

U.S. watchdog probes firms’ trading tips – sources

NEW YORK/WASHINGTON, Dec 18 (Reuters) – The U.S. brokerage watchdog is probing how Wall Street firms, including JP Morgan Chase and Citigroup Inc, offer stock research, two people familiar with the probe said on Friday.

The Financial Industry Regulatory Authority, which supervises nearly 4,800 brokerage firms, sent letters to more than 10 firms in early November asking for information related to their unpublished research material, one of the people said.

The same person said FINRA is eyeing the firms’ policies related to their delivery of the unpublished research material. Both sources requested anonymity because the sweep has not been made public.

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