Tags: FINRA

Open Call Report – FINRA Cross Product Surveillance

Open Call

Good evening and welcome to tonight’s STA Open Call titled FINRA’s Cross Product Surveillance of the Listed Options and Equity Markets. Tonight’s call is brought to you by the STA Foundation, a non-profit, 501 c 3 corporation that serves as STA’s educational arm.

As we all know, FINRA does a tremendous amount of surveillance across the marketplace. Earlier this year on an STA Open Call, Tom Gira gave us a high-level view of FINRA’s capabilities, in particular its use of AI that has enabled FINRA to surveil more efficiently with less false signals. Here with us this evening is FINRA’s Gene DeMaio, Senior Vice President, Market Regulation, who is going to go into greater detail on what FINRA is doing in its cross product surveillance of the listed options and equity markets.

See Summary Report here

Open Call Report – FINRA’s 2018 Regulatory and Examination Priorities Letter

Open Call
On January 8, 2018, FINRA published its 2018 Regulatory & Examinations Priorities Letter. The list of categories included; Fraud; Operational & Financial Risks; Sales Practice Risks; New Rules and Market Integrity, which was topic of the call, in particular Manipulation; Best Execution and Options.
Mr. Gira touched on the process FINRA follows in crafting its Priorities Letter and provided an update on FINRA’s surveillance programs and new Report Cards it hopes to publish in 2018.
Open Call Report here

Open Call Report – New FINRA Exam Process

Open Call

In July 2017 the SEC approved FINRA’s proposed rule change to streamline competency exams and expand opportunities for prospective securities professionals

STA Open Call – November 29, 2017 – Call Notes
“New FINRA Exam Process”
Presenter: Joe McDonald, Senior Director Exams & Continuing Education FINRA

Opening Remarks – Jim Toes, STA President & CEO
Senate Tax Bill – The Senate Finance Committee passed a comprehensive tax reform bill. The bill is now being debated by the full Senate. One item of particular concern to STA is a provision that would generally require taxpayers to use a FIFO cost basis on the sale of securities. We published a bulletin publicly and to Hill Staff voicing our objection. link

SEC Commissioner Nominees Update – Nominees for the two (2) SEC Commissioner Positions; Hester Peirce and Robert Jackson received approval from the Senate Banking Committee. They now await approval from the full Senate. Unfortunately, we do not expect this to happen this year.

House Fin’l Services Subcommittee Hearing on CAT – The House Financial Services Committee will be
holding a hearing titled “Implementation and Cybersecurity Protocols of the Consolidated Audit Trail” on November 30th at 10am. Among those testifying will be, Mike Beller, CEO of Thesys Technologies and Chris Concannon, President & COO of Cboe. link

Open Call Summary
In July, 2017 the SEC approved FINRA’s proposed rule change to streamline competency exams and expand opportunities for prospective securities professionals seeking to enter or re-enter the securities
industry. The proposal is a combination of consolidating certain registration rules and restructuring the representative-level qualification examinations by creating a general knowledge examination called the
Securities Industry Essentials (SIE). The SIE is a new, introductory-level FINRA exam for prospective securities industry professionals. The SIE assesses a candidate’s knowledge of basic securities industry information and upon passing is valid for four years. Association with a firm is not required to take the SIE however passing it alone does not qualify an individual to engage in the securities business. Individuals, who do pass the SIE and are then sponsored by a FINRA member firm, need only to take an abridged version of a qualification exam (such as the Series 7). These changes become effective Oct 1, 2018. Please refer to the below links for additional informational on the proposal and how to make a direct inquiry to Joe McDonald.

SEC Approves FINRA Exam and Continuing Education Requirement link

FINRA Securities Industry Essentials Exam, “SIE” link

This brief is meant for informational purposes only and therefore should not be considered legal advice. STA’s goal is to raise awareness and encourage industry dialogue.

STA Comment Letter on Lapsed Licenses

Women in Finance

Newsletter No.30

STA recently filed a comment letter that included a recommendation on an issue that acutely impacts women in finance: lapsed licenses. According to FINRA regulations, a Series 7 license expires after an employment lapse of two years. While STA did not comment on whether two years is too long or too short a period of time, we did recommend that FINRA institute a new reinstatement policy that has characteristics similar to lawyers. This includes the ability for individuals in a lapse state to take continuing education classes, and guidelines that would allow employers to reasonably expect that a potential hire will have his or her license(s) reinstated upon employment. Further…

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Lawyers vs. Brokers

CEO's Desk Women in Finance
STA recently filed a comment letter that included a recommendation on an issue that acutely impacts women in finance: lapsed licenses. According to FINRA regulations, a Series 7 license expires after an employment lapse of two years. While STA did not comment on whether two years is too long or too short a period of time, we did recommend that FINRA institute a new reinstatement policy that has characteristics similar to lawyers. This includes the ability for individuals in a lapse state to take continuing education classes, and guidelines that would allow employers to reasonably expect that a potential hire will have his or her license(s) reinstated upon employment. Further, we state that the existing policy is flawed because it “creates an unreasonable barrier of re-entry for qualified individuals” particularly those who are primary childcare providers. STA’s position on instituting a new reinstatement policy for licenses is based partially on fairness, but more so on a fundamental belief that investors will better served from a policy that retains qualified individuals. We all know someone who made a positive impact on our industry and the investors we serve, who then decided to leave for an extended period of time to raise a family. When this individual looks to re-enter our industry they face an unreasonable barrier, in part, because they are uninformed on current practices, and it is difficult to find an employer willing to sponsor them on retaking their exams. Consequently, many of these individuals seek employment elsewhere resulting in a loss of talent for our industry. If that individual were an attorney, they would be able to take continuing education classes during their time off, pay an annual fee and have their license remain valid. Upon re-entering the field of law, they would be educated on current issues and an employer could reasonably expect them to be productive since their license would be valid. STA believes a similar policy in financial services would be beneficial for our industry because it would ultimately benefit investors. Retaining talented people is something every industry must do to be effective. STA will continue to advocate on this issue and we hope you will join us.

STA’s letter to FINRA dated June 19, 2017

Lapsed Licenses
Obtaining the necessary licenses to practice in the financial services industry requires an intense commitment by individuals who must demonstrate mastery in the securities business and their employers who must sponsor them. STA supports the high standards required to pass such exams in order to obtain these licenses. However, STA believes that the requirements for individuals whose employment lapses beyond FINRA’s regulations to retake exams in order to re-enter the financial services industry are too onerous.
STA believes FINRA’s current policy is flawed because it creates an unreasonable barrier of re-entry for qualified individuals, in particular those who are primary childcare providers. According to FINRA regulations, the Series 7 license expires after an employment lapse of two years. STA has no comment on whether two (2) years is too long or too short a period of time, but we do believe that FINRA should institute a new reinstatement policy and process that has the following characteristics: the ability for individuals in a lapse state to take continuing education classes; requires individuals to apply and upon approval have their license(s) reinstated and guidelines which would allow employers to reasonably expect that a potential hire will have their license(s) reinstated upon employment. Reinstatement policies and processes exist in other industries such as the practice of law, therefore there are examples to compare.
See July STA WIF Newsletter here

Comment Letter: FINRA Engagement Initiative

Comment Letters

Dear Ms. Mitchell:

STA welcomes the opportunity to offer comment on FINRA Special Notice (the “Notice”) Engagement Initiative. We greatly respect and appreciate FINRA’s 360 Review, in particular this request for comment on FINRA’s Engagement Initiatives.

STA’s diverse membership, as measured by geography and business models, and long history of interacting with FINRA and its preceding organizations offers a unique perspective on FINRA’s Engagement Initiatives which we hope will contribute favorably to any strategic decisions made by FINRA.

Full Comment Letter (PDF)>

Comment Letter: FINRA Safe Harbor on Desk Commentary

Comment Letters

Dear Ms. Mitchell,

The Security Traders Association (“STA”) [1]welcomes the opportunity to comment on proposed amendments to FINRA Rule 2241 (Research Analysts and Research Reports) and FINRA Rule 2242 (Debt Research Analysts and Debt Research Reports) to create a limited safe harbor for “specified brief, written analysis distributed to eligible institutional investors that comes from sales and trading or principal trading personnel but that may rise to the level of a research report (desk commentary)”[2], herein referred to as, the “Proposal”, or the “Safe Harbor”. The Safe Harbor would be non-exclusive and only available to communications that meet specific conditions regarding the author, the content of the communication and the recipient of the communication. Each limitation reflects FINRA’s stated objective to ensure that retail investors retain the full protections of the research rules and that any safe harbor does not cause firms to migrate their research function to the trading desk to avoid Rules 2241 or 2242.

[1] The STA is a trade organization founded in 1934 for individual professionals in the securities industry and is committed to promoting goodwill and fostering high standards of integrity in accord with the Association’s founding principle, Dictum Meum Pactum – “My Word is My Bond”

[2] FINRA Regulatory Notice 17-16 April 2017

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FINRA Cybersecurity Report/eSentire

Open Call

Special Presenter: J. Paul Haynes, eSentire

On February 2, 2015 FINRA released a report for financial firms on cybersecurity practices. Information found in the report is based on various assessment initiatives conducted by FINRA in 2014. The report is intended to educate firms on cyberattacks in general and to offer recommendations and best practices on how firms can better protect their clients and employees from such attacks.

Full Open Call transcript (PDF)>

FINRA CARDS

Open Call

Special Presenter: Mike Rufino, FINRA

This evening we will be featuring FINRA’s requests for comments on a rule proposal to implement the Comprehensive Automated Risk Data System, better known as CARDS.

Full Open Call transcript (PDF)>

FINRA’s Regulatory Notice 14-07; ATS Reporting

Open Call

Special Presenter: Chris Stone, FINRA

On January 17, 2014, the SEC approved two (2) proposed FINRA rule changes; (i) adopt FINRA Rule 4552 which requires each ATS to report to FINRA weekly volume information and number of securities transactions within the ATS and (ii) to also require each ATS to acquire and use a single, unique MPID when reporting information to FINRA.

Full Open Call transcript (PDF)>