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FINRA Launches Enhanced BrokerCheck
On November 12, FINRA released an enhanced version of BrokerCheck, its online system that allows investors to research the professional background of investment professionals. The enhancements allow investors to search both the BrokerCheck and Investment Adviser Public Disclosure record of any securities professional or firm directly on the FINRA homepage. Additional changes were made to present data in a more user-friendly format.
FINRA Report Reviews Broker-Dealer Industry Conflicts Of Interest
On October 14, FINRA released a report on conflicts of interest in the broker-dealer industry, stating that the report is intended to identify potential problem areas and highlight effective conflicts management practices that may go beyond current regulatory requirements. The report identifies the components of an effective conflicts management framework, which include, for example (i) identifying and managing conflicts on an ongoing basis through an enterprise-level approach that is scaled to the size and complexity of a firm's business, (ii) establishing new product review processes that provide independent perspectives and identify potential conflicts raised by new products, (iii) minimizing conflicts in compensation structures between customer and broker or firm interests where possible, and (iv) including "best-interest-of-the-customer" standards in codes of conduct that apply to brokers' personalized recommendations to retail customers.
SEC Adopts New Broker-Dealer Requirements, Amends Others
On July 31, the SEC approved a final rule that amends certain broker-dealer annual reporting, audit, and notification requirements. The amendments require, among other things, (i) that broker-dealers conduct audits in accordance with PCAOB standards, (ii) that broker-deals that clear transactions or carry customer accounts agree to allow the SEC or the broker-dealer’s designated examining authority (DEA) to review the documentation associated with certain reports of the broker-dealer’s independent public accountant and to allow the accountant to discuss the findings relating to the reports of the accountant with those representatives when requested in connection with a regulatory examination of the broker-dealer, and (iii) that broker-dealers file a new form with their DEA that elicits information about the broker-dealer’s practices with respect to the custody of securities and funds of customers and non-customers. Broker-dealers are required to begin filing new quarterly reports with the SEC and annual reports with the Securities Investor Protection Corporation by the end of 2013, and must begin filing annual reports with the SEC June 1, 2014. The SEC also approved amendments to the net capital, customer protection, books and records, and notification rules for broker-dealers. Those amendments take effect 60 days after publication in the Federal Register.
SEC Approves FINRA Rule Change to Publicly Release Additional Disciplinary Action Information
On June 21, the SEC approved a change to FINRA’s rules that will allow the self-regulatory organization to publish greater information about FINRA’s disciplinary actions. Under existing rules, FINRA only releases disciplinary actions upon request, unless the action meets specified criteria established for use in determining whether an action is worthy of publication. Once the new rules take effect – likely several months from now – those publication criteria will be removed, and most FINRA disciplinary actions will be released as a matter of course. FINRA will retain authority to redact information to protect privacy of individuals. The new rules also update and codify FINRA’s practices related to the publication of other FINRA actions, including temporary cease and desist orders, statutory disqualification decisions, expedited proceeding decisions, summary actions, and others.
Federal Authorities Announce More Charges in Broker-Dealer Foreign Bribery Case
On June 12, the DOJ and the SEC announced additional charges in a previously announced case against employees of a U.S. broker-dealer related to an alleged “massive international bribery scheme.” The DOJ unsealed criminal charges against a third employee of the broker-dealer who allegedly arranged bribe payments to a Venezuela state economic development bank official in exchange for financial trading business for the broker-dealer. The SEC, whose routine compliance examination detected the allegedly illegal conduct, announced parallel civil charges.