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Stories of Interest
- North Korean caught secretly mining bitcoin rival
- IPO Timelines Cut by 80% After SEC's Private Filing Decision
- How the Carried Interest Break Survived the Tax Bill
- FINRA: The Neutral Corner
- Coinbasex Says Buying and Selling Temporarily Disabled Amid Price Rout
- Bitcoin plunges by more than a third in a single day
- Goldman Is Setting Up a Cryptocurrency Trading Desk
- Jefferies Lets Employees Choose When to Receive Their Bonuses
- UBS Told to Pay $903K After Losing Retaliation Verdict
- BEWARE: Long Island Iced Tea Shares Soar After Changing Name to Long Blockchain
- Gary Cohn’s Last Laugh: Cashing Out on Trump’s Tax Plan
- E*Trade Lets Customers Trade in CBOE Bitcoin Futures
- Swiss Find Serious Shortcomings at JPMorgan in 1MDB Case
- Washington-based Investment Adviser and His Business Partner Charged in Multi-Million Dollar Scheme
- FINRA Board of Governors Meeting
- Cryptocurrency Market Now Doing Same Daily Volume as the NYSE
- Jailed Barclays Trader Must Pay $400,000 From Libor Profits
- Trump Asks ‘How’s Your 401(k)?’ But Most Voters Don’t Have One
- A Bitcoin Hedge Fund’s Return: 25,004% (That Wasn’t a Typo)
- Madoff Victims Near Full Recovery of Principal With Payout
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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.