The Securities Industry/Regulatory Council on Continuing Education (Council) recently released its Firm Element Needs Analysis Quarterly Highlights (formerly known as Firm Element Advisory) to assist industry participants with the identification of potential topics to include in Firm Element training plans. The Council has identified the topics from a review of the industry, regulatory and self-regulatory organization (SRO) announcements, and publications of significant events.
The Council suggests that firms use the FE Training Ideas Firm Element Needs Analysis Quarterly Highlights as an aid in evaluating and prioritizing their Firm Element needs and developing written training plans. However, firms are reminded to not rely on the report as a comprehensive list of all areas they should consider. This article summarizes the Council’s complete guide and strictly focuses on the “New” material that was listed in the recent Firm Element Advisory (FEA).
SALES & TRADING: PRIVATE PLACEMENTS
(New) FINRA Reminds Members of Their Obligation When Selling Private Placements
This Notice highlights a member’s obligation, when recommending a security, to conduct a reasonable investigation of the security. This duty has long been rooted in the antifraud provisions of the federal securities laws and is a core component of a broker-dealer’s obligations under Securities and Exchange Commission (SEC) Regulation Best Interest (Reg BI) and FINRA Rule 2111 (Suitability), the fundamental standards that members must meet when recommending securities. This Notice also addresses certain additional obligations for members when selling private placements, including FINRA’s filing requirements and its communications with the public and supervision rules.
SALES & TRADING: MUNICIPALITY SECURITIES
(New) SEC Approves New MSRB Rule G-46 on Duties of Solicitor Municipal Advisors and Related Amendments to MSRB Rule G-8
On March 29, 2023, the MSRB received approval from the SEC to create a new rule, MSRB Rule G-46, on duties of solicitor municipal advisors and amend MSRB Rule G-8, on books and records. New MSRB Rule G-46 is designed to establish the core standards of conduct for solicitor municipal advisors when engaging in solicitation activities that would require them to register with the SEC and the MSRB as municipal advisors. The related amendments to Rule G-8 establish recordkeeping requirements to facilitate and document compliance with the new obligations of Rule G-46. The adoption of Rule G-46 and the related amendments to Rule G-8 furthers the MSRB’s mandate to protect municipal entities, obligated persons, investors, and the public interest. The compliance date for Rule G-46 and the related amendments to Rule G-8 will be March 1, 2024.
MARKETING INTEGRITY: FRAUD
(New) FINRA Shares Effective Practices to Address Risks of Fraudulent Transfers of Accounts Through ACATS
To bring attention to a rising trend in the fraudulent transfer of customer accounts through the Automated Customer Account Transfer Service (ACATS), FINRA issued Regulatory Notice 22-21, which alerted member firms about how bad actors effect fraudulent transfers of customer assets using ACATS (referred to as ACATS fraud). That Notice listed several existing regulatory obligations that may apply in connection with ACATS fraud and provided contact information for reporting the fraud. FINRA’s regulatory programs—through examinations and investigations, review of customer complaints and member firm engagement—have identified increased instances of ACATS fraud. Through recent industry engagement, FINRA has gained further insights from member firms and other industry representatives about their approaches to detect and mitigate the risk of ACATS fraud. This Notice provides an overview of some indicators of ACATS fraud and the practices some firms apply to address it.
To view the full Firm Element Advisory, click here.
To view Quest CE’s full Firm Element course catalog, click here.