News SpotlightSpotlight news

Recent industry news articles with links to the full story

Double Check: FISIO Unit FINRA and Securities Industry Oversight added

Oct 2016 SEC has launched a new  team to oversee FINRA. The new team called FISIO is equipped with the power to supervise, inspect, and examine FINRA. Marc Wyatt, Director of OCIE says,  “FISIO will oversee FINRA and ensure that it is fulfilling its mandate in terms of evaluating member broker-dealers.”

Implementation of FISIO was prompted in part by the increase of registered investment advisors, notably more than 2000 new advisors are registered with the SEC.  This increase was met by a shifting of examiners into the IA/IC staff.  The OCIE now has a goal of examining all new registrants.

Impact on Private Fund Advisors: OCIE will attempt to allocate resources by analyzing data. Data will then be used to compile a list of firms that pose the greatest risk to investors. Private Fund exams will come under scrutiny of information reported on form PF as well as market risks, prior examination information, performance, strategy, asset concentration. 

Read more here


New SEC Rule:  Websites must Hyperlink to FINRA BrokerCheck

Effective June 6, 2016 FINRA Rule 2210 (Communications with the Public) requires broker-dealer(s) initial website(s) and any professional web page(s) operated by registered representatives who promote a broker-dealer’s business should include a readily apparent reference and hyperlink to FINRA’s BrokerCheck. The requirement applies to the web page(s) that broker-dealers intend to be viewed by retail investors and any web page(s) of registered representatives who promote the broker-dealer’s business to retail investors.

To determine whether the reference and hyperlink is readily apparent, broker-dealers should factor among other things, the placement, font size and font color of the required communication, taking in consideration the perspective of a reasonable retail investor. FINRA generally does not believe that posting the reference and hyperlink to BrokerCheck in a footer would satisfy the “readily apparent” standard. 

To satisfy the rule’s requirements, a broker-dealer can add a link on its opening website to take customers directly to the BrokerCheck homepage 

FINRA suggests that the following text description be used (with the text “FINRA’s BrokerCheck” being the active hyperlink).

  • Check the background of this firm on FINRA’s BrokerCheck.
  • Check the background of this investment professional on FINRA’s BrokerCheck.

Firms may also create direct links to the broker-dealer or the registered person’s specific BrokerCheck record, use a custom BrokerCheck image or use a BrokerCheck widget on its website to satisfy the rule requirements. 

BrokerCheck related icons and resources on how to comply with requirement can be found at: and by accessing Regulatory Notice 15-50.

Currently, the reference and hyperlink to BrokerCheck is not required from communications appearing on a third-party website (e.g. social media websites) or on each email or text message sent by the broker-dealer or registered person to retail investors.  

FINRA issues Report Cards to help firms spot Spoofing and Layering

April 28, 2016: 

New Equities Supervision Reports issued by FINRA beginning April 2016 are the first in a planned series of preventative market manipulation surveillance. The new report prompts firms to review specific activity that may indicate stock market manipulation schemes like layering or spoofing.

Tom Gira, Executive VP of Market Regulation cited; “… firms attempt to review for market manipulation, but bad actors look to mask their activity by trading across market platforms or firms, making them harder to detect.” FINRA is now leveraging their access to cross-market data as a means to identify suspicious trade activity. They will then send findings out to member firms in the form of alerts, or report cards. The report cards are intended as a means for firms to review the transactions and take appropriate action. They do not necessarily conclude that violations have occurred, but rather point out possibilities to firms. Note however, armed with these details, FINRA could of course request a formal investigation.

This new report card system is indicative of FINRA’s increased reliance on a data driven approach to market surveillance. It is also a step closer to working with member firms by prompting them with preventative market surveillance data.

Read the FINRA news release


New Rule: DOL Fiduciary Standards 2016

April 2016: Department of Labor released a final statement April 6, 2016 on the Fiduciary Rule for brokerages, representatives, and investment advisors working with senior investors and retiree investment products. 

Compliance with the new requirements begin no later than 1 year after the final rule is published, April 2017; allowing time for firms to change policies and procedures, and product portfolio’s to meet the new compliance regulations. Namely retirement investment service providers and representatives will need to adjust their retirement vehicle sales from non-fiduciary to fiduciary based product models.

Brokerage firms are particularly concerned about the amount of resources they will need to devote to analyzing how this new rule impacts their business model and product portfolio; in addition to developing new compliance policies, product lines, and staff training programs. Feel free to reach out to the professional services team at RND Resources for help understanding the 2016 fiduciary rule change and assistance implementing policy changes, product updates, and the staff CE program. 

Read our blog post outlining the 2016 Fiduciary Rule change released by the Department of Labor April 6, 2016.


New: Broker-Compensation Rule

March 23, 2016 – SEC approves new rule requiring brokers to reveal information about compensation and incentives they receive when changing firms.

The new “compensation rule” applies to brokers who are transferring to a new firm and solicit existing clients to make the move with them.  The rule is structured that clients will receive an “educational communication” from their broker outlining considerations they (the client) should make in moving their investments to the new firm.

The communication will provide investors with information relevant to evaluating if, among other things; financial incentives the broker is receiving may be creating a conflict of interest; whether some of their investments cannot be moved; and potential costs involved in moving investments. The document will also include recommended questions an investor should ask their broker when considering a transfer of investments.

No implementation date has been set just yet, but it is expected to be announced soon.

Reference: FINRA Rule 2273 (Educational Communication Related to Recruitment Practices and Account Transfers)

Access FINRA 2015-057 documents regarding the “Compensation Rule” from proposal of the rule, through comments submitted, and to the final approval order 

FINRA Approval order SR-FINRA-2015-057  – released March 29, 2016


FINRA to review broker-dealer firms compliance culture

February 2016, Press Release –

FINRA asserts, “Firm culture has a profound influence on how a broker-dealer conducts its business, including how it manages conflicts of interest. A culture that consistently places ethical considerations and client interests at the center of business decisions helps protect investors and the integrity of the markets.”

Broker-Dealer firms can expect to receive a letter from FINRA requesting details about  firm culture.  The letter is not an indication that FINRA has concerns. At this time FINRA is researching industry practices to better understand steps firms are taking that align cultural values to influence how employees make and carry out decisions. 

Read FINRA’s release and list of questions centered around Firm Culture.  

What are you doing at your firm to influence compliance as part of the company culture?



2016 – MSRB taking applications for Board of Directors seats

Application deadline for Board of Directors seat: February 19 2016

The MSRB, Municipal Securities Rulemaking Board, is the self-regulated organization (SRO) that sets the strategic direction for Municipal Securities regulation. Members of the MSRB help craft policy for the regulation of financial professionals, assess market structure, and oversee EMMA.

What is EMMA? Electronic Municipal Market Access, a website tool used by market participants to monitor municipal security trade price and disclosure information.

The Board consists of 11 independent members representative of the public and 10 MSRB regulated entities such as broker-dealers. At this time MSRB seeks to fill 4 public seats and 3 regulated entity seats. 

Members of the MSRB Board of Directors have the opportunity to: 

  • Craft policy that protects investors, state and local governments and municipal entities, and public interest;
  • Authorize rule-making with the goal of promoting a fair and efficient municipal market, subject to oversight by the SEC;
  • Oversee operation of EMMA, the MSRB’s Electronic Municipal Market Access portal which is vital in providing municipal security trade price and disclosure information.

Qualified individuals from around the country representing diverse organizations and market perspectives are encouraged to apply. Investor applicants with strong knowledge of pricing and trading municipal securities, including those with “buy-side” experience are highly desired.

Read the Press Release – January 4, 2016

RND Resources Inc has compliance programs for Municipal Securities Dealers and Trade Desks. Our complete suite of services covers:

  • Outsourced Chief Compliance Officer (Series 24 Registered)
  • Outsourced Municipal Securities Principal (Series 53 Registered)
  • SEC Municipal Advisor Registration and Forms Filing
  • Continued Education programs for Employees CE
  • Written Supervisory Procedures Manuals (WSPs) development and maintenance
  • Annual Compliance Program and Supervisory System Reviews
  • On-going maintenance of compliance policies, documents, and agreements

Call our office for a quote (818) 657-0288

2016 – FINRA Cybersecurity Conference

February 11 2016 New York, NY at the New York Hilton, Midtown

FINRA member firm executives have a unique responsibility to protect investors and proprietary firm information from compromise. The notion of cybersecurity as an IT department issue has long since been re-assessed by securities firms and the topic is now taken into the board room. Discussions include much more than security of networks, systems, applications, and data; but cover a whole gamut of “what if” scenarios, company policy, and risk reducing strategy. And, no matter how much of the cybersecurity program is outsourced to IT professionals, the ultimate responsibility lands on the shoulders of each firms executive leadership. Gain more insight into Cybersecurity strategy at the FINRA conference in New York, February 2016.

Get the conference agenda and registration information

Sessions include:

Fundamentals of CyberSecurity Controls: Get a handle on big-impact controls such as; one-time passwords, anti-malware tools, limiting administrative privileges, vulnerability and patch management.

Security Awareness Case Studies: Discuss real-life examples of system failures and the consequences including damage to reputation and exposure of customer assets.

Identifying High-Risk Business Activities: Each firm has a unique threat landscape based on their business model. Identifying threats to your firm is a critical step in developing an effective cybersecurity strategy. Find out how to determine risk. 

Strategy for Mitigating Risk: Most firms these days will at some point be the subject of a cybersecurity attack. FINRA staff and industry practitioners address techniques firms can implement to mitigate risk. Panelists discuss how to approach communication, analysis, mitigation, and improvements that help reduce the impact of cyber-attacks.

Ask the Experts: Get answers to questions about the cybersecurity landscape, insider threats, and more. Hear perspectives and helpful tips. FINRA staff shares information about how the secure and monitor sensitive data.

Concerned about your firms cybersecurity risk? RND Resources has expertise creating cybersecurity governance plans to meet FINRA regulatory requirements. Check our website for more details or call us at 818.657.0288 for information.

January 13 2016 – Message from FINRA Small and Mid-Size Firm Governors

Read the letter sent out to Executive Representatives from FINRA small and mid-sized firm Governors:

A group of us recently met with Susan Axelrod, EVP of Regulatory Operations, and Chip Jones, SVP of Member Relations and Education. It was a candid and forthright discussion. Our basic goal is to foster an environment in which well-intentioned firms believe that exams are fair, balanced, and consistent, and that any sanctions that do occur are proportionate to the violations.


December 2015 – Read the Article

Rules for Payments of Transaction-based Compensation to Un-registered Members is Changing

Analysis of transaction based payments to non-registered members , no long registered members, and selling groups by National Law Review by Max L Schatzow of Stark & Stark Law Group

New rule effective August 24, 2015 may trigger issues for broker-dealers engaged in

  • Asset purchase agreements between current representative (Selling groups)
  • Compensation to retired representatives, their beneficiaries, or their estate
  • Referral arrangements


New FINRA Series 57 Registration Examination opens at January 4 2016

November 2015 – SEC approved FINRA proposal to replace Series 55 license with a more comprehensive series 57 license. Examinees can schedule to take the new license examination as early as January 4, 2016. This revision is a step toward costly changes for high frequency traders applying rule 15b9-1 which bypasses FINRA association.  

Earlier this year FINRA issued a survey to members with the series 55 registration gathering statistics about current roles, responsibilities, and functions of Equity Traders and Proprietary Traders. Feedback from that survey prompted the November 2015 FINRA release of regulatory notice 15-45 announcing the implementation of series 57 at January 4, 2016. Read FINRA Regulatory Notice 15-45 …

Series 57 Securities Trader Qualification is a revision to Rule 15b9-1 that is designed to require broker-dealers engaged in proprietary high-frequency trading (HFT) of securities or other applicable products to register with a regulatory association (an “Association”).

Read more about the impact on Floor Traders and HFT dealers by changes to NASD rule 1032 (f)

Firms needing Principal Officer services to comply with the rule changes find support at RND Resources Inc.


FINRA involved in cross-market surveillance to prevent spoofing on futures market

Nov 11, 2015 – FINRA is running a test pilot program intended to teach stock brokers how to identify spoofing schemes. The program provides a snapshot equity trading report card telling firms where to spot and prevent manipulative activity. This program is on the heels of stepped up enforcement of spoofing, an area FINRA does not regulate, but none-the-less has the ability to monitor. 

Compliance officers voice concerns that given the increasingly automated world, aggressive trading algorithms could end up engaging in practices that are considered spoofing.

Read more….


What is Spoofing ?  (Phantom Bids, Pump and Dump)

Spoofing is a disruptive algorithmic trading scheme employed by traders to manipulate commodity markets


To spoof, traders who own shares of a certain stock place an anonymous buy order for a large number of shares of the stock through an electronic communications network (ECN). Then they cancel, or withdraw, the order seconds later.

As soon as the order is placed, however, the price jumps. That’s because investors following the market closely enter their own orders to buy what seems to be a hot stock and drive up the price.

When the price rises, the spoofer sells shares at the higher price, and gets out of the market in that stock. Investors who bought what they thought was a hot stock may be left with a substantial loss if the price quickly drops back to its pre-spoof price.


Some industry compliance officers overseeing firms with aggressive trading algorithms are concerned about how spoofing is defined by regulators. There may be a fine line between legitimate market practices and trades considered to be spoofing.



RND Resources Inc provides outsourced compliance, audit, and back office support for securities professionals. Visit our services page for more details.