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securities
FINRA ANNOUNCES INITIATIVE TO TRANSFORM REGISTRATION SYSTEMS THAT WILL LEAD TO ENHANCED EFFICIENCIES AND REDUCED COMPLIANCE COSTS FOR FIRMS
On June 14, 2018, FINRA announced details of a multi-phased effort to overhaul its registration and disclosure programs, including the Central Registration Depository (CRD). FINRA operates the CRD for the U.S. securities industry and its regulators and it provides the backbone of BrokerCheck.
securities
ENHANCEMENTS TO FINRA’S DISCLOSURE REVIEW VERIFICATION PROCESS PERMITS FIRMS TO RELY ON PROCESS FOR COMPLIANCE WITH PUBLIC FINANCIAL RECORDS SEARCHES OF APPLICANTS AND REGISTERED PERSONS
Beginning on July 9, 2018, FINRA is enhancing its disclosure review process to enable it to conduct a public records search of information relating to bankruptcies, judgments and liens, within fifteen calendar days from the date of an applicant’s Form U4. These enhancements will allow FINRA to verify the accuracy and completeness of an applicants’ information relating to all bankruptcies, judgments and liens reported to the Central Registration Depository (CRD) system through the Form U4.
securities
FINRA REVISES THE SANCTION GUIDELINES
FINRA revised its Sanction Guidelines to instruct adjudicators in the disciplinary process to consider customer-initiated arbitrations that result in adverse arbitration awards or settlements when assessing sanctions. As a result, when a Respondent’s disciplinary history, and history of arbitration awards and arbitration settlements, together with the violation found in a disciplinary case, form a pattern, the new Sanction Guidelines will advise that adjudicators should consider imposing more stringent sanctions.
securities
U.S. APPEALS COURT VACATES OBAMA ERA ‘FIDUCIARY RULE’ REQUIRING FINANCIAL ADVISORS TO ACT IN CUSTOMERS’ BEST INTEREST
On March 15, 2018, the 5th U.S. Circuit Court of Appeals in New Orleans voided the U.S. Department of Labor’s “fiduciary rule” adopted by the Obama administration in 2016 as a means to limit and reduce conflicts of interest among financial advisors providing retirement planning advice. The majority found in the case, Chamber of Commerce of the United States of America v. U.S. Department of Labor, 17-10238, that the Department of Labor overstepped its authority and that the Obama-era rule’s redefinition of “fiduciary” was unreasonable.
securities
FINRA SEEKS COMMENT ON PROPOSED NEW RULE GOVERNING OUTSIDE BUSINESS ACTIVITIES AND PRIVATE SECURITIES TRANSACTIONS
FINRA launched a retrospective review of its outside business activities and private securities transactions rules in May of 2017 to assess their effectiveness and efficiency. This request for comment stems from that review of FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of an Associated Person). The proposed rule would replace FINRA Rules 3270 and 3280 and is intended to reduce unnecessary burdens, while strengthening investor protections relating to outside activities.
securities
FINRA ARBITRATION 2017 STATISTICS
Arbitration case filings through December 2017 reflected a 6 percent decrease compared to cases filed in 2016 during the same time frame.  More specifically, 3,681 cases were filed in 2016, but 3,456 cases were filed in 2017.  Of the 3,456 cases filed, 65 percent or 2,260 were customer disputes and 35 percent or 1,196 were intra-industry disputes. 
securities
HIGHLIGHTS FROM THE FINRA 2018 REGULATORY AND EXAMINATION PRIORITIES LETTER
FINRA released its annual list of Regulatory and Examination Priorities for 2018.  FINRA will continue its focus on high-risk and recidivist brokers in terms of rulemaking initiatives and examinations. This year’s priority includes strengthening the current operation, while becoming more efficient. 
securities
ARBITRATION PANEL GRANTS EXPUNGEMENT IN RECENT CASE
Our firm recently obtained an award from a FINRA panel granting a Motion for Expungement.  The claim (Arbitration number 16-01770) was filed in June, 2016 and alleged negligence, breach of fiduciary duty, negligent supervision, and breach of contract.  The claims were related to charges Claimant suffered when he surrendered a fixed annuity and losses he incurred in various types of moderately aggressive investments.
securities
FINRA SEEKS COMMENT ON THE EFFICACY OF ALLOWING COMPENSATED NON ATTORNEYS TO REPRESENT PARTIES IN ARBITRATION
The FINRA Codes of Arbitration and Mediation Procedure currently allow compensated non-attorney representatives (“NAR”) to represent clients in securities arbitration and mediation subject to some exceptions.  Some parties are represented by relatives or friends who assist with case preparation or presentation.  NAR firms typically provide public investors an alternative to representation by attorneys in disputes between investors and broker dealers. FINRA is conducting a review of the efficacy of continuing to allow such representation and is accepting comments from memb
securities
THE ALABAMA SUPREME COURT CONFIRMS DISCOVERY MUST BE LIMITED IN STATE COURT WHILE A MOTION TO COMPEL ARBITRATION IS PENDING
In Ex parte Locklear Chrysler Jeep Dodge, LLC and Locklear Automotive Group, Inc., the Alabama Supreme Court granted a Petition for Writ of Mandamus (“Petition”), finding that the trial court exceeded its discretion when it granted a Motion to Compel discovery on issues unrelated to arbitration while a Motion to Compel arbitration was presently pending.
securities
OCTOBER IS FINRA MEDIATION SETTLEMENT MONTH
Every October, FINRA’s Office of Dispute Resolution significantly reduces mediation prices in order to encourage mediation and settlement of customer and industry disputes.  The goal of Settlement Month is to encourage parties to experience the benefits of mediation for the first time and to reinforce its value and effectiveness for those who have been through the mediation process already.
securities
THE DEPARTMENT OF LABOR SEEKS AN 18 MONTH DELAY ON THE FIDUCIARY RULE’S EXEMPTIONS
The Department of Labor (“DOL”) recently submitted a proposal to delay implementation of the remaining parts of its fiduciary rule from January 1, 2018 until July 1, 2019.  Two provisions of the rule, which greatly expands the definition of who counts as a fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code, took effect on June 9, 2017.  One remaining provision includes the best interest contract exemption, which allows brokers to charge variable compensation for products as long as they sign a legally binding agreement to put their c
securities
SEC APPROVES FINRA’S PROPOSED RULE CHANGE TO EXPEDITE THE ARBITRATOR LIST SELECTION
The SEC approved a proposed rule change to amend FINRA Rules 12402 and 12403 of the Customer Code and Rule 13403 of the Industry Code to allow the Director of FINRA’s Office of Dispute Resolution (“Director”) to send the list generated by the Neutral List Selection System to all parties at the same time, within 30 days after the last answer is due.  The list will now be sent within this time, regardless of whether the parties agree to extend any answer due date.
securities
ARBITRATION PANEL GRANTS ELIGIBILITY MOTION TO DISMISS AND EXPUNGEMENT IN RECENT CASE
Our firm recently obtained an award from a FINRA panel denying all of Claimant’s claims and finding for Respondents.  The panel also granted our Motion for Expungement.  The claim (Arbitration number 16-03568) was filed in December, 2016.  Claimant alleged claims of breach of fiduciary duty, breach of contract, failure to supervise, violation of the Alabama Securities Act, violation of securities regulatory rules, ongoing fraud, and common law claims of misrepresentation, unjust enrichment and negligence.  The claims were related to Claimant’s purchase of prefe
securities
FINRA REVIEWS RULES ON OUTSIDE BUSINESS ACTIVITIES AND PRIVATE SECURITIES TRANSACTIONS
In Regulatory Notice 17-20, FINRA announced it is requesting comments on Rules 3270 and 3280 governing outside business activities and private securities transactions.  The request for comments comes as a result of FINRA’s new retrospective rule review.  The review concentrates on rules governing broker dealer employees’ business and securities activities carried out away from their firm—activities that are outside the regular course of scope of their employment with the firm.
securities
FINRA ARBITRATION 2016 STATISTICS
Arbitration case filings for year-end 2016 reflected a 7 percent increase compared to cases filed in 2015 during the same time frame.  More specifically, 3,435 cases were filed in 2015, but 3,681 cases were filed in 2016.  Of the 3,681 cases filed, 68 percent or 2,519 were customer disputes and 32 percent or 1,162 were intra-industry disputes. 
securities
THE ELEVENTH CIRCUIT HOLDS THAT THE SAFE HARBOR PROVISION IS AVAILABLE TO DEFENDANTS IN SEC ENFORCEMENT ACTIONS
In SEC v. Levin, the United States Court of Appeals for the Eleventh Circuit (“Eleventh Circuit”) held that the safe harbor provision of Regulation D’s Rule 508(a) is available to a defendant in a Securities and Exchange Commission (“SEC”) enforcement action based on a failure to register securities under Section 5 of the Securities Act.
securities
HIGHLIGHTS FROM THE FINRA 2017 REGULATORY AND EXAMINATION PRIORITIES LETTER
FINRA released its Regulatory and Examination Priorities Letter for 2017.  The letter provides information about areas FINRA plans to review in its 2017 exams based on observations from their regulatory programs, as well as input from various stakeholders, including broker dealers, other regulators and investor advocates.
securities
RECENT CASE INVOLVING ALTERNATIVE INVESTMENTS RECEIVES AWARD FOR RESPONDENT
Our firm recently obtained an award from a FINRA panel denying all of Claimant’s claims and finding for Respondents.  The claim (Arbitration number 16-01352) was filed in May, 2016.  Claimant alleged claims of unsuitability, breach of fiduciary duty, breach of contract, failure to supervise, violation of the Alabama Securities Act, violation of securities regulatory rules, and common law claims of misrepresentation, unjust enrichment and negligence.
securities
FINRA’S RECOMMENDATIONS FOR EXPEDITED ARBITRATIONS
 FINRA allows for expedited arbitration proceedings in cases involving senior and seriously ill parties.  While there is no specific rule within the Code of Arbitration Procedure, once FINRA determines that a matter involves an elderly or ill party, the case is flagged as an expedited case.  FINRA then endeavors to complete the arbitration process as quickly as possible.  FINRA recently formed a committee to determine how to process expedited cases more efficiently.  
securities
FORUM SELECTION PROVISIONS IN CUSTOMER AGREEMENTS
FINRA released Regulatory Notice 16-25 reminding broker dealers that claimants have a right to request arbitration through FINRA at any time and do not forfeit that right by signing any agreement with a forum selection provision specifying another dispute resolution process or an arbitration venue other than the FINRA arbitration forum.   
securities
RECENT RULEMAKING ITEMS APPROVED BY FINRA
FINRA recently authorized filing with the SEC two proposed amendments to rules from the Code of Arbitration Procedure for Customer Disputes and Industry Disputes.  The rules affect chairperson eligibility in arbitration and the arbitrator panel selection process.
securities
FINRA ISSUES GUIDANCE ON USE OF STOP ORDERS DURING VOLATILE MARKET CONDITIONS
FINRA issued Regulatory Notice 16-19 in an effort to encourage firms to review their practices regarding stop orders.  Registered representatives often recommend stop orders as a tool for managing market risk.  Investors use stop sell orders to protect profit position in the event a stock’s price declines and stop buy orders if they have a short position to limit losses in the event a stock’s price increases.  Once stop orders are triggered, they become market orders, which are inherently risky, especially in volatile market conditions.  
securities
SEC APPROVES RULE REQUIRING FIRMS TO SEND AN EDUCATIONAL PAMPHLET TO THE FORMER CLIENTS OF THEIR NEWLY HIRED REPRESENTATIVES
The SEC recently approved the adoption of FINRA Rule 2273 which creates an obligation to deliver educational communication in connection with firm recruitment practices and account transfers.  The new rule affects financial firms that want to recruit the former clients of newly hired representatives.
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