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FINRA’s guidance sheds further light on the new rule, which will permit firms to elect “non-branch” designation for a private residence where an associated person conducts specified supervisory activities.

By Marlon Q. Paz, Naim Culhaci, and Donald Thompson

The Financial Industry Regulatory Authority (FINRA) has issued much-needed guidance on residential supervisory locations (RSLs). The new guidance supplements its January 23, 2024, Regulatory Notice 24-02 (Reg. Notice 24-02) on new supplementary material .19 under FINRA Rule…

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The proposed amendment seeks to modify the existing framework of FINRA Rule 2210 to accommodate the use of certain projections and targeted returns.

By Stephen P. Wink, Marlon Paz, Gail Neely, Naim Culhaci, Matthew Lee, and Deric Behar

On November 13, 2023, the Financial Industry Regulatory Authority (FINRA) filed a proposed rule change with the Securities and Exchange Commission (SEC) to amend FINRA Rule 2210. If adopted, the amendment would permit FINRA-regulated firms to include certain performance projections or targeted returns with respect to a security or asset allocation or other investment strategy in their communications with certain recipients.

Guidance clarifies assessment of liability under Rule 3110, including designation as supervisor, application of reasonableness standard, and factors for and against charging compliance officials.

By Marlon Q. Paz, John J. Sikora Jr., Stephen P. Wink, and Deric Behar

On March 17, 2022, the Financial Industry Regulatory Authority, Inc. (FINRA) published Regulatory Notice 22-10 (Reg. Notice 22-10), reminding broker-dealers of the scope of liability for chief compliance officers (CCOs) under FINRA’s Supervision Rule (Rule 3110). The role of compliance, and that of the CCO in particular, which is often characterized as “vital” in helping to prevent, detect, and remediate potential violations of internal policies and procedures and the securities laws, has been the subject of policy debate for some time.[1] In Reg. Notice 22-10, FINRA outlines a blueprint to assess the potential liability of CCOs under Rule 3110.

Rule 3110 imposes various supervisory obligations on member firms, such as the obligation to “establish and maintain a system, including written procedures, to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.” Firms are also required to designate registered principals as supervisors for these responsibilities. The express or implied designation of supervisory authority is the basis for individual liability under Rule 3110.

The proposed amendments could significantly alter the landscape for extended settlement of securities offerings by expressly limiting the public offering exception for “when-issued” securities to equity IPOs.

By: Senet S. Bischoff, Gregory P. Rodgers, Stephen P. Wink, and Naim Culhaci

The Financial Industry Regulatory Authority (FINRA) has proposed amendments to its margin requirement rules, which protect member firms against customer credit risk by generally requiring firms to collect margin when they extend credit to their customers.

The…

In setting forth its rationale, FINRA observed that private placement retail communications reviewed by AdReg have “revealed significant and pervasive” violations of FINRA Rule 2210.

By Dana G. Fleischman, Stephen P. Wink, Naim Culhaci, and Deric Behar

On October 28, 2020, the Financial Industry Regulatory Authority, Inc. (FINRA) filed with the US Securities and Exchange Commission (SEC) proposed amendments (the Proposal) to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities). The proposed amendments would require FINRA members to file all retail communications used by members in connection with private placement offerings that are subject to those Rules’ filing requirements (Covered Private Placements).[1]

The guidance addresses how the filing and review of public offerings both before and after the amendments’ September 16 implementation date will be impacted.

By Dana G. Fleischman and Gail S. Neely

On September 14, 2020, the Financial Industry Regulatory Authority, Inc. (FINRA) updated its Public Offerings page, including its Frequently Asked Questions regarding amendments to Rule 5110 (the Corporate Financing Rule). As of September 16, 2020 (the Amendment Implementation Date), FINRA members participating in public offerings of securities must comply with Rule 5110 as amended by rule changes that were approved by the Securities and Exchange Commission on December 23, 2019 (the Amended Rule).

The guidance highlights certain issues identified by FINRA regarding member firm communications to retail investors in private placement offerings.

By Dana G. Fleischman, Stephen P. Wink, Naim Culhaci, and Deric Behar

On July 1, 2020, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 20-21 (RN 20-21) to assist member firms in their creation, review, approval, distribution, and use of retail communications regarding privately placed securities.

FINRA prefaced RN 20-21 by stating that its recent review of…

In the wake of COVID-19, the SEC and FINRA are taking steps to support markets and market participants.

By Dana G. Fleischman, Stephen P. Wink, and Deric Behar

The US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA) continue to monitor and address ongoing impacts of COVID-19 to US capital markets and securities industry participants. These latest support and regulatory measures include the following:

  • SEC Forms Investor Advisory Committee Focusing on COVID-19: On April 24, 2020, the SEC announced the formation of a COVID-19 Market Monitoring Group comprised of senior-level directors from across a number of SEC divisions. The Group will assist with analysis and actions related to the effects of COVID-19 on markets, issuers, and investors. The group will also respond to requests for information, analysis, and assistance from regulators, financial agencies, and public sector partners, such as the President’s Working Group on Financial Markets, the Financial Stability Oversight Council, and the Financial Stability Board.

As COVID-19 disruptions unfold, FINRA has granted temporary relief regarding alternate working arrangements for broker-dealer employees.

By Dana G. Fleischman, Stephen P. Wink, Naim Culhaci, and Deric Behar

On March 9, 2020, the Financial Industry Regulatory Authority, Inc. (FINRA) issued Regulatory Notice 20-08 to members, reminding FINRA-member broker-dealer firms of their business continuity planning obligations during the pandemic and granting temporary regulatory relief to members in certain areas.

FINRA granted temporary relief in the following areas: