Information Notice – 10/2/19

Summary:

Several member firms recently notified FINRA that they have experienced email account takeovers (ATOs) while using cloud-based email platforms, including Microsoft Office 365 (O365). Attackers used compromised email accounts to defraud member firms by requesting fraudulent wire requests or stealing confidential firm information or non-public personally identifiable information (PII). 

This Notice outlines the attackers’ tactics in executing ATOs, as well as steps taken by member firms to address ATO risks when using cloud-based email systems.

Questions concerning this Notice should be directed to:

• David Kelley, Surveillance Director, at (816) 802-4729.

View Full Notice Here:

Regulatory Notice 19-31

Summary:

This Notice responds to questions that FINRA has received from members about how they can comply with FINRA rules when communicating with customers—particularly when using websites, email and other electronic media—while ensuring fair and balanced presentations. Our goal is to facilitate simplified and more effective disclosure in communications with the public.

FINRA welcomes the opportunity to consult with members about expanding their use of alternative and innovative design techniques—such as technology that offers customized information—in their marketing communications to help investors better understand their products and services. We are interested in ways that members can make communications more interesting and informative and how, together, we can improve the effectiveness of disclosure. Firms are encouraged to contact the Advertising Regulation Department directly at (240) 386-4500 to discuss these approaches.

Questions concerning this Notice should be directed to:

• Joseph E. Price, Senior Vice President, Corporate Financing/Advertising Regulation, at (240) 386-4623;
• Thomas A. Pappas, Vice President, Advertising Regulation, at (240) 386-4553; or
• Amy C. Sochard, Senior Director, Advertising Regulation, at (240) 386-4508.

View Full Notice Here:

David A. Greene, the former head of the Financial Industry Regulatory Authority in Los Angeles, replaces Brian A. Stern, who will be leaving the company at the end of the year.

Read more here!

Nomination Deadline: October 4, 2019

Summary:

The purpose of this Notice is to inform small FINRA member firms¹ of the upcoming Small Firm Advisory Committee (SFAC) election. One seat on the SFAC is up for election, representing the New York region.

The SFAC provides guidance to FINRA staff, particularly regarding the potential impact of proposed regulatory initiatives on FINRA’s small firm members. The SFAC meets four times a year, primarily in Washington, DC, prior to FINRA Board of Governors (FINRA Board) meetings. Potential candidates should ensure that their other commitments will allow for their participation in all SFAC meetings.

Any eligible candidate wishing to have his or her name included on the ballot must submit the relevant information via the candidate profile form to the Corporate Secretary of FINRA by Friday, October 4, 2019. The candidate profile form is available online. 

Read more here!

WASHINGTON—FINRA announced today the election or appointment of four Governors to its Board of Governors:

• Chris W. Flint, President & Chief Executive Officer, ProEquities, Inc. and Senior Vice President, Distribution Companies for Protective Life Insurance Company, was elected by large firms as a Large Firm Governor, one of three representatives of large firms on the Board.
• FINRA small firms elected Linde Murphy, Chief Compliance Officer, M.E. Allison & Co., Inc., as one of three small firm representatives on the Board of Governors.

The two newly elected Governors join two new public Governors on FINRA’s Board. The two new public Governors, who were nominated by the Nominating Committee and approved by the full Board at its July Meeting in Washington, DC, are:

• Camille Busette, Director of the Race, Prosperity, and Inclusion Initiative and Senior Fellow in Governance Studies at the Brookings Institution; and
• Ethiopis Tafara, Vice President and General Counsel of Legal, Compliance Risk and Sustainability at the International Finance Corporation (part of the World Bank Group).
• Read more here!

Regulatory Notice 19-27

Summary:

FINRA is conducting a retrospective review to assess the effectiveness and efficiency of its rules and administrative processes that help protect senior investors from financial exploitation. The protection of senior investors is a top priority for FINRA. As such, FINRA is interested in whether additional tools, guidance or changes to FINRA rules or administrative processes are appropriate to further address suspected financial exploitation and other circumstances of financial vulnerability for senior investors.

This Notice outlines the general retrospective rule review process, summarizes the rules and administrative processes that most directly apply to financial exploitation of senior investors, and seeks responses to a number of questions related to addressing financial exploitation. Comment Period Expires: October 8, 2019

Questions regarding this Notice should be directed to:

• James S. Wrona, Vice President and Associate General Counsel, Office of General Counsel (OGC), at (202) 728-8270;
• Jeanette Wingler, Associate General Counsel, OGC, at (202) 728-8013;
• Lori Walsh, Deputy Chief Economist, Office of the Chief Economist (OCE), at (202) 728-8323; or
• Dror Y. Kenett, Economist, OCE, at (202) 728-8208.

View Full Notice Here:

to Require Reporting of Transactions in U.S. Dollar-Denominated Foreign Sovereign Debt Securities to TRACE. Comment Period Expires: September 24, 2019.

Regulatory Notice 19-25

Summary:

FINRA requests comment on a proposal to expand TRACE reporting requirements to collect information on trades in foreign sovereign debt securities that are U.S. dollar-denominated. Issuance activity in these debt securities has accelerated in recent years and FINRA believes the proposal would provide important regulatory information on an increasingly active segment of the market. Under the proposal, trades in U.S. dollar-denominated foreign sovereign debt securities would be subject to same-day reporting and would not be disseminated publicly. The proposed rule text is set forth in Attachment A.

Questions regarding this Notice should be directed to:

• Alié Diagne, Director, Transparency Services, at (212) 858-4092 or;
• Joseph Schwetz, Senior Director, Market Regulation, at (240) 386-6170;
• Alex Ellenberg, Associate General Counsel, Office of General Counsel (OGC), at (202) 728-8152; or
• Cara Bain, Assistant General Counsel, OGC, at (202) 728-8852.

View Full Notice Here:

Last week, FINRA’s Board of Governors met in Washington, DC for their July 2019 meeting.

FINRA CEO Robert Cook, Chairman Bill Heyman, Board members and FINRA staff provide updates from the 2019 FINRA Board of Governors meeting. Click the link to view the video now! http://www.finra.org/industry/july-2019-board-update

This reference guide covers a range of private placement topics, from the basic question of “What is a private offering?” to more technical discussions on broker-dealer compliance with FINRA’s private placement rules.

1. The Basics – What Is a Private Placement?

Private placements are unregistered, non-public securities offerings that rely on an available exemption from registration with the Securities and Exchange Commission (SEC). Unregistered offerings of securities must rely on an exemption from registration under either Sections 3 or 4 of the Securities Act of 1933 (the ’33 Act^[1].) Most private offerings, however, are sold pursuant to three “safe harbor” rules promulgated under the ’33 Act; Regulation D, Rules 504,^[2] 506(b),^[3] and 506(c).^[4] These rules provide issuers with a clearer and more objective set of requirements for which their offerings may qualify for exemption from registration.

Of the approximate 4,000 FINRA-registered member firms, nearly a quarter (or 23%) have reported revenue from private placement activities during the past five years. Many of these firms are not frequent filers, having submitted fewer than five filings. The following information provides guidance which may be helpful to member firms that are either first-time or infrequent filers or have limited compliance resources.

Click here to read more about private placement topics!

Regulatory Notice 19-22

Comment Period Expires: September 7, 2019

FINRA Requests Comment on a Proposal to Publish ATS Volume Data for Corporate Bonds and Agency Debt Securities on FINRA’s Website.

FINRA requests comment on a proposal to expand the alternative trading system (ATS) volume data that it publishes on its website to include information on transactions in corporate bonds and agency debt securities that occur within an ATS and are reported to FINRA’s Trade Reporting and Compliance Engine (TRACE).

Questions concerning this Notice should be directed to:

• Chris Stone, Vice President, Transparency Services, at (202) 728-8457;
• Patrick Geraghty, Vice President, Market Regulation, at (240) 386-4973;
• Racquel Russell, Associate General Counsel, Office of General Counsel (OGC), at (202) 728-8363; or
• Robert McNamee, Assistant General Counsel, OGC, at (202) 728-8012.

View Full Notice Here: