Understanding the Latest Facts and Trends From FINRA

As a financial advisor, you have probably heard that the Financial Industry Regulatory Authority (FINRA) is proposing several changes to its rules and regulations. It can be difficult to keep up with the nuances of these changes, their potential impact, and the timeline for their implementation. From recent disciplinary actions that FINRA has taken to notable arbitration awards decided in recent months, here are some of the measures FINRA has taken to give you a sense of its activities and priorities. Should you find yourself facing or struggling with a FINRA-related issue, get in touch with an experienced and trusted securities law attorney to discuss your options for resolving the matter.

FINRA’s Recent Enforcement Activity

In a recent ruling, FINRA fined a financial firm $250,000 for failing to maintain appropriate written supervisory procedures (WSPs). The member firm, First Manhattan Co., acknowledged and signed the Acceptance, Waiver & Consent form detailing FINRA’s findings. According to this document, FINRA determined that First Manhattan had failed to establish WSPs that aligned with the requirements set forth in Section 5 of the Securities Act of 1933. FINRA alleged that the financial firm did not sufficiently instruct representatives about adhering to all provisions of Section 5. Additionally, according to the document, First Manhattan’s anti-money laundering program failed to meet the minimum requirements of identifying and addressing suspicious trading in microcap securities. The key takeaway from this FINRA enforcement action is that firms should habitually review their WSPs to ensure they are effective, current, and in adherence with all applicable rules and regulations.

Regulatory Notices Recently Issued by FINRA

FINRA has taken a number of enforcement actions against member firms in recent months. As FINRA focuses increasingly on protecting the public and cracking down on risky, negligent, or reckless activities, it’s important to recognize and understand its priorities. Here are just a few of the regulatory notices FINRA has issued and enforced in recent months.

Sales Practice Obligations for Alternative Mutual Funds

According to FINRA Regulatory Notice 22-11, the agency took enforcement action against many firms for their failure to create or maintain a supervisory system for recommendations of alternative mutual funds. The notice reminded member firms of their sales practice and supervisory obligations for these funds, detailing patterns and trends found in recent examinations and enforcement matters. In particular, FINRA noted that many member firms had inadequate written supervisory procedures, insufficient oversight in alternative mutual funds mutters, insufficient review of communications with the public, and other similar deficiencies in their internal protocols and systems. FINRA reminded member firms to maintain proper documentation of their reasonable diligence regarding alternative mutual funds to avoid potential issues in the future.

CCO Liability and FINRA Rule 3110

FINRA’s Regulatory Notice 22-10 detailed how the scope of FINRA Rule 3110 pertains to a chief compliance officer’s (CCO’s) potential liability for failing to discharge designated supervisory responsibilities. The notice explains that the role of a CCO is advisory, not supervisory. As such, FINRA does not focus on the CCO for supervisory failures, looking instead at the firm’s managers and supervisors.

Rule Proposal for Accelerated Arbitration Proceedings

Recently, FINRA issued Regulatory Notice 22-09, which proposes a new rule that accelerates arbitration proceedings for elderly parties and parties who are seriously ill. This new rule would provide for abbreviated, rule-based case processing deadlines for the parties and provide guidance to arbitrators regarding how quickly the arbitration process should take to complete. If enacted, this rule would apply only to those parties aged at least 75 and individuals who are seriously ill.

Obligations When Making Securities Recommendations to Retail Customers

Under FINRA Regulatory Notice 22-08, the agency reminds member firms that they have regulatory obligations when making securities recommendations to retail customers, especially the application of Regulation Best Interest. FINRA noted, “the number of accounts trading in complex products and options has increased significantly in recent years,” and as a result, FINRA is “reminding members of their current regulatory obligations.” The notice also encouraged public comments, and FINRA will address this matter in greater detail once it has reviewed the comments and other considerations.

Keeping Up With the Latest FINRA Rules and Obligations

FINRA’s ever-shifting rules and procedures can be daunting to keep up with, especially as a busy financial professional. Whether you just want to understand how a new rule could affect your firm or FINRA has notified you of your role in an ongoing investigation, seek the guidance of a trusted securities law attorney to obtain the peace of mind you need. An experienced securities law attorney can answer your questions, address your concerns, and help you face the matter with greater clarity and confidence. Your attorney will assess the specifics of your situation and help you determine the most appropriate and strategic path forward.


Call Judex Law, LLC, today at (303) 523-4022 to discuss your situation with an experienced and friendly securities law attorney.

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