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).

FIRM OPERATIONS: BOOK & RECORDS

(New) Electronic Recordkeeping Requirements

The SEC adopted amendments to the recordkeeping rules applicable to broker-dealers, security-based swap dealers, and major security-based swap participants. The amendments modify requirements regarding the maintenance and preservation of electronic records, the use of third-party recordkeeping services to hold records, and the prompt production of records. The Commission also is designating broker-dealer examining authorities as Commission designees for purposes of certain provisions of the broker-dealer record maintenance and preservation rule. The effective date is January 3, 2023. The compliance date for the amendments to 17 CFR 240.17a-4 is May 3, 2023. The compliance date for the amendments to 17 CFR 240.18a-6 is November 3, 2023

SEC Release No.34-96034 (October 12,  2022)

FIRM OPERATIONS: BUSINESS CONTINUITY PLANNING

(New) Succession Planning

Member firms often encourage registered representatives to have succession plans in place to plan for expected or unexpected life events. Succession planning can benefit customers, member firms and registered representatives. This Notice discusses these benefits, as well as common types of succession plans. This notice also provides an overview of related FINRA rules and administrative processes and includes questions to consider when developing and implementing succession plans.

FINRA Regulatory Notice 22-23 (November 1, 2022)

SALES AND TRADING: OPTIONS

(New) Prearranged Trading & Signaling of Imminent Orders

As a general matter, all transactions must be affected in accordance with applicable rules, must be subject to risk of the market, and must be reported for dissemination. Trading Permit Holders/Members are cautioned that the following activities (among others) may violate Exchange Rules, as well as various provisions of the Securities Exchange Act of 1934, as amended (the “Act”) and rules thereunder: any purchase or sale transaction or series of transactions, coupled with an agreement, arrangement, or understanding, directly or indirectly to reverse such transaction, which is not done for a legitimate economic purpose, or is done without subjecting the transactions to market risk; and use of orders or quotes to signal the arrival of an order or otherwise to coordinate order flow with another market participant

CBOE Regulatory Circular 22-014 (September 26, 2022)

MARKET INTEGRITY: FRAUD

(New) Heightened Threat of Fraud

FINRA alerts member firms to a rising trend in the fraudulent transfer of customer accounts through the Automated Customer Account Transfer Service (ACATS), an automated system administered by the National Securities Clearing Corporation (NSCC), that facilitates the transfer of customer account assets from one firm to another.

This Notice provides an overview of how bad actors effect fraudulent transfers of customer accounts using ACATS (referred to as ACATS fraud), lists several existing regulatory obligations that may apply in connection with ACATS fraud, and provides contact information for reporting the fraud. As FINRA continues to gather additional information related to ACATS fraud, FINRA is committed to providing guidance, updates and other information to help member firms stay informed about the latest developments, and will supplement this Notice, as appropriate.

FINRA Regulatory Notice 22-21 (October 6, 2022)

MARKET INTEGRITY: PROHIBITED PRACTICES

(New) FINRA Sanction Guidelines

The NAC has revised FINRA’s Sanction Guidelines, which guide FINRA adjudicators in developing remedial sanctions for violations of the securities rules. These revisions were based on a review to ensure that the guidelines accurately reflect the levels of sanctions imposed in FINRA disciplinary proceedings. The revisions tailor sanctions to differentiate between types of respondents and modify the Sanction Guidelines in the following ways:

  • split each current guideline into separate guidelines for individuals and firms;
  • create separate fine ranges for small and mid-size or large-size firms;
  • remove the upper limit of the fine ranges for mid-size and large-size firms for select guidelines;
  • create Anti-Money Laundering guidelines;
  • add additional discussion of non-monetary sanctions for firms;
  • introduce single fine ranges for all actions in the Quality of Markets guidelines and other select
    guidelines;
  • establish $5,000 as the minimum low end for all firm fine ranges; and
  • delete select guidelines.

FINRA Regulatory Notice 22-20 (September 29, 2022)

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