Welcome Remarks: Chip Jones, FINRA Member Relations and Education Tuesday, October … ·...
Transcript of Welcome Remarks: Chip Jones, FINRA Member Relations and Education Tuesday, October … ·...
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
Welcome Remarks: Chip Jones, FINRA Member Relations and Education Tuesday, October 9 9:00 a.m. – 9:15 a.m.
Speaker: Chip Jones Senior Vice President FINRA Member Relations and Education Speaker Biography: Chip Jones is Senior Vice President of Member Relations and Education for FINRA. In leading the Member Relations and Education Department, Mr. Jones’ responsibilities include maintaining and enhancing open and effective dialog with FINRA member firms. Mr. Jones also oversees FINRA’s Member Education area, which includes FINRA conferences and other member firm educational offerings such as the FINRA Institute at Georgetown for the Certified Regulatory and Compliance Professional (CRCP)® designation. Prior to joining FINRA, Mr. Jones spent six years as Vice President of Regulatory and Industry Affairs at American Express Financial Advisors (AEFA). Previous to AEFA, he spent two years as Advocacy Administrator for the Association for Investment Management and Research (AIMR). Mr. Jones was employed by the Virginia Securities Division as a senior examiner/investigator prior to joining AIMR.
Disclosure Reporting, Monitoring and Registration ConferenceOctober 9, 2018 | New York, NY
Welcome Remarks: Chip Jones, FINRA
Member Relations and Education
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Speaker
Chip Jones, Senior Vice President, FINRA Member Relations
and Education
Panelist
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© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
Regulatory Reporting Requirements Tuesday, October 9 9:15 a.m. – 10:15 a.m. This session focuses on regulatory requirements and firm practices related to reporting and disclosure. FINRA panelists highlight key reporting requirements, including requirements for maintaining Forms U4 and U5, and customer complaint reporting obligations.
Moderator: Mario DiTrapani Vice President FINRA CRD/Public Disclosure Panelists: Sean Driscoll Director, Registration, Global Employee Trading and Outside Activities Credit Suisse Wendy Lanton Chief Operations and Chief Compliance Officer Lantern Investments, Inc. Ronald Peterson Senior Director FINRA Regulatory Review and Disclosure
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2
Regulatory Reporting Requirements Panelist Bios: Moderator: Mario DiTrapani is Vice President, FINRA, Registration and Disclosure (RAD), which is responsible for the operation of the Central Registration Depository (Web CRD®), the Investment Adviser Registration Depository (IARDTM) and FINRA BrokerCheck®. His current management responsibilities encompass the following RAD units: Regulatory Services and Operations, Regulatory Review and Disclosure, Quality Control and Communications. Mr. DiTrapani also serves as chair to FINRA’s Licensing and Registration Council, an ad hoc committee that advises and consults with FINRA staff regarding a broad range of issues relating to the licensing and registration of financial services firms and their associated persons. Mr. DiTrapani began his tenure with FINRA in 2006 as part of NASD, which consolidated with the NYSE Member Regulation in 2007 to form FINRA. Mr. DiTrapani also currently serves on the Securities and Insurance Licensing Association’s (SILA) Board of Directors as a Regulatory Advisor. Prior to joining FINRA, he was Senior Vice President and Deputy Director of Compliance for UBS Financial Services Inc., where he oversaw registration, insurance licensing, regulatory reporting, outside accounts, and outside business activities. Mr. DiTrapani also served as President of the Association of Registration Management (ARM). He has been a financial services industry professional for more than 35 years and has served on various industry/regulatory committees focusing on registration and qualifications issues. Mr. DiTrapani holds a Bachelor of Business Administration degree in Finance and Investments from the Bernard M. Baruch College of the City University of New York. Panelists: Wendy Lanton has been in the financial services industry for more than 25 years. She is one of the founding principals of Lantern Investments, a FINRA registered broker dealer, and Lantern Wealth Advisors, an SEC registered investment advisor. She has been the Chief Compliance Officer of Lantern Investments since its inception in 1993. The firm has multiple business lines and currently has 46 registered representatives and operates 13 branch offices across the country. Ms. Lanton is responsible for both the firm’s compliance and the day-to-day operations. In December 2015 she was appointed to the FINRA Small Firm Advisory Committee and presently serves as the committee’s chairperson. She also currently serves on the Steering Committee for her firm’s current clearing firm and was the co-chairperson on the steering committee at her previous clearing firm. As a steering committee member, her industry experience is called upon to help direct both compliance and technology resources. Ms. Lanton has also served as the chairperson for multiple Compliance Forums for retail brokerage firms. She is a frequent panelist/speaker at FINRA conferences. Her industry perspective is called upon to discuss topics such as Anti-Money Laundering, Top Regulatory Concerns and Effective Risk Based Examinations. In February 2016 Ms. Lanton served as a panelist representing small firms at the Cybersecurity Conference. She has written numerous compliance-centric articles focusing on topics ranging from client suitability to cyber-security. Ms. Lanton graduated from George Washington University where she majored in International Finance. Ron Petersen is Senior Director of Regulatory Review and Disclosure, FINRA, RAD. In this role, he oversees staff responsible for individual and organization disclosure review, statutory disqualification, expungement, as well as U6 filings for FINRA, SEC and CFTC/NFA. Prior to joining FINRA (then NASD) in 2001, Mr. Petersen was an Examiner with the Colorado Securities Division, where he established the state’s investment adviser registration and examination programs and oversaw the registration and regulation of local government investment pools managing more than $1.5 billion in assets. He also previously served as RAD’s primary liaison with other securities regulators and supervised the department’s Regulatory User Support Desk, which serves as a front-line resource for the SEC, SROs and state securities commissions. Additionally, he was the Director of the Registration Management unit, during which he oversaw the operation of the FINRA Disciplinary Actions Online database, CRD Accounting, Research and the annual Renewal Program. He received a Bachelor of Music Education degree from Capital University in Columbus, Ohio, and an MBA in Finance from the University of Colorado at Denver.
Disclosure Reporting, Monitoring and Registration ConferenceOctober 9, 2018 | New York, NY
Regulatory Reporting Requirements
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Moderator
Mario DiTrapani, Vice President, FINRA CRD/Public Disclosure
Panelists
Sean Driscoll, Director, Registration, Global Employee Trading
and Outside Activities, Credit Suisse
Wendy Lanton, Chief Operations and Chief Compliance Officer,
Lantern Investments, Inc.
Ronald Peterson, Senior Director, FINRA Regulatory Review
and Disclosure
Panelists
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Uniform Forms
Form U4 – Other Business
Forms U4/U5 Customer Complaint Questions
Form U5 – Disclosure Certification Checkbox
FINRA Rule 3110(e)
Forms U4 & U5 Filing Tips
Topics of Discussion
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Uniform Form Types
Form U4 to register an individual
Form U5 to terminate an individuals registration
Form U6 filed by a regulator to report a regulatory action
Form BD to register an entity as a broker-dealer
All uniform forms must be amended within 30 days of an event or proceeding which
renders a previous response inaccurate or incomplete. Exception: Events triggering
Statutory Disqualification must be reported, via an amended Form U4, within 10 days.
Form BD Disclosure questions also apply to control affiliates and control persons.
Certain events are reportable on Forms U4 and U5, but are not reportable on Form BD.
Examples include Wells Notice and customer complaints and arbitration claims.
Individual and Broker-Dealer Disclosures
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
RRs currently engaged in any other business as a proprietor, partner, officer, director, employee, trustee, agent or otherwise, must disclose that on Form U4 (item # 13). Remember to include the following information:
Name and address of the business,
Whether or not it is investment-related,
Nature of the business,
Your position, title or relationship,
Start date,
Approximate number of hours/month devoted to the business,
Number of hours you devote during securities trading hours, and
Briefly describe your duties
For the purpose of Form U4, please exclude non-investment-related activity that is exclusively charitable, civic, religious or fraternal and is recognized as tax exempt.
Form U4 – Other Business
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
“Subject of” an arbitration/civil litigation – RRs are required to report sales practice related claims that do not name them as a party, but whose conduct was the cause of the claim.
All complaints involving forgery, theft, misappropriation or conversion of funds or securities are reportable, regardless of dollar amount.
If a written customer complaint does not allege a specific dollar amount, it must be reported unless the firm can determine that the damages are less than $5,000.
Verbal customer complaints are only reportable if they result in settlement of $15,000 or more.
Settlement is the total amount paid to customer to resolve dispute – not just the RR’s contribution.
Forms U4 & U5 Customer Complaint Questions
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Allows firms to apply the disclosure towards satisfying its
4530(a)(1) reporting obligation
Disclosure Reporting Page (DRP) 4530 checkbox
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
By checking the box the firm certifies that:
– There is no additional information to be reported at this time
– Firm acknowledges it will update information, as appropriate.
Form U5 Disclosure Certification Checkbox
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
“To Hire or Not to Hire, THAT is the Question”
HR and Business Coordination All results are communicated to HR and Hiring Manager
What are Compliance Concerns?
Obtain documents, records, statements
Review Employment Application
Review and Evaluate Outside Activities for conflicts
Review Role/Registration Requirements
Advise of Risks
Agree to Disagree? Assume Risks?
Coordination with HR and Hiring Manager
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
On July 1, 2015, FINRA Rule 3110(e) went into effect requiring firms to validate the information reported on Form U4.
The validation required, at minimum, a search of public records to be conducted by the member or third-party vendor (the fingerprint process validates the criminal disclosure questions).
In late 2014, through the use of a vendor, FINRA conducted financial public record searches to validate the bankruptcy, judgment and lien question on Form U4.
Since FINRA was already performing the financial public record searches, FINRA announced that it would perform these searches on behalf of industry upon submission of Form U4 (see Information Notice dated May 18, 2018).
This process, which officially kicked off on July 9th, provides a huge savings to industry since they no longer have to contract third-party vendors to perform these financial public record searches.
Enhanced Public Records Review
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
CRD Pre-Hire Check
All persons seeking employment in a registered capacity or an indication they once held a registration should be reviewed through the performance of a CRD Pre-hire Check.
Best practice is to perform CRD Pre-hire Checks on all candidates
Authorization to search CRD to conduct the Pre-Hire Check must be provided by the candidate through a written consent form
CRD Snapshots and/or full screens prints are reviewed to assist in the determination to hire
All documents, approvals to perform the CRD Pre-Hire check, and resulting decision should be maintained for books and records and documentation purposes
Vendor Background Checks
Member firms will often use vendors to provide investigative reports for the purposes of performing background checks*
Firms will often determine the depth and scope of a report that best meets its compliance and business requirements
Full U.S. review or partial
Include all forms of financial/credit
Include education search
Employment
Criminal
Industry Perspective -- Background Checks
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Site Map
Outstanding Disclosure Letters (1 of 3)
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Display Queue
Outstanding Disclosure Letters (2 of 3)
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Queue Results
Outstanding Disclosure Letters (3 of 3)
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Congratulations!! You Passed. . . . . Now What??
The maintenance and the accuracy of Registration information is everyone’s responsibility! Policies and Procedures for ensuring the accuracy
Controls, Reports, Surveillance
Reporting Obligations
Continuing Education – Regulatory and Firm Element
Continued Background Checks and Searches
Monitoring Broker Check and CRD Queues/Notifications
Notifying New Manager of RR History
RR responsibility does not end at the passing of the exams and the providence of approvals
Life After Approvals – This is just the beginning. . . .
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
What to look out for….
Disclosure and Fingerprint Reviews
• Customer Complaints, Arbitrations, Criminal Litigations
• 3 or more in 5• Compensatory Damages/Settlement
Amounts• Individual Contribution Amount• Awards/Dismissal• SD Review/Status (10 Years)• Type of allegations/disposition• States/SROs Registration Requirements
Regulatory – State, Federal, SRO
• Types of Violations (Willful)
• Suspensions/Revocations
• Heightened Supervision
• Limited Activities
Financial
• Bankruptcies; Liens; Judgments
• Status
• Number/Type of actions
• State Registration Requirements
• Job description
Employment; Exam and CE Records
• Employment with several Firms
• Length of Service
• Outside Activities
• Exam – Qualified for Role?
• CE Compliance History
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Reports Tab
Reports (1 of 2)
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Reports (2 of 2)
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Allows RRs to review their CRD records.
Enable former RRs the ability to change their residential
address on file in CRD.
Links directly to the Continuing Education (CE) Online to
complete continuing education requirements.
Links directly to the Prometric website to schedule exams.
View and print a copy of your latest Form U5 filed by your
previous employer.
Financial Professional Gateway
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Query Web CRD right before submission of U4 to ensure disclosure is accurate, even if a pre-hire was done earlier.
Whenever possible (Initial/Transfer), submit and track fingerprints prior to submission of U4.
Obtain criminal history and credit reports (optional) prior to filing.
If regulatory actions exist, especially state actions, documents may be required for review for SD under Sarbanes-Oxley.
Require periodic certification from RRs that U4 disclosure is accurate.
Sign up for automatic email notifications.
Track pending disclosure.
If all required disclosure is submitted on the initial U4, no late disclosure fee will apply no matter how old the events are.
Compliance Tips
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Uniform Forms (U4/U5 and Explanation of Terms): www.finra.org/file/explanation-terms-crd-forms
Forms U4 and U5 Interpretive Questions & Answers (as of 03/05/15): www.finra.org/CRD/u4u5faq/
U4/U5 Revisions: Reg. Notice 09-23: www.finra.org/Industry/Regulation/Notices/2009/P118706 Electronic Filing Requirements for Uniform Forms: Reg. Notice 09-40:
www.finra.org/Industry/Regulation/Notices/2009/P119432 U5 Obligations: Reg. Notice 10-39: www.finra.org/Industry/Regulation/Notices/2010/P122041 Regulatory Notice 15-05: www.finra.org/industry/notices/15-05 Information Notice – 05-18-18: www.finra.org/industry/information-notice-051818 Financial Professional Gateway: www.finra.org/industry/features-financial-professional-
gateway Protecting Personal Information in Registration Form Filings (from FINRA.ORG):
www.finra.org/industry/web-crd/protecting-personal-information-registration-form-filings
Disclosure Reporting Key Resources
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© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
Regulatory Reporting Requirements Tuesday, October 9 9:15 a.m. – 10:15 a.m.
Resources FINRA Resources
Uniform Forms (U4/U5 and Explanation of Terms)
Website: www.finra.org/file/explanation-terms-crd-forms
PDF: www.finra.org/sites/default/files/AppSupportDoc/p468051.pdf
Forms U4 and U5 Interpretive Questions & Answers (as of 03/05/15)
Website: www.finra.org/CRD/u4u5faq/
PDF: www.finra.org/sites/default/files/Interpretive-Guidance-final-03.05.15.pdf
Financial Professional Gateway
www.finra.org/industry/features-financial-professional-gateway
Protecting Personal Information in Registration Form Filings (from FINRA.ORG)
www.finra.org/industry/web-crd/protecting-personal-information-registration-form-filings
FINRA Notices
Information Notice: Enhancements to FINRA’s Disclosure Review Process Relating to Public Financial Records (May 2018)
www.finra.org/sites/default/files/notice_doc_file_ref/Information-Notice-051818.pdf
Regulatory Notice 15-05, SEC Approves Consolidated FINRA Rule Regarding Background Checks on Registration Applicants (March 2015)
www.finra.org/sites/default/files/notice_doc_file_ref/Notice_Regulatory_15-05.pdf
Regulatory Notice 10-39, Obligation to Provide Timely, Complete and Accurate Information on Form U5 (September 2010)
www.finra.org/sites/default/files/NoticeDocument/p122040.pdf
Regulatory Notice 09-40, SEC Approval and Effective Dates for New Consolidated FINRA Rules on Electronic Filing Requirements for Uniform Forms and Arbitration Disclosures (July 2009)
www.finra.org/sites/default/files/NoticeDocument/p119431.pdf
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2
Regulatory Notice 09-23, SEC Approval of Proposed Changes to Forms U4 and U5 and FINRA Rule 8312 (FINRA BrokerCheck Disclosure) (May 2009)
www.finra.org/sites/default/files/NoticeDocument/p118705.pdf
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
New CRD® —Transforming the Registration and Licensing Experience
Tuesday, October 9 10:30 a.m. – 11:30 a.m. FINRA has begun a multi-year initiative to transform the CRD system. During this session, FINRA business and technology staff cover the upcoming changes, significant feature releases, how your firm can participate during product development, and answer your questions about the future of this important system.
Moderator: William Swanstrom Vice President, Registration & Disclosure Business Services FINRA Registration and Disclosure's Business Development and Innovation Panelists: Noah Egorin Product Manager and Senior Director FINRA Registration and Disclosure's Business Development and Innovation Deepa Parasuram Director FINRA Registration and Disclosure Technology
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2
New CRD® —Transforming the Registration and Licensing Experience Panelist Bios:
Moderator: Bill Swanstrom, Vice President, FINRA Registration and Disclosure, leads business development, innovation and strategic initiatives that leverage RAD’s licensing systems and business services as well as overseeing the Gateway Call Center. Mr. Swanstrom’s focus is on outreach and expanding the role and impact that member firms have when it comes to licensing and registration systems and services. The new CRD system and Financial Professional (FinPro) Gateway are opportunities to leverage technology, respond to industry challenges and introduce a more effective licensing platform. These systems will focus on enabling firm compliance, reducing administrative burden, simplifying requirements and improving the overall user experience. Throughout his tenure, Mr. Swanstrom sponsored the development, deployment and operation of the Nationwide Multistate Licensing System on behalf of FINRA for The Conference of State Bank Supervisors (CSBS). In addition, he has led numerous support consolidation initiatives to improve efficiency and expand the customer support model introducing improved access to information and enhanced communication channels for the Gateway Contact Center. The Gateway Contact Center staff includes the front-line responders for member firms, investors, compliance professionals, and the general public regarding compliance and registration questions, navigational support, and investor questions. The systems supported include: Web CRD, IARD, BrokerCheck, Firm Gateway, FinPro, Account Administration, E-Bill, OATS, and eFOCUS among others. He holds a Bachelor’s degree from Towson University in Political Science. Panelists: Noah Egorin is Product Manager and Senior Director in FINRA’s Registration and Disclosure’s Business Development and Innovation Unit. His primarily areas of responsibility is leading FINRA’s effort to modernize and transform the products the industry utilize for meeting registration and disclosure obligations. Mr. Egorin is also focused on utilizing FINRA’s information, analyses, and unique role to create new products that benefit the financial services industry. Prior to taking on his current role, Mr. Egorin led FINRA’s Firm Compliance Tools unit. He has focused on developing tools to assist broker-dealers with compliance activities. His efforts have focused on compliance tool offerings associated with variable annuity exams, mutual funds, and municipal bond disclosure. In this role, Mr. Egorin had responsibility for the FINRA Report Center (and associated Report Cards), FINRA’s Online Manual, and other interactive tools. Mr. Egorin has also supported FINRA’s efforts to syndicate investor education materials and developing data interfaces for FINRA systems. Prior to joining FINRA, Mr. Egorin served as Group Manager for the Product Planning practice of the Adrenaline Group, a Washington, DC-based consulting firm that assisted firms with commercial product development, and also spent time as Program Manager on the Microsoft Office team in Redmond, WA. Mr. Egorin holds a BS in Computer Science from Washington & Lee University. Deepa Parasuram, Director of FINRA Registration and Disclosure Technology, is responsible for all the Registration & Disclosure applications namely Web CRD, IARD, PFRD, Web EFT and other related products such as the Financial Professional Gateway. Ms. Parasuram began her tenure with FINRA (then NASD) in 2003 as a quality assurance analyst. Since then she has held positions of progressively increased responsibility supporting these programs as a business analyst and currently as a product manager. Ms. Parasuram has a Bachelor of Science degree in Engineering from the University of Mumbai, India, and an MS in Computer Science from Johns Hopkins University.
Disclosure Reporting, Monitoring and Registration ConferenceOctober 9, 2018 | New York, NY
New CRD® — Transforming the
Registration and Licensing Experience
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Moderator
William Swanstrom, Vice President, Registration and Disclosure Business Services, FINRA Registration and Disclosure's Business Development and Innovation
Panelists
Noah Egorin, Product Manager and Senior Director, FINRA Registration and Disclosure's Business Development and Innovation
Deepa Parasuram, Director, FINRA Registration and Disclosure Technology
Panelists
1
A New CRD
A modern, cost efficient registration system that
allows FINRA to be responsive to change, support
proactive compliance, enable an ecosystem and
delight all of its users.
Copyright 2018 FINRA
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved. 3
Part of our DNAo Dozens of sessions held this year.
Thank you!
o Feedback driving features and priority
12Regulators
62Firms
“FINRA staff are clearly interested in understanding our problems, needs and business drivers. This feels like a different experience and big opportunity for our firm.”
Outreach and Feedback
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
New CRD landing page for firms
o All “classic” queues now available in a
single inbox, with sophisticated filtering
oCustomizable quick links
oCustomizable favorite reports list
o Export
Financial Professional Gateway
o U5 Notifications
o Enhanced support for rep editing
Infrastructure
o Establish the foundation for moving to
the cloud and new functionality
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1,500New CRD visits
35,000FinPro reps
What have we done since last year?
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Let’s take a closer look…
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What’s next?
• Activities dashboard• New views of individuals,
firms and branches• Quick edits• Improved form
experience• Notifications• Bulk actions
Firms
• New CRD landing page for states
• Activities dashboard• New views of
individuals, firms and branches
State Regulators
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• Enhanced Public Records review support
• Criminal history review review automation
FINRA
Copyright 2018 FINRA
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Let’s take a closer look…
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Today individuals can:
Access their own information
Collaborate with their firm on updates
Continuing education
See Form U5 (if applicable)
In the future firms can allow:
Signing filings
Initiating registration requests
Receiving notifications and alerts
Attestation of information
Managing required documentation
Paying of FINRA fees directly
FinPro: The Representative’s Home
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Let’s take a closer look…
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U5 available via FinPro
An email notification
is sent when a new U5 is
available
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U4 rep edit available via FinPro
No need to send
reference numbers to
reps!
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Easy access to continuing education
Single sign-on
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Rep-initiated updates
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Firms control access to FinProfeatures
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Scenario:
A rep wants to update her
outside business activities
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
We need your help!
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How should we move forward?
• What sort of reporting and data access do you need?
• How can we simplify working with CRD and FINRA?
• How do we support your efforts to automate?
• How can we enhance FinPro to ease the compliance burden?
In short, how can we make this transformation effort a leap forward for you?
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Q A
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To provide feedback, keep up-to-date on developments and for further
outreach, visit finra.org/newcrd.
©2018 Financial Industry Regulatory Authority (FINRA). All rights reserved. Materials may not be reprinted or republished without the express
permission of FINRA. Individuals, firms and data mentioned in these materials are fictitious and presented exclusively for the purpose of
illustration or example.
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Thanks for listening!
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© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
Qualification Examination Program Restructure and Regulatory Continuing Education (CE) Program Changes Tuesday, October 9 1:00 p.m. – 2:00 p.m. This session provides guidance on FINRA’s exam restructuring initiative. Panelists discuss the consolidated rules, the restructuring of the representative-level qualification examination program and change in the CE requirements for permissively registered individuals. Additionally, panelists discuss recently proposed changes to the vision of the CE Regulatory Element published by the CE Council, and offer practical answers to questions about these program changes.
Moderator: John Kalohn Vice President FINRA Testing and Continuing Education Panelists: Joseph McDonald Senior Director FINRA Testing and Continuing Education Alexandra Toton Associate Director FINRA Testing & Continuing Education
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2
Qualification Examination Program Restructure and Regulatory Continuing Education (CE) Program Changes Panelist Bios: Moderator: John Kalohn is Vice President, FINRA, Registration and Disclosure/Testing and Continuing Education. He leads FINRA’s efforts in the development, maintenance and delivery of the securities industry qualification examinations and continuing education programs. He has more than 20 years of experience in educational measurement and assessments, and extensive experience developing, implementing and managing assessment programs for professional licensure and university admissions. Mr. Kalohn’s prior experiences include service with one of the nation’s largest providers of educational and workplace measurement and research services. He holds a bachelor’s degree from State University of New York, a master’s degree from Wake Forest University and a doctorate from the University of Wisconsin, Madison. Panelists: Joe McDonald is Senior Director in FINRA’s Testing and Continuing Education Department, where he manages the FINRA qualification examination and examination waivers programs. Previously, he was a director in FINRA’s Market Regulation Department. Mr. McDonald has been with FINRA for 20 years. Before joining FINRA, he worked as counsel in the Office of Compliance and Inspections and the Division of Market Regulation at the Securities and Exchange Commission, and as a clerk for an administrative law judge at the Commodity Futures Trading Commission. Mr. McDonald received a bachelor’s degree in psychology from the State University of New York at Stony Brook and a law degree from the American University’s Washington College of Law. Alexandra (Lex) Toton is Associate Director of Testing and Continuing Education, RAD, FINRA, where she co-manages the FINRA qualification examination and client services programs. Ms. Toton has been with FINRA for nine years. Before joining FINRA, Ms. Toton worked in compliance and operations at The Investment Center in Bedminster, New Jersey. Ms. Toton received a B.S. in Business Administration from the Boston University and a M.S. in Finance from Johns Hopkins’ Carey Business School.
Disclosure Reporting, Monitoring and Registration ConferenceOctober 9, 2018 | New York, NY
Qualification Examination Program
Restructure and Regulatory Continuing
Education (CE) Program Changes
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Moderator
John Kalohn, Vice President, FINRA Testing and Continuing
Education
Panelists
Joseph McDonald, Senior Director, FINRA Testing and
Continuing Education
Alexandra Toton, Associate Director, FINRA Testing and
Continuing Education
Panelists
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Exam Restructuring, the SIE Exam and Registration
Rule Consolidation
CE Program enhancements under consideration by
the CE Council
Agenda
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
The Securities Industry Essentials Exam is now
available.
The representative-level qualification exams have
been restructured – most are now shorter in length.
The registration rules have been consolidated into the
FINRA Rule 1200 Series.
October 1, 2018 Rollout
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FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Revised Rep-level Exam Structure
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SIE Exam
Series
6Series
7
Series 22
Series 52
Series 57
Series 79
Series 82
Series 86/87
Series 99
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How many questions? 75
How long do I have? 105 minutes
How long is it good for? 4 years
Can I take it even if I do not work for a firm? Yes
How much does the SIE cost? $60
What is the passing score? 70
SIE – Answers to ‘Essential’ Questions
5
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Content areas covered:
Knowledge of capital markets
Understanding products and their risks
Understanding trading, customer accounts and prohibited
activities
Overview of the regulatory framework
SIE – ‘Essential’ Facts
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Top-offs – ‘Essential’ Facts
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As of October 1, 2018, FINRA no longer offers the following exams:
Series 11
Series 17/37/38
Series 42
Series 62
Series 72
Candidates for these exams whose 120-day window opened prior to October 1, 2018, will be able to take these exams after October 1, 2018, until their windows close.
Other Features of the Restructuring
8
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Most current registrants have received credit for the
Essentials Exam, and it will be valid for 4 years upon
leaving the industry. CRD reflects this.
Registrants who return between 2 and 4 years later will
not need to take the Essentials Exam, only the top-off
exam for the registration position.
Registrants who return more than 4 years later will
need to take both the Essentials and the top-off exam.
Effect on Current Registrants
9
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Individuals who applied for registration on or before September 30 will take their exam under the old format (i.e., the 250-question Series 7), even though their exam appointment date is on or after October 1. If they pass, they will receive credit for the SIE.
Individuals who apply for registration on or after October 1 will take the SIE and the revised qualification exam (i.e., SIE + revised 125-question Series 7).
Overlap Period of Old and New Exams
10
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Access enrollment system from finra.org
Initially need to create an account to enroll and pay
Access direct link to Prometric appointment scheduling
from enrollment system
Will receive score report at test center
Can also view result in enrollment system
Can pay for exam with credit card or by redeeming voucher
Essentials Exam Enrollment for Individuals
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Through CRD, there are two options for a firm to
request an enrollment for the Essentials Exam:
Form U4: request a rep-level registration (e.g., GS request
opens SIE and S7 exam enrollments)
Non-Form U4: enrollment system
– Group – upload a list of candidates
– Purchase vouchers – used by candidates to enroll for the SIE
Essentials Exam Enrollment Options for Firms
13
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Web CRD has an option for firms to enroll non-registered individuals for the SIE and pay the exam fees from the firm’s Flex-Funding Account.
Non-U4 SIE Enrollment
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Non-U4 SIE Enrollment (cont.)
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Firms can use the downloadable templates to create the CSV file and then select for upload.
Non-U4 SIE Enrollment (cont.)
16
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SIE enrollments uploaded and paid for by the firm will be added to the Individuals Enrolled for SIE list.
Once an individual sits for the exam, the same list will be updated with the exam result and score (if applicable).
Non-U4 SIE Enrollment (cont.)
17
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Firms also have the option to purchase SIE vouchers (up to 100 at a time) to provide to individuals who can enroll themselves for the SIE.
Non-U4 SIE Enrollment – Vouchers
18
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After vouchers are purchased, firms can download a spreadsheet to obtain the list of voucher codes and track their redemption.
Non-U4 SIE Enrollment (cont.)
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Non-U4 SIE Enrollment Reminders
Enrolling an individual for the SIE outside of Form U4 does not by itself create a CRD number for them. A CRD number will be assigned when a filing is made for the individual in CRD.
Non-U4 SIE exam results can be seen in the “SIE Enrollment/Results” link and can also be viewed via the existing Pre-Registration Search feature. However, they will not immediately be part of the individual’s CRD record.
When an SIE-only individual becomes registered, their SIE “Pass” result will then be posted to their CRD record.
Non-U4 SIE Enrollment (cont.)
20
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Firms that pay the Essentials Exam fee are able to
view the individual’s result.
If an individual pays the Essentials Exam fee, the firm
will ONLY be able to view the result when:
Conducting a pre-registration search or
Filing a Form U4 requesting a registration.
Viewing SIE Results
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The Pre-Registration Search has been enhanced to display individuals that have passed the SIE outside of Form U4.
Pre-Registration Search
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As of October 1, 2018, CRD shows the following:
For passing test results – indicates that the individual passed
the exam but does not display the test score.
For failing test results – indicates that the individual failed the
exam and displays the test score.
Once an individual passes the exam, the failing results will no
longer be displayed. Only the passing result will be displayed.
Change in CRD Display of Exam Results
23
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Why was this change made?
CRD maintains registration information.
FINRA qualification exams determine whether a person has
demonstrated minimum proficiency to act in a registered
capacity.
Exam score is not intended to predict how well a person will
perform in a position (i.e., a person who scores 90 will not
necessarily perform better than a person with a score of 75).
Test scores are not stored in CRD.
Change in CRD Display of Exam Results (cont.)
24
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Revised Test Center Exam Results Report – Pass
25
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Revised Test Center Exam Results Report – Fail
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Exam Validity
Exam History has a new field that indicates if a passed/waived exam is still valid for registration purposes, including a future expiration date (if applicable).
SIE Credit
SIE exam credit has been automatically granted to individuals registered within the last 4 years, and displayed in Exam History.
(See sample screenshots on the following slide…)
CRD Exam Views
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Exam History Samples
#1 – Currently registered individual
#2 – Not currently registered, but exams still valid
#3 – Out of the industry
Exam History
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FINRA Registration Rule Consolidation
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FINRA Rule 1200 Series has replaced the NASD and
incorporated NYSE registration rules.
Requires firms to designate a Principal Financial
Officer and a Principal Operations Officer (can be
same person at non-clearing firms)
If not already listed on Schedule A of Form BD with
another title, the Principal Financial Officer and/or
Principal Operations Office must be added.
Consolidated Registration Rules
30
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Chief Compliance Officers (CCOs) now have a FINRA Compliance Officer registration requirement – CR (Series 14 exam).
Persons with a General Securities Representative and General Securities Principal (S7 GS and S24 GP) registration can register as a Compliance Officer without taking the Series 14 exam.
On October 1, FINRA automatically granted CR registration to persons with a GS/GP who were listed as the CCO on Schedule A of Form BD.
Chief Compliance Officer
31
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Investment Banking Principal (BP) – S79 + S24
Private Securities Offering Principal (PO) – S82 + S24
General Securities Principal (GP) is now limited to S7 + S24
On October 1, FINRA automatically granted the BP to persons holding the IB (S79) and GP registrations.
On October 1, FINRA automatically granted the PO to persons holding the PR (S82) and GP registrations.
New Principal Positions
32
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Sample screenshot of individual automatically granted the BP, and GP automatically terminated:
New Principal Positions (cont.)
33
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Allows permissive registration of persons engaged in
a bona fide business purpose of a member (i.e., an
associated person)
Expands current NASD rule allowing for permissive
registration of persons performing certain limited
functions (e.g., legal, compliance, internal audit)
Such persons will be subject to a level of supervision
commensurate with their status.
Permissive Registration
34
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FSAWP allows an individual working for a financial
services affiliate of a member to receive a waiver of a
qualification exam requirement upon returning to the
member for up to seven years, provided the firm and
the individual satisfy certain criteria.
Financial Services Affiliate Waiver Program (FSAWP)
35
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Firm files Form U5 for individual and emails FINRA requesting FSA eligibility (must meet 10/5/1 rule).
FSAWP eligibility request email must include email address for individual.
FINRA notifies individual via email of his/her FSA eligibility and individual’s responsibilities to maintain eligibility, including CE requirement.
Recommended that individual establish a Financial Professional Gateway (FinPro) account
FINRA notifies individual via email of each upcoming CE requirement with a link to enrollment page.
Overview of FSAWP Process
36
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When individual returns, firm files Form U4 and an
FSAWP exam waiver request.
FINRA processes waiver request within 30 days
Individual who has successfully maintained eligibility
is granted an unconditional exam waiver
Overview of FSAWP Process (cont)
37
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SR-FINRA-2017-007
Regulatory Notices 17-30 and 18-27
Essentials webpage:
www.finra.org/industry/essentials-exam
Exam Restructuring webpage:
www.finra.org/industry/exam-restructuring
Resources
38
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CE Program Enhancements under
Consideration by the CE Council
_____
Call for Comments
39
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The CE Council is seeking feedback on aspects of the industry’s Continuing Education program.
The CE Council has published a document on the CE Council website (cecouncil.com) that includes a combination of specific ideas under consideration and general areas of inquiry.
Providing comments: FINRA Regulatory Notice 18-26
MSRB Notice 2018-21
Cboe and NYSE are directing potential commenters to the FINRA regulatory notice.
The comment period ends on November 5.
Program Enhancements Under Consideration
40
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Communicating regulatory developments to the industry via the Regulatory Element in a timely fashion
Improving coordination between firm and regulatory training programs
Allowing for diverse instructional formats that facilitate the learning of a variety of content
Identifying and reducing redundancy among training requirements and programs
Ensuring all registered professionals in the industry receive adequate training
Enabling previously registered individuals to maintain their qualification status by satisfying continuing education requirements while out of the industry
Considering more defined minimum standards of CE for the industry
Program Review Goals
41
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Increased Relevance: Narrowing focus of Regulatory Element to current rule changes and
industry-wide regulatory issues
Limiting an individual’s Regulatory Element session to topics directly pertinent to the individual’s current registrations
Improved Timeliness: Shorter CE session required annually
System Enhancements: Improved reporting and tracking in CRD
Potential for automated notifications in Financial Professional Gateway
Synergy with Firm Element: Communication of Regulatory Element topics
Considerations for Regulatory Element
42
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Council Resources: Perceived value of current CE Council resources (e.g., Firm Element Advisory)
Suggestions for additional resources that the CE Council should provide
Typical Firm Element: Amount and variety of training included
Other Training Conducted: Additional training requirements that firms manage
Common credentialing programs with CE requirements that firms support
Access to Firm Element Content: Typical mix of firm-developed and third-party materials used for Firm Element
Value of creating a centralized multiple-provider content catalog
Considerations for Firm Element
43
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The CE Council is exploring a recommendation to allow previously registered individuals to maintain qualification status while away from the industry.
Program Considerations: Annual Regulatory Element plus additional CE comparable to Firm Element
Administered and tracked through FINRA systems
CE content targeted to individual’s terminated registrations
Eligibility and Program Duration Considerations: Eligibility requirements: Minimum registration period and good standing
Maximum program participation before needing to requalify
Access to “Catch-Up” CE could replace two-year termination provision.
Maintaining Qualification Status
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QA
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
FINRA’s Membership Application Program (MAP) Tuesday, October 9 2:15 p.m. – 3:15 p.m.
Attend this session to hear about FINRA’s Membership Application Program (MAP). Learn how FINRA evaluates proposed business activities of potential and existing member firms, including the applicants’ financial, operational, supervisory and compliance systems. This session provides an overview of the application process, including MAP’s fast track/expedited review process. Panelists also discuss changes to the Membership Rules, including Regulatory Notice 18-06.
Moderator: Alissa Robinson Senior Director FINRA Membership Application Program Panelists: Patricia Dorilio Application Manager, MAP FINRA Member Application Program Linde Murphy Chief Operating Officer and Chief Compliance Officer M.E. Allison & Co., Inc.
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2
FINRA’s Membership Application Program (MAP) Panelist Bios: Moderator: Lisa Robinson serves as Senior Director, FINRA, Membership Application Program group, where she works directly with industry professionals, entrepreneurs and innovators on a wide range of topics, including compliance and regulatory issues, unique/novel products and business models, and large scale restructuring. She offers insight to both internal and external constituents with a focus on policy, risk assessment, mitigation and collaboration. In addition, Ms. Robinson liaises with government agencies on a wide range of topics impacting the broker-dealer community. She is also a member of FINRA’s Digital Asset Policy group. Prior to joining MAP, Ms. Robinson served as an Associate Director in FINRA’s Member Regulation, Sales Practice Department, where she was responsible for the oversight and execution of the District 10 examination plan, including cycle, cause and branch examinations for many member firms. She has participated on several national initiatives, most recently FINRA’s Retrospective Review of the MAP rules. Ms. Robinson has served as a panelist at numerous industry events on topics such as crowdfunding, examinations, supervisory controls and ethics and has presented at FINRA Institute at Wharton. She is a Certified Regulatory and Compliance Professional™ (CRCP™). Ms. Robinson completed the FINRA Excellence in Management Program at Wharton and is a recent graduate of Harvard Kennedy School of Executive Education, Women and Power. Panelists: Patricia Dorilio is Application Manager in the Membership Application Program (MAP) Group at FINRA, a position she has held since January 2014. Ms. Dorilio supervises application review staff in the execution of the examination/application review program, including the collection and analysis of information and documentation to determine applicants’ satisfaction of standards for FINRA membership, and standards for continuation of membership. Before joining FINRA in 2011, Ms. Dorilio was employed in the private sector, and immediately prior to that, was Special Counsel in the Division of Member Firm Regulation at the New York Stock Exchange. She began her career as an Assistant Attorney General in the Securities Bureau of the New York State Attorney General’s Office. Ms. Dorilio earned her J.D. from the Maurice A. Dean School of Law at Hofstra University, and her B.A. in Political Science from Hofstra University. She is a member of the bar of the State of New York. Linde Murphy currently serves as compliance advisor to M.E. Allison & Co., Inc., a full-service broker/dealer and Texas registered investment adviser. Founded in 1946, the firm also provides municipalities with advisory and underwriting services. In 2012, Ms. Murphy joined Presidio Financial Services as they began the CMA process to join M.E. Allison & Co., Inc. Ms. Murphy started her career in investments on a trading desk in Chicago in 1999 and has held positions in compliance, sales, business development and management. In addition to the pertinent industry licenses, Ms. Murphy obtained the CRCP™ designation in 2014 after attending the FINRA Institute at Wharton on the FINRA Small Firm scholarship. She currently serves on the FINRA Small Firm Advisory Committee and the District 6 Committee. Ms. Murphy served on the FINRA Fixed Income Committee as well as the FINRA Regulatory Advisory Committee.
Disclosure Reporting, Monitoring and Registration ConferenceOctober 9, 2018 | New York, NY
FINRA's Membership Application Program
(MAP)
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Moderator
Alissa Robinson, Senior Director,FINRA Membership
Application Program
Panelists
Patricia Dorilio, Application Manager, MAP, FINRA Member
Application Program
Linde Murphy, Chief Operating Officer and Chief Compliance
Officer, M.E. Allison & Co., Inc.
Panelists
1
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Under the “Schedule” icon on the home screen,
Select the day,
Choose the FINRA's Membership Application Program
(MAP) session,
Click on the polling icon:
To Access Polling
2
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Structure and Scope of MAP
Materiality Consultations
FINRA’s “Fast Track” Program
Continuing Membership Applications (CMA’s)
Rule Proposals Impacting MAP
Presentation Overview
3
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Centralized Group
Team reports in to common management
Collaborative process between MAP and District staff
Inclusion of other internal FINRA Departments as needed
Not just applications
Structure and Scope of MAP
4
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1. Have you filed a MAP matter in the past 12 months?
If so, did you file a:
a. NMA (new membership application)
b. CMA (continuing membership application)
c. Materiality Consultation
Polling Question 1
5
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NASD Notice to Members 00-73 describes, among other subject matter,
criteria for evaluating materiality
Any written request for staff’s opinion should identify all relevant facts and circumstances regarding the proposed activity, including:
Nature of the proposed expansion;
Relationship, if any, between the proposed activity and the firm’s existing business;
Effect the proposed change will have on the firm’s capital;
Qualifications and experience of firm personnel; and,
Impact to existing financial, operational, supervisory and compliance systems.
Materiality Consultations
6
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How to submit and what to provide
Firm Gateway
Explain the proposed business and support why you believe the change is not material
– Provide an analysis of the firm’s current business and explain why you believe the new business is similar based on criteria in NTM 00-73-See slide 5!
Processed quickly (in most cases)
The assessment is FREE!
Materiality Consultations
7
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2. For those that filed a materiality consultation, was
your request deemed “material”?
a. Yes
b. No
Polling Question 2
8
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What is Fast Track?
Provides expedited review of low risk, less complex, near-
complete matters,
Abbreviated time frames,
Average time to decision.
FINRA’s Fast Track Process
9
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3. For those that filed a MAP matter in the past 12
months, was your matter “fast tracked”?
a. Yes
b. No
Polling Question 3
10
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Contact your firm’s Regulatory Coordinator to discuss the proposed change
Having a conversation with FINRA staff before filing a CMA can reduce questions / issues in the initial review stages.
Be prepared
Prospective plans submitted by firms whose applications do not include demonstrated ability (e.g., systems, procedures) to conduct the planned business will encounter delays.
Remember that FINRA staff isn’t “living” the change…
Provide information sufficient for staff to understand the activity/ transaction – and how the firm has accounted for its impact.
Tips on Preparing for a CMA
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Demonstrated Capacity to Conduct the Business Are systems in place, tested and available to demo?
Procedures adequately tailored to the business activities?
Product information (e.g., registration statement or offering memorandum, advertising materials) prepared and adequate?
Regulatory History & Customer Claims Always address Rebuttable Presumption in initial submission.
– Not just “what” happened but how and when issues were addressed through corrective action and, in light of the issues, how the firm still meets the standards.
Consider and discuss the impact, or lack thereof, for other regulatory history (e.g., exam findings, pending reviews) and customer claims (e.g., complaints, arbitrations).
Provide the supporting documentation Agreements supporting the transaction (e.g., stock, asset purchase and merger
agreements, resolutions/authorizations, etc.)
Tips on Preparing for a CMA
12
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Expansions permitted without a CMA
CMA Safe Harbor Provision
13
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Avoid changing the substance of the application Once an application is filed, modifying the scope of business, the methodology
for conducting the business or the personnel proposed to conduct the business will impact the review timelines and overall review process.
– Significant changes may result in a determination by staff that the change constitutes a new application.
Asset Transfers Must provide an adequate plan for the protection of customer related awards
and claims.
Review of Negative Consent letter by clearing firm prior to submission
Funding & Liquidity Issues Make sure capital and liquidity of the firm is adequate to conduct the proposed
activity.
Common Issues & How to Avoid Certain Delays
14
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Regulatory Notice 13-11
– FINRA will waive the requisite fee where FINRA determines that a CMA
is proposing less significant changes that do not require substantial staff
review
– FINRA will refund the application fee (less a $500 processing fee) if an
applicant withdraws a new membership application (NMA) or CMA within
30 days after filing the application.
Submit the request as part of the initial application
FINRA will issue a decision on the request for a fee waiver
Fee Waivers
15
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4. For those that filed a CMA, did you request a Fee
Waiver?
a. Yes
b. No
Polling Question 4
16
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Regulatory Notice 18-23 Retrospective Review
To improve the effectiveness and efficiency of the MAP rules
Reduce overall application review period from 180
days to 150 days
Clarify events that would require a CMA
Material Change in Business Operations
“To include member engaging, for the first time, in settling or clearing of
transactions for the member’s own business or for other broker-dealers, or
carrying customer accounts.”
Proposal regarding MAP Rules
17
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Pre-approval of Changes
CMA Waivers
Materiality Consultations
Streamline the standards “..by deleting those that are
obsolete and redundant, and consolidating others with
the standards that are closely related.”
Proposal Regarding MAP Rules
18
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Standard 1 Complete and Accurate Application (Overview of the Applicant) Consolidate Standards 1 and 14
Standard 2 Licenses and Registrations Required by State and Federal Authorities and SRO’s Consolidate Standards 2 and 12
Standard 3 Compliance with Industry Rules, Regulations, and Laws
Standard 4 Contractual or Other Arrangements and Business Relationships
Standard 5 Business Facilities Eliminate Standard 5
Standard 6 Adequacy of Communications and Operational Systems
Standard 7 Determining the Adequacy of Net Capital Consolidate Standards 7 and 8
Standard 8 Financial Controls
Standard 9 Control Mechanisms Consistent with Industry Practices Consolidate Standards 9 and 10
Standard 10 Adequate Supervisory System
Standard 11 Recordkeeping System
Standard 12 Continuing Education
Standard 13 Other Information Possessed by FINRA
Standard 14 Consistency with Federal Securities Laws
Regulatory Notice 18-23 – Streamline Standards
19
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MAP to Incentivize Payment of Arbitration Awards
“To create further incentives for the timely payment of arbitration
awards by preventing an individual from switching firms, or a firm
from using asset transfer or similar transactions, to avoid payment of
arbitration awards while staying in business.”
– Materiality Consultation for Business Expansion and Asset Acquisitions
and Transfers
– Notification of Changes
MAP Proposal Regulatory Notice 18-06
20
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Q&A
21
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Overview of Fast Track Review Process www.finra.org/industry/fast-track
FINRA Notice to Members-Material change in Business www.finra.org/file/notice-members-00-73
Overview of Materiality Consultation Process www.finra.org/industry/overview-materiality-consultation-process
CMA Fee Waiver Process www.finra.org/industry/notices/13-11
Membership Application Proceedings-Rules Governing NMA/CMA Process www.finra.org/industry/notices/18-23
Membership Application Program-Incentivize Payment of Arbitration Awards www.finra.org/industry/notices/18-06
FINRA Resources
22
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
FINRA’s Membership Application Program (MAP) Tuesday, October 9 2:15 p.m. – 3:15 p.m.
Resources FINRA Notices
Regulatory Notice 18-23, FINRA Requests Comment on a Proposal Regarding the Rules Governing the New and Continuing Membership Application Process (July 2018)
www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-18-23.pdf
Regulatory Notice 18-06, FINRA Requests Comment on Proposed Amendments to Its Membership Application Program to Incentivize Payment of Arbitration Awards (February 2018)
www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-18-06.pdf
Regulatory Notice 13-11, FINRA Provides a Process for Waiving CMA Fees for Less Significant CMA Changes and Refunding of NMA and CMA Fees for Applications Withdrawn Within 30 Days After (March 2013)
www.finra.org/sites/default/files/NoticeDocument/p217586.pdf
Notice to Members 00-73, Membership Rules, SEC Approves Amendments To NASD Membership Rules (November 2000) www.finra.org/sites/default/files/NoticeDocument/p003977.pdf
Resources
Overview of Fast Track Review Process
www.finra.org/industry/fast-track
Overview of Materiality Consultation Process
www.finra.org/industry/overview-materiality-consultation-process
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
Identifying and Assessing High-Risk Activity Tuesday, October 9 3:30 p.m. – 4:30 p.m.
Join FINRA staff as they share helpful insight on identifying and assessing activity of registered representatives as high risk and how that intelligence can be more broadly used to assess risk across and within branch offices.
Moderator: Thomas Drogan Senior Vice President, Deputy FINRA Member Regulation, Office of Sales Practice Panelists: Patricia Hatzfeld Senior Director, Office of Sales Practice FINRA Member Regulation, Office of Sales Practice John Salerno Examination Manager, High Risk Registered Rep Program FINRA High Risk Registered Rep Program
© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2
Identifying and Assessing High-Risk Activity Panelist Bios: Moderator: Thomas Drogan is Senior Vice President, Deputy of FINRA Member Regulation, Sales Practice department and has been with FINRA for more than 19 years. Prior to the merger between NYSE Regulation and NASD, he spent four years in the Financial/Operational Department in the NYSE’s Division of Member Firm Regulation before moving to the NYSE’s Sales Practice Review Unit where he held multiple positions. In January 2008, following the merger, Mr. Drogan was promoted to Deputy Director in FINRA’s New York office where he served until December 2008 when he was appointed Deputy Director of FINRA’s Long Island office. In January 2013, Mr. Drogan was promoted to Vice President and in December 2013 was promoted to District Director for FINRA’s New York Office where he was responsible for New York’s examination and surveillance programs. In May of 2014, Mr. Drogan was appointed as Deputy in the Office of Sales Practice and in February 2016 was named Senior Vice President. In this role, Mr. Drogan provides strategic and tactical advice on how to achieve corporate and departmental goals and successfully implement regulatory programs. Specifically, Mr. Drogan assists the Executive Vice President in overseeing the national Sales Practice examination and surveillance programs to ensure work is completed in a quality and timely fashion. Mr. Drogan also ensures that the relationship with member firms results in meaningful dialogue between FINRA, Member Regulation and industry representatives and serves as a key contact with the SEC, state securities regulators, and other SROs. Mr. Drogan also has direct responsibility for FINRA’s Membership Application Program, High Risk Registered Representative Program and Senior Helpline. Mr. Drogan received his Finance degree from St. John’s University and his J.D. from Brooklyn Law School. Panelists: Patricia Hatzfeld is Senior Director in FINRA’s Member Regulation Sales Practice Department working in the New York, NY District Office leading national initiatives and projects and assisting in the oversight of the District Offices. Ms. Hatzfeld has been working at FINRA for more than 12 years. Ms. Hatzfeld began her career in the Securities Industry as a Financial and Operations Principal. She is a Certified Public Accountant and holds a Master’s Degree in Economic Crime Management. Her tenure at FINRA includes seven years as an Examiner and four years in management positions in the New York Region District Offices where she was responsible for the scheduling, planning, supervision and review of sales practice examinations of member firms. In her role as Senior Director, Ms. Hatzfeld is responsible for assisting in overseeing the national examination programs and policies as well as leading certain initiatives such as the High Risk Registered Representative Program and Examination Unit, Blotter Analytics, Special Examination Sweeps, and Annual Sales Practice Examination priorities. In the examination space, Ms. Hatzfeld serves as the Senior Director of the High Risk Registered Representative Unit. As a Regulatory Specialist in the areas of Fraud and Non-traded REITs, she has led initiatives and training sessions in the areas of Non-traded REITs and BDCs, Anti-Money Laundering, and Securities and Investment Fraud investigation techniques. Ms. Hatzfeld also worked in FINRA’s Office of Risk developing more initiatives to enhance FINRA’s risk based examination program. John Salerno is Examination Manager for FINRA’s High-Risk Representative Program. Mr. Salerno joined the program when it was founded in 2016. Mr. Salerno’s responsibilities include the identification, monitoring, and execution of examinations of High Risk Representatives for FINRA’s national program. Mr. Salerno has been with FINRA for more than 16 years. Prior to joining FINRA’s High-Risk Representative Program, Mr. Salerno worked within FINRA’s Member Supervision department conducting examinations and investigations of firms and associated persons, focusing primarily on high-risk activity. Mr. Salerno also worked for FINRA’s then subsidiary, the Nasdaq Stock Market, serving as a business analyst for its corporate offices. Prior to joining FINRA in 2002, Mr. Salerno worked for more than six years in various accounting and control positions at money center banks and large broker dealers covering derivatives, commodities, and equity sales and trading. Mr. Salerno is also a Certified Fraud Examiner.
Disclosure Reporting, Monitoring and Registration ConferenceOctober 9, 2018 | New York, NY
Identifying and Assessing High-Risk
Activity
FINRA Disclosure Reporting, Monitoring and Registration Conference | © 2018 FINRA. All rights reserved.
Moderator
Thomas Drogan, Senior Vice President, Deputy, FINRA Member
Regulation, Office of Sales Practice
Panelists
Patricia Hatzfeld, Senior Director, Office of Sales Practice,
FINRA Member Regulation, Office of Sales Practice
John Salerno, Examination Manager, High Risk Registered Rep
Program, FINRA High Risk Registered Rep Program
Panelists
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