The SEC Achieved a Record Breaking Year of Filing Enforcement Actions and Obtaining Disgorgement and Penalties During the 2014 Fiscal Year

According to an SEC press release, in the 2014 fiscal year that ended on September 30, 2014, the SEC achieved a record-breaking year by filing 755 enforcement actions and obtaining orders that totaled $4.16 billion in disgorgement and penalties. The SEC attributed these results to its implementation of new investigative approaches and the innovative use of data. The agency’s filings…

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SEC Approves Amendments Expanding FINRA Arbitrators Authority to Make Referrals During Arbitration Proceedings

In Regulatory Notice 14-42 (“RN 14-42”), FINRA announced amendments to the FINRA Customer and Industry Codes increasing an arbitrator’s authority to make referrals to FINRA enforcement during the course of an arbitration hearing.  Previously, the referral protocol limited the ability of a FINRA arbitrator to make referrals until the conclusion of a matter. Post-matter referrals are still allowed and encouraged…

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FINRA CAUTIONS FIRMS IN ITS REGULATORY NOTICE 14-40 THAT CONFIDENTIALITY PROVISIONS IN SETTLEMENT AGREEMENTS AND IN THE ARBITRATION DISCOVERY PROCESS MAY LEAD TO VIOLATIONS OF FINRA RULE 2010

In Regulatory Notice 14-40 (“RN 14-40”), released last week, FINRA cautioned firms on confidentiality or settlement agreements that prohibit or restrict a party from communicating or providing documents to FINRA or other securities regulators.  FINRA warned that such provisions would violate FINRA Rule 2010 (just and equitable principles of trade), and could subject firms to FINRA disciplinary action. While FINRA…

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FINRA Defends Arbitrator Pool Amidst Criticism From New PIABA Study

On October 7, 2014, the Public Investors Arbitration Bar Association (“PIABA”) released a report that condemns FINRA for the “lack of diversity” and “transparency” found within its arbitrator pool. The PIABA report, based on an analysis of 5,375 FINRA arbitrators, identifies concerns involving: (1) arbitrators average age - according to the report, the average age of a FINRA arbitrator is…

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FINRA’S ACCOUNT REPORTING SYSTEM (“CARDS”) MOVES FROM CONCEPT PROPOSAL STAGE TO RULE PROPOSAL

In Regulatory Notice 14-37, FINRA requested comment on a rule proposal to implement the Consolidated Automated Risk Data System (“CARDS”). The system would collect account information (excluding personally identifiable information), initially, from carrying and clearing firms, and subsequently, from introducing firms, in an automated format. The information to be submitted would include data relating to securities and account transactions, holdings,…

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FINRA Amends Code of Arbitration Procedure to Protect Personal Confidential Information

Amendments to the FINRA Code of Arbitration Procedure for Customer and Industry Disputes aimed at protecting personal information became effective on July 28, 2014. The amended Rules 12300 (Customer Code provision) and 13300 (Industry Code provision) require parties filing documents with FINRA that contain an individual’s Social Security Number, taxpayer identification number or financial account number to redact the information…

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FINRA Proposes Changes to Definitions of Non-Public and Public Arbitrators

The proposal expands the “non-public” arbitrator definition by: (1) requiring individuals who worked in the financial services industry for any duration to always be classified as non-public arbitrators; (2) adding new categories of financial industry personnel who qualify as non-public arbitrators; and (3) requiring professionals (e.g., attorneys and accountants) devoting a significant part of their business to representing or providing…

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The SEC Adopts FINRA Rule 2081 in an effort to boost the integrity of the CRD System

The SEC approved a new FINRA rule (FINRA Rule 2081) prohibiting member firms and associated persons from conditioning the settlement of a customer dispute on expungment relief from the Central Registration Depository (“CRD”).  The CRD system is an online registration and licensing database maintained by FINRA, pursuant to FINRA rules and an agreement with the North American Securities Administrators Association…

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BROKER DEALERS MUST IMPLEMENT REVIEW OF INTERNAL COMMUNICATIONS BY DEC. 1, 2014

DWH Legal Chicago Attorneys                                              Rule Alert: REVIEW OF INTERNAL COMMUNICATION December 1, 2014: Deadline for broker- dealers to implement review of internal communications related to investment banking and securities business under new FINRA Supervision rule 3110(b)(4). Expanded Requirements: Rule 3110(b)(4) expands broker-dealer communications review to include internal communications by all firm employees related to the member’s investment banking or…

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