Evershed Sutherland’s annual analysis of FINRA’s disciplinary actions indicates that FINRA fined firms and individuals a record-setting $176 million in 2016.. In addition, it ordered $28 million in restitution in 2016.
But. . .
Additional contributor to this post:
Eversheds Sutherland (US) LLP has completed its annual study of the disciplinary actions reported by FINRA in 2016. Key takeaways:
Additional contributor to this post:
Brian L. Rubin, brianrubin@eversheds-sutherland.com
In a recent Risk Alert, the staff of the Office of Compliance Examinations and Inspections (“OCIE”) of the Securities and Exchange Commission (“SEC”) observed that one of the most frequent deficiencies identified in OCIE examinations was the failure of investment advisers to recognize that they might be deemed to have custody of client assets for purposes of Rule 206(4)-2
(“Custody Rule”) under the Investment Advisers Act of 1940 (“Advisers Act”). On February 21, the staff of the SEC’s Division of Investment Management provided additional guidance under the Custody Rule that addressed three situations where there have been significant questions as to whether an investment adviser has custody of client assets:
Additional contributor to this post:
Gregory T. Larkin, gtlarkin@debevoise.com
The Financial Industry Regulatory Authority, Inc. (“FINRA”) recently filed an immediately effective proposal with the Securities and Exchange Commission (“SEC”) to adopt new rules aimed at certain abusive forms of electronic trading. The proposed rules prohibit two specific types of disruptive quoting and trading activity, and permit FINRA to bring expedited cease and desist proceedings against violations, even if there is no showing of improper intent. The proposal was published by the SEC on November 21, and will become operative on December 15 (see SR-FINRA-2016-043, available here).
On November 14, 2016, FINRA fined a registered broker-dealer $650,000 for failing to safeguard confidential customer data against foreign hackers. Confidential customer information was stored on the firm’s electronic system without adequate protection from cyber hackers, which resulted in the exposure of confidential information for approximately 5,400 firm customers. Although there was no evidence that the exposure of this customer information resulted in any distinct customer harm, FINRA insisted that the firm’s cybersecurity procedures and systems were inadequate. The firm’s prior disciplinary history (similar fine in 2011) was also an important factor in FINRA’s decision to levy this $650,000 punishment.