MVA White Collar Defense, Investigations, and Regulatory Advice Blog

Securities regulators have long been concerned with the potential regulatory risks associated with geographically dispersed broker-dealer offices, citing the observation that the distance of these offices from compliance and supervisory personnel could make it easier for them to be involved in and conceal securities laws violations.  On-site internal inspections of those offices have been viewed as a vital component of the supervisory process in mitigating those potential risks.  SEC Staff Legal Bulletin No. 17 (March 19, 2004).  However, given recent advances in technology and changing work environments resulting from the COVID-19 pandemic, broker-dealer supervisory practices have evolved.  This evolution has not gone unnoticed by regulators such as FINRA, who has adopted a new voluntary inspections pilot program rule which will allow member firms to perform required office inspections by remote means.  FINRA member firms will have the ability to opt into this voluntary program beginning on June 1, 2024.  The discussion below covers some aspects of what FINRA member firms may expect, including potential benefits, regarding this new rule.  

In response to ever increasing reports of forgery and falsification of records in the digital signature space, FINRA issued Regulatory Notice 22-18. This Notice reminds FINRA members of relevant regulatory obligations, while also addressing misuse scenarios and identification methods, in order to help members mitigate risk in this area.

In the Notice, FINRA highlights that forgery occurs when an individual “signs or affixes, or causes to be signed or affixed,” the name of another person to a document without that person’s prior permission. FINRA further stated that ...

On March 17, 2022, FINRA issued Regulatory Notice 22-10 (“Notice”), which reminds FINRA member firms and their associated persons of the scope of supervisory liability for Chief Compliance Officers (“CCO”). The Notice discusses this liability in the context of FINRA Rule 3110, which among other things, requires FINRA member firms to establish and maintain a system (including written procedures) to supervise the activities of each associated person in a manner that is reasonably designed to achieve compliance with applicable securities laws, regulations, and FINRA ...

After extensive retrospective review of FINRA Rule 4370, which covers member firm business continuity plan (“BCP”) requirements during times of business disruption (such as the COVID-19 Pandemic), FINRA issued its Retrospective Rule Review Report entitled “Business Continuity Planning and Lessons From the COVID-19 Pandemic.”[1]  In doing so, FINRA issued guidance and summarized stakeholder feedback on such topics as the inspection and registration of temporary/remote offices, Membership Application Program (“MAP”) compliance for those offices, and the ...