This Notice reminds members of the SEC’s adoption of a best interest standard of conduct for broker-dealers and a relationship summary (Form CRS) delivery obligation, and provides an SEC email address where members may submit questions about the new requirements. As more fully described below, the SEC encourages firms to actively engage with SEC staff as early as possible as questions arise when planning for implementation. Firms may send their questions by email to IABDQuestions@sec.gov. FINRA also will assist members in their implementation of the best interest standard in various ways.
The SEC is adopting a new rule, establishing a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities. Regulation Best Interest enhances the brokerdealer standard of conduct beyond existing suitability obligations, and aligns the standard of conduct with retail customers’ reasonable expectations by requiring broker-dealers, among other things, to: (1) act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interests of the retail customer; and (2) address conflicts of interest by establishing, maintaining, and enforcing policies and procedures reasonably designed to identify and fully and fairly disclose material facts about conflicts of interest, and in instances where we have determined that disclosure is insufficient to reasonably address the conflict, to mitigate or, in certain instances, eliminate the conflict. The standard of conduct established by Regulation Best Interest cannot be satisfied through disclosure alone. The standard of conduct draws from key principles underlying fiduciary obligations, including those that apply to investment advisers under the Investment Advisers Act of 1940. Importantly, regardless of whether a retail investor chooses a broker-dealer or an investment adviser (or both), the retail investor will be entitled to a recommendation (from a broker-dealer) or advice (from an investment adviser) that is in the best interest of the retail investor and that does not place the interests of the firm or the financial professional ahead of the interests of the retail investor.
Cboe Exchange, Inc. is issuing this Regulatory Circular to inform Trading Permit Holders that the Exchanges will be discontinuing access to Market Replay as outlined in further in the Regulatory Circular.
This Notice provides information to assist market participants in understanding the short sale volume data published on FINRA’s website. FINRA is aware that some market participants, including investors, may occasionally perceive the percentage of short sale volume to be unusually high or inconsistent with reported short interest data. This perception may cause market participants to draw inaccurate conclusions about the level or nature of short selling activity in the relevant security. FINRA is issuing this Notice to further explain the published short sale volume data and provide several key points for market participants to consider when evaluating the data.
FINRA Regulatory Notice 19-04 FINRA’s 529 Plan Share Class Initiative Encourages Firms to Self-Report Potential Violations
Over the past several years, FINRA has found that some firms have failed to reasonably supervise brokers’ recommendations of multi-share class products. FINRA has raised concerns specifically regarding firms’ supervision of share-class recommendations to customers of 529 savings plans. FINRA is launching a 529 Plan Share Class Initiative to promote firms’ compliance with the rules governing 529 plan recommendations, to promptly remedy potential supervisory and suitability violations related to recommendations that customers of 529 plans buy share classes that are inconsistent with the accounts’ investment objectives, and to return money to harmed investors as quickly and efficiently as possible. As described in this Notice, to encourage voluntary reporting under this initiative, FINRA’s Department of Enforcement will recommend that FINRA accept favorable settlement terms for firms that self-report these potential violations and provide FINRA with a detailed remediation plan.
MSRB Notice 2018-12 MSRB Answers Frequently Asked Questions Regarding MSRB Rule G-42 and Making Recommendations
On February 15, 2018, the MSRB sought public input on draft answers to frequently asked questions and related scenarios regarding MSRB Rule G-42, on duties of nonsolicitormunicipal advisors, and the making of recommendations. The MSRB received eight comment letters and revised the draft FAQs to reflect these comments as well as insight gained from the MSRB’s ongoing engagement with the industry regarding compliance with Rule G-42. FAQs Regarding MSRB Rule G-42 and Making Recommendations, has been published as a compliance resource for municipal advisors, provides further explanation of Rule G-42, particularly with respect to making a recommendation and the obligations for municipal advisors that result therefrom. Access the FAQs and other compliance resources in the Compliance Center on MSRB.org. It should be noted that the FAQs do not create new legal or regulatory requirements, or new interpretations of existing requirements and should not be interpreted by municipal advisors or examining authorities as establishing new standards of conduct
MSRB Regulatory Notice 2018-09 Request for Comment on Draft MSRB Rule G-36, on Discretionary Transactions in Customer Accounts, and Related Draft Amendments
The MSRB is requesting comment on draft MSRB Rule G-36, on discretionary transactions in customer accounts, and related draft amendments. Draft Rule G-36 would re-establish a standalone rule to govern discretionary transactions by brokers, dealers and municipal securities dealers and their associated persons in customer accounts by consolidating and explicitly articulating existing requirements for such transactions. Additionally, draft Rule G-36 would establish limited, new requirements for discretionary transactions in customer accounts effected by individuals other than dealers and their associated persons. The MSRB is considering these rule changes to provide clarity to all dealers, securities firms and banks, on their obligations related to discretionary transactions in customer accounts, to improve consistency with similar rules of other regulators and to fulfill its previously-stated intention to address these types of transactions in a separate rule. The MSRB believes this potential rulemaking is consistent with its current strategic goal to assist dealers and other regulated entities with compliance with MSRB rules, as it would streamline, and bring consistency and uniformity to, the rules relating to discretionary transactions in customer accounts, which the MSRB believes would, in turn, assist dealers and their associated persons in complying with these requirements and improve regulatory efficiency, while imposing a relatively small burden on them to achieve compliance.
FINRA Regulatory Notice 18-13 FINRA Requests Comment on Proposed Amendments to the Quantitative Suitability Obligation Under FINRA Rule 2111
FINRA seeks comment on proposed rule amendments that would revise the quantitative suitability obligation under FINRA Rule 2111 (Suitability) to more effectively address instances of excessive trading in customers’ accounts. The proposed rule amendments would remove the element of control that currently must be proved to demonstrate a violation, but would not change the obligations to prove that the transactions were recommended and that the level of trading was excessive and unsuitable in light of the customer’s investment profile.
We are proposing a new rule under the Securities Exchange Act of 1934 establishing a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer. The proposed standard of conduct is to act in the best interest of the retail customer at the time a recommendation is made without placing the financial or other interest of the broker-dealer or natural person who is an associated person making the recommendation ahead of the interest of the retail customer (“Regulation Best Interest”). This obligation shall be satisfied if: the brokerdealer or a natural person who is an associated person of a broker-dealer, before or at the time of such recommendation reasonably discloses to the retail customer, in writing, the material facts relating to the scope and terms of the relationship, and all material conflicts of interest associated with the recommendation; the broker-dealer or a natural person who is an associated person of a broker-dealer, in making the recommendation, exercises reasonable diligence, care, skill, and prudence; the broker-dealer establishes, maintains, and enforces written policies and procedures reasonably designed to identify and at a minimum disclose, or eliminate, all material conflicts of interest that are associated with such recommendations; and the broker-dealer establishes, maintains, and enforces written policies and procedures reasonably designed to identify and disclose and mitigate, or eliminate, material conflicts of interest arising from financial incentives associated with such recommendations.
MSRB Regulatory Notice 2018-07 Notice Regarding Transactions in the Municipal Securities of Distressed Municipalities
Transactions in the municipal securities of distressed municipalities recently have received increased attention in the municipal securities market, in some instances based on substantial price fluctuations. The MSRB is publishing this notice to remind brokers, dealers and municipal securities dealers of some of the investor protection rules applicable to dealers effecting customer transactions in such securities.
Page 1 of 12 Next >>
- Industry News
- By Date
- By Topic
- Register for Email Alerts
- Subscribe to RSS Feeds