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Industry participants know that FINRA’s monthly posting of its “Disciplinary and Other FINRA Actions” offers insight into its enforcement priorities.  One can also say it offers various teaching moments.  The March edition is no exception.

Of interest to me was a Letter of Acceptance, Waiver and Consent (AWC) that FINRA accepted from a broker-dealer to resolve violations of FINRA Rule 3110.  FINRA stated, among other things, that until 2020 this firm maintained written supervisory procedures (WSPs) that cited an NASD rule that FINRA had replaced in 2012.  From where I sit, there is no louder signal to a regulator that a suite of WSPs may not be, as Rule 3110(b)(1) requires, “reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules” than to cite to outdated or decommissioned rules.  Indeed, during my time at FINRA I saw several WSPs concerning the sale of private placements that included provisions of pre-JOBS Act Regulation D, which I took as a clear sign that further inquiry was needed.  I highly recommend that both broker-dealers – and although not subject to FINRA authority, registered investment advisers – include in their annual review a specific item to vet their WSPs against any changes to the applicable rules.

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Thank you for reading this article.  Please know that I wrote it for informational purposes only (some may consider it ADVERTISING MATERIAL) and did not intend for it to be legal advice or to form an attorney-client relationship with you – especially in jurisdictions where I am not licensed to practice law.  I encourage you to seek your own counsel to help you with your specific situation.  To that end, I invite you to contact me if you would like to discuss my services.

I enable broker-dealers, registered investment advisers and their associates to spend more time growing their business by helping them address a wide range of legal and compliance responsibilities with clear and detailed advice.