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Stories of Interest
- Credit Suisse Fully Compliant on Sanctions: CEO
- Ex-UBS Metals Trader Beats Spoofing Conspiracy Charge
- Investment Advisor, WCAS Management Corp, To Pay Nearly $800K Over Conflicts of Interest
- Altaba, fka Yahoo!, to Pay $35Mn for Failing to Disclose Massive Cybersecurity Breach - SEC
- SEC Formerly Bars Martin Shkreli from Industry
- HF Billionaire Steve Cohen Buying Into Fintech Start-Ups
- Deutsche Bank Is Weighing Massive Cuts in Its U.S. Cash Equities Unit
- Richard Jenrette, Co-Founder of DLJ Investment Bank, Dies at 89
- Goldman Sachs Makes First Hire in Cryptocurrency Markets Unit
- Special FINRA Election to Fill Large Firm Governor Vacancy
- Chicago-Based Investment Adviser Sentenced to 151 Months in Prison - SEC
- Dun & Bradstreet Hit With FCPA Violations - SEC
- SEC Charges Additional Defendant in Fraudulent ICO Scheme
- Warren Buffett Simply Blew it on Wells Fargo Stock: Dick Bove (Video)
- Barclays and Deutsche Bank to Lag U.S. Trading Peers
- NY AG Schneiderman Seeks to Close Loophole That Could Let Trump Pardons Block State Charges
- 'Fearless Girl' is Moving to NYSE After Year Staring Down 'Charging Bull'
- What's In Your Wallet - American Express Shares Soar After Earnings Release
- Deutsche Bank's Executive Departures Continue Following Change in CEO
- Reflections of an Economist Commissioner (SEC's Piwowar)
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NEWSLETTERS & ALERTS
FINRA's High-Risk Registered Rep Program
FINRA has a program for identifying and monitoring High-Risk Registered Representatives (“RR’s”) – those more likely to cause harm to customers. This program is the subject of a new FINRA podcast (8-1/2 minutes in length), featuring Mike Rufino, a FINRA EVP and Head of Regulation - Sales Practice. Along with Chip Jones, FINRA SVP of Member Relations and Education, this podcast offers an overview of the program, the criteria FINRA uses to identify high-risk activity, and tools and resources available to help firms perform their own reviews.
METHODOLOGY/CRITERIA USED BY FINRA TO IDENTIFY HIGH-RISK RR’S. FINRA uses a risk-based methodology to identify highest-risk individuals. Here are some of the criteria that go into FINRA's determinations:
- An RR’s current and past associations with firms that have been highly-disciplined or were expelled for sales practice issues.
- Length of time an RR has spent with such firms.
- Number of such firms with which an RR has been associated.
- Pattern of an RR’s migration from one ‘bad’ firm to another and another.
- Number and aging of disclosures on an RR’s CRD file.
- Number of customer complaints and arbitrations on an RR’s Forms U4 and U5.
TOOLS & RESOURCES FIRMS CAN USE TO IDENTIFY HIGH-RISK RR’S. When it comes to identifying high-risk RR’s, a brokerage firm has at its disposal certain information that's not readily accessible to FINRA. For example:
- Does the RR’s book of business contain a large number of senior investor customers, or institutional accounts?
- What types of products does an RR typically sell to customers?
- What is the RR’s lifestyle, and has the firm noticed any behavioral changes?
- How often does an RR show up on exception reports - e.g., high levels of trading, as identified by the clearing broker?
FINRA ALERTS TO FIRMS. In 2018, FINRA will make a conscious effort to tell firms when any of its RR’s are added to the High-Risk Registered Rep Program.
WHY FINRA’S HIGH-RISK PROGRAM IS NOT A ‘ROACH MOTEL’. Placement on the High-Risk Program is not necessarily a “lifetime sentence.” Instead, RR's can be dropped from the list if and when FINRA’s annual assessment indicates that the RR no longer exhibits high-risk behavior or associations.