Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
The Financial Industry Regulatory Authority is considering combining two of its enforcement programs to better streamline its processes.
Currently, FINRA has two separate enforcement programs, one in its member regulation group, which focuses on member firms and their employees, and another in its market regulation group, which oversees over-the-counter trading. “We are one team, and all of us are responsible for FINRA’s success,” FINRA President and CEO Robert Cook said May 17 at the 2017 FINRA annual conference in Washington.
According to Cook, many stakeholders view the units as two different regulators, which could lead to duplicative and burdensome efforts for both the firms and FINRA. As a result, he said, his organization is weighing the pros and cons of whether the two units should be combined.
The potential merger is part of an ongoing multi-year initiative called FINRA360, in which the self-regulatory organization is conducting a complete review of day-to-day functions and programs, with input from both inside and outside the organization.
Although FINRA has high hopes for the initiative, it recognizes that it will be no easy task. “FINRA360 will take time—a comprehensive and thoughtful review requires no less,” Cook said. However, he said FINRA won’t wait until the entire review is completed before making necessary changes.
As part of the review, FINRA also is taking a close look at its rules for private securities transactions and business activities taking place outside of the firms.
The rules were designed to protect investors from potentially problematic activities unknown to the firm, but that could be perceived by the investing public as part of the firm’s business, FINRA said. Additionally, the rules protect firms from reputational or litigation risks when employees engage in business and securities activities outside of the firm.
Comments on whether the rules effectively address the problems they were intended to mitigate and on any compliance challenges are due by June 29.
Another area that FINRA is focusing on is the impact of fintech-related business models and tools on investors and broker-dealer operations.
In the near future, the self-regulatory organization expects to launch a FINRA Innovation Outreach Initiative to “proactively engage with those in the securities industry seeking to develop or utilize new financial technology applications and other innovations,” Cook said. The initiative will help FINRA better understand these innovations and how it can foster a collaborative environment for productive interactions with firms operating in this space, he said.
An important initial step in this outreach initiative will be FINRA’s Blockchain Symposium taking place in New York on July 13, Cook said.
FINRA is also continuing its crackdown on bad practices at broker firms. Last year, it started handing out cross-market report cards to brokers noting manipulative activities, Cook said. He said the effort has led to a 68 percent decline in “layering exceptions,” in which traders make and then cancel orders they never intended to execute.
Since the manipulative activity can be extremely difficult for firms to detect, FINRA is now alerting its members when its surveillance programs flag a suspicious trading pattern. “These new report cards do not reflect conclusions that violations have occurred. Rather, they indicate potential problems that a firm needs to review. It is our hope that you can use this information to upgrade your internal controls and to address any problematic activity long before FINRA can complete a formal investigation,” Cook said.
By the end of the year, FINRA hopes to expand the program to include two more types of cross-market surveillance alerts, Cook said.
To contact the reporter on this story: Antoinette Gartrell in Washington at email@example.com
To contact the editor responsible for this story: Phyllis Diamond at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)