FINRA Board of Governors Approves Tougher Expungement Guidance for Arbitrators

The FINRA Board of Governors (the “Board”’) met in mid-September to discuss rulemaking items and initiatives. Among other issues, the Board authorized FINRA to file with the SEC proposed amendments to FINRA Rules 12805 and 13805 (Expungement of Customer Dispute Information under Rule 2080), codifying best practices from the Expanded Expungement Guidance Document (previously issued as a notice in 2013).…

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SEC Proposes Amendments to Form ADV and the Books and Records Rule of the Advisers Act

On May 20, 2015, the Securities and Exchange Commission (the “SEC”) issued Release No. 1A-4091 (the “Release”), which proposes amendments to Form ADV and to Rules 204-1 and 204-2 of the Investment Advisers Act of 1940 (the “Advisers Act”). The SEC focused its proposed amendments in the following three areas: (1) to fill certain data gaps and to enhance current…

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Proposed Rule Change to Amend FINRA Rule 2210 (Communications with the Public) to Require BrokerCheck Link on Member Websites

On June 29, 2015, FINRA filed with the SEC a proposed rule change to amend FINRA Rule 2210 (Communications with the Public) to require that member firms include BrokerCheck links on their websites. The new proposal, if approved, would require, “a readily apparent reference and hyperlink to BrokerCheck on: (i) the initial webpage the member intends to be viewed by…

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FINRA Seeks Comments on Proposed Rule Requiring Delivery of Educational Communications to Customers of a Transferring Representative

On May 27, 2015, FINRA released Regulatory Notice 15-19 (“RN 15-19”) seeking comment on a proposed rule which would require recruiting firms to provide educational communications to retail customers who intend to transfer their assets to a registered representative’s recruiting firm. The purpose of the educational communications would be to inform customers of potential implications of transferring assets to the…

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FINRA Proposes to Make It Easier to Communicate with the Public

FINRA has proposed several amendments to the public communications rules[1] that are designed to ease some of the regulatory burdens associated with these rules, while not sacrificing underlying investor protections.  The proposals emerged from a reassessment FINRA conducted of the effectiveness and efficiency of the public communications rules.  FINRA published the results of the study in December 2014 and set…

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FINRA’s National Adjudicatory Counsel Amends Sanction Guidelines

On May 12, 2015, FINRA announced that the National Adjudicatory Council (“NAC”) had revised FINRA’s Sanction Guidelines, incorporating several amendments and revisions toughening recommended sanctions for unsuitable or fraudulent conduct. FINRA publishes the Sanction Guidelines so that member firms, associated persons, and counsel can become familiar with the types of disciplinary sanctions applicable to various violations. Importantly, the guidelines provide…

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The Recent Omnicare Decision Evaluates When an Opinion Stated in a Registration Statement Gives Rise to Liability Under Section 11

On March 24, 2015, the Supreme Court issued the decision Omnicare, Inc. v. Laborers District Counsel Construction Industry Pension Fund. The seminal opinion evaluates how the truth or falsity of statements of opinion should be considered under the securities laws. The case arises out of a registration statement Omnicare filed in connection with its 2005 public offerings of common stock.…

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National Senior Investor Initiative Report

FINRA and the SEC’s Office of Compliance Inspections and Examinations (OCIE) (collectively, the “Staff”) released the National Senior Investor Initiative (the “Report”) cautioning broker-dealers to reexamine their policies and procedures related to senior investors 65 years or older. The Report discusses strategies for broker-dealers to utilize when deciding which securities to recommend to senior investors. The Report focused on the…

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FINRA Regulatory Notice 15-09

FINRA recently released Regulatory Notice 15-09 (the “Notice”) to provide guidance on supervision/control practices for member firms and market participants using algorithmic trading strategies (including high frequency trading). According to the Notice, algorithmic strategies account for a substantial portion of trading activity in U.S. markets. While member firms engaging in algorithmic strategies are subject to SEC and FINRA rules, FINRA’s…

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PIABA Announced its Support for the Passage of the Investor Choice Act – H.R. 1098

On February 26, 2015, Rep. Keith Ellison (D-MN) introduced proposed bill H.R. 1098 titled the Investor Choice Act (the “ICA”).  The ICA is the latest attempt to statutorily prohibit the enforcement of pre-dispute arbitration provisions and to provide investors with the ability to select the forum (either arbitration or the court) to resolve their disputes with the brokerage firms.  Further,…

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