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Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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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.