News & Events –

FINRA issued a series of significant proposals over the past few weeks that would 1) reinforce certain firm supervisory obligations concerning associated persons with a history of past misconduct, 2) impose new restrictions on member firms that hire or employ high-risk brokers and 3) revise quantitative suitability standards. These proposals have significant implications going forward. Comments are due at the end of June. These and other issues were discussed at FINRA’s 2018 Annual Conference this week in Washington, D.C.

Movement toward a common approach by U.S. regulators on digital currency may be slow (sometimes imperceptible), but new developments are keeping up the momentum. Treasury, CFTC and SEC regulators are speaking about the need to coordinate, courts are recognizing authorities and state attorneys are exerting pressure. Bates Research looks at some new developments.

It’s been two weeks since the SEC Best Interest Rule was unveiled, and the three-part proposal is drawing praise, criticism and much scrutiny. As expected, political and industry reaction is coming in from many quarters. Meanwhile, the fate of the DOL fiduciary rule has been decided by the Fifth Circuit Court of Appeals which denied several motions for reconsideration of their decision to vacate the rule. As expected, none of this has slowed states’ actions, as they keep promulgating suitability, fiduciary duty and disclosure standards. Bates has a recap of the latest activity.

Away from the headlines, federal and state regulators continue to prepare financial institutions for their new anti-money laundering compliance obligations. In the past few weeks, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) and FINRA provided additional guidance to covered institutions on how to comply with rules that are set to go into effect next month. In New York, the certification provisions of the Department of Financial Services (“NYDFS”) BSA/AML rules went into effect. Bates research has the highlights.

Congress has become increasingly sensitive to high-profile data breaches. Two new Congressional bills have been proposed to establish general standards for data protection and also address a number of concerns regarding the security of consumers’ credit reports, inspired by the Equifax breach. New York Attorney General Eric Schneiderman said his office is in the midst of investigations into Equifax and has joined the Massachusetts Attorney General in an investigation into Cambridge Analytica. 

Meanwhile, Congressional leaders have called for “a national solution to create data security safeguards and responsible notification processes,” although some State Attorneys General made clear that this may be an incomplete solution.

This is the second in a two-part series looking at the current state of cyber protections in light of recent hacks, data breaches, and cyberwarfare.

Attacks on private personal and financial information have not decreased since Bates Research last reported on the headline-grabbing data breaches of Uber and Equifax, and the governmental data breach of the SEC’s EDGAR filing system. In the wake of three new dramatic data breaches, cyberthreats seem far from contained. 

This is the first in a two-part series looking at the current state of cyber protections in light of recent hacks, data breaches, and cyberwarfare.

FINRA is stepping up its efforts to address a number of longstanding procedural issues in its arbitration forum. With proposals to (i) increase the likelihood of recovery on unpaid arbitration awards, (ii) tighten the process to expunge customer dispute information, (iii) eliminate fees for explaining certain arbitration decisions and (iv) change procedures for arbitrating small claims, regulators are attempting to both protect investors and strengthen the securities arbitration forum. Bates Research has a top-line brief on the headlines.

In a little more than ten weeks, new rules go into effect that require municipal securities dealers to disclose the mark-ups and mark-downs they charge when selling municipal bonds to retail investors. Despite a significant notice and comment period, the provision of a year and a half of lead time, and considerable substantive guidance, bond traders are said to be scrambling to meet the May 14th implementation date. They may yet get some relief. We take a closer look at where things stand.

Tech firms are scrambling to gain a piece of the 8.5 trillion-dollar financial industry market, and financial institutions are racing to partner with tech firms to create competitive advantage. Regulators and legislators, mindful of protecting investors and ensuring the integrity of the financial markets, are simultaneously promoting fintech business innovation, issuing enforcement warnings, entering into regulatory collaborations, and looking to regtech to help them adjust to the shifting paradigm. Highlights of federal and state activity over the past few weeks demonstrate this dynamic and their concerns. Bates Research dives into the details.

In the sixth annual publication of examination priorities, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) identified four “pillars” of their mission to protect investors and ensure the integrity of the U.S. capital markets. The 2018 OCIE priorities are consistent with these pillars and do not reflect a significant new direction for OCIE. Beyond the specific highlights, however, there is a clear concern about limited regulatory resources and a corresponding enthusiasm for the use of data, technology and analytics. Bates Research has the details.

The SEC has announced their examination priorities for 2018.

With a week to go before broad FINRA rules intended to protect seniors from financial exploitation take effect, activity across the federal and state landscape shows no sign of slowing. In addition to looking at the updated FAQs released by FINRA in relation to the new rules, we also review reaction to the passage of the Elder Abuse Prevention and Prosecution Act, consider this week’s House passage of the Senior $AFE Act, and highlight some important state-level developments.

FINRA followed up its recently-issued regulatory and examinations priorities letter with the publication of a 2018 annual budget summary containing financial guiding principles. This new disclosure is another first for the self-regulating organization as it continues on a path toward more transparency and accountability. FINRA President Robert Cook also had a chance to comment on this in person at a SIFMA-CL lunch in New York City this week with industry members.

Bates has some key takeaways from FINRA’s latest disclosures.

Legislators, regulators and enforcement officials are providing a glimpse of what is likely to be a formidable year in the development of a new anti-money laundering (AML) framework. Recent AML activities, summarized last month by Bates Research, included new FINRA compliance guidance for member firms and the launch of the FinCEN “Exchange” program to facilitate greater information sharing between the public and private sectors. Since the first of the year, the U.S. Senate has held hearings on several core AML reforms, the Treasury Secretary alerted financial service firms that AML and know-your-customer (KYC) rules apply to crypto-currencies, and the Comptroller of the Currency and the N.Y. Department of Financial Services (DFS) imposed substantial AML penalties against two large institutions. Bates Research has the details.

This week, FINRA released its Regulatory and Exam Priorities for 2018. The Priorities Letter is intended to be a reference point for firms to prepare their compliance, supervisory and risk management programs, as well as to prepare for FINRA examinations. While most of the priorities from previous years remain in force, there are a handful of new topics and new emphases stemming from regulatory developments during 2017. Bates Research explains how these priorities have changed over time and what's in store for 2018.

FINRA has announced their regulatory and examination priorities letter for 2018.