FINRA weighs tougher stance
FINRA is reacting to recent SEC criticism by considering higher fines for financial misconduct. Many in the industry think FINRA fines are too insignificant to members and represent a cost of doing business for firms. FINRA enforcement actions outnumbered those of the SEC last year, but the overall fines imposed was much smaller. The smaller fines are due to the fact that FINRA usually fines for operational failures, while the SEC takes action on serious crimes that are fraud related. FINRA said in the article that they will go after more individuals when fining firms this year.
Consider yourself served: The rules haven’t changed, but technology has
The way investment firms preserve and retain data has changed significantly in the past decade. Most firms employ FinTech solutions that use electronic archiving to preserve records. However, firms are having trouble producing the information when it is requested. The article states that in 8 out of 10 cases employee lawsuits have been thrown out because there was a failure to retain electronic correspondence. In this day and age, the failure to retain records is chalked up to negligence and the risk is catastrophic for firms that fail to preserve data. Reliable e-discovery is of utmost importance.
Fire heats up under FINRA’s brokercheck link proposal
Titans of the investment industry are fighting a FINRA proposal that would require brokerage firms to place a link to the online brokercheck database on every piece of marketing materials on the internet. In addition to adding the links to social media sites advisors use, these firms would have to go back and possibly add the links to past marketing materials and communications to comply. This would take a large amount of time and resources. FINRA’s mission with the proposal is the widen the awareness of the brokercheck database so more investors use it.
House panel denies SEC additional funding for RIA exams
A Senate House Panel denied the SEC the full budget it would have needed to hire a third party to audit RIAs. The SEC was hoping for a full 1.7 billion budget which would have enabled the regulator to hire 316 staffers for the Office of Compliance Inspections and Examinations. About 240 of these employees would have been auditing 11,000 RIAs nation wide. Only 9% of these RIAs are audited annually by the SEC with the current budget. This budget shortfall could leave many retail investors who use RIAs vulnerable.