FINRA’s head of enforcement’s speech yesterday at SIFMA AML was noteworthy. Schroeder signaled a commitment by FINRA to avoid regulation by enforcement. She said “(t)ransparency is particularly important in Enforcement. In order for the industry to be able to follow a rule, FINRA’s expectations have to be clear and rule violations have to be foreseeable. We want to avoid any perception of “rulemaking by enforcement.” That is why as we continue to integrate two enforcement teams, we are also thinking about our internal processes when we bring a case. In particular, we are considering how to identify any novel issues early, and ensure that we flag and discuss these issues with the rest of FINRA to develop the most effective regulatory response on behalf of the organization. Enforcement actions are one type of tool that FINRA can use to effect compliance. Other departments have other tools, and we want to make sure that we consult and collaborate early and often with our FINRA colleagues to consider issues holistically, and to think about the range of actions we might take, from an enforcement action to a Regulatory Notice or even a new rule.
Category Archives: Regulatory
The Final Rule: Considerations and Analysis of the DOL’s 18-Month Transition Period Extension
The Department of Labor (DOL) extended until July 1, 2019, the date for compliance with the full conditions in its new “investment
advice” fiduciary definition and related exemptions (Final Rule), which became generally applicable on June 9. After considering the commentary it received, DOL has extended the Transition Period as proposed, without change. Thus, the same transition rules and standards in effect on June 9 will remain in effect until July 1, 2019. Of particular note, the DOL explained that:
• It needs more time to “carefully and thoughtfully review” the commentary it has received and to honor the President’s directive, as well as to coordinate with the SEC, FINRA, NAIC and other regulators.
• It anticipates proposing a new streamlined class exemption in the near future, which presumably would address innovative products being developed in response to the Final Rule.
• It “sees no compelling reason” to further extend the “grandfathering exemption” (although it did solicit supplemental comments on this point going forward). The applicability date for determining whether a transaction may be grandfathered remains June 9, 2017.
Additional contributor to this post:
SEC Chairman Clayton Shares His Thoughts With the Senate
On September 26, 2017, SEC Chairman Jay Clayton delivered to the U.S. Senate Committee on Banking, Housing and Urban Affairs his first testimony as Chairman. A copy of his prepared remarks may be found here.
Mr. Clayton’s testimony was fairly broad in scope, covering a variety of issues of concern to the Committee, from the SEC’s budget request to its activity in the enforcement arena. Of interest to BDIA’s were his comments on:
- Encouraging Initial Public Offerings and Investor Choice
- A Fiduciary Duty for Broker-Dealers
- Examinations of Broker-Dealers
Additional contributor to this post:
Lloyd S. Harmetz, lharmetz@mofo.com
Mixed Results for FINRA’s Disciplinary Actions in First Half of 2017
A midyear analysis of the disciplinary actions reported by FINRA from January through June 2017 indicates:
- Certain program areas and restitution are up, but fines and the number of disciplinary cases are significantly down
- FINRA appears to be focusing on more “nuts and bolts” issues like trade reporting, record retention, and supervisory policies and procedures
- Despite an overall reduction in fines and the number of disciplinary actions, firms should still concentrate on core issues like suitability and books and records, among others
Additional contributor to this post:
Brian L. Rubin, brianrubin@eversheds-sutherland.com
Securities: Top Five Unclaimed Property Issues
While securities have long been a hot spot for unclaimed property issues, the past several years have seen a continued expansion of audit activity targeting broker-dealers, stock issuers, transfer agents, mutual funds, banks, and others in the financial services industry. Unclaimed property laws—and unclaimed property audits—can present a number of specific challenges in this space.
Additional contributors to this post:
Holly H. Smith, hollysmith@eversheds-sutherland.com
Mary Jane Wilson-Bilik, mjwilson-bilik@eversheds-sutherland.com