SEC/FINRA Compliance

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA - created in July 2007 through the consolidation of the National Association of Securities Dealers and the regulation enforcement and arbitration functions of the New York Stock Exchange) are the primary regulatory agencies for the financial services industry.

In light of recent scandals, SEC and FINRA regulators have no tolerance for inadequate recordkeeping and supervision of electronic communications. In order to improve the transparency of financial institutions, they now require them to archive and supervise all electronic communications such as email, attachments, instant messaging (e.g., MSN, Yahoo), Bloomberg®, Thomson Reuters, BlackBerry, social media and more. 
 
  • SEC Rule 17a-3, 17a-4: These amendments expand the types of records that broker-dealers must maintain and require broker-dealers to maintain or promptly produce certain records, including electronic records, at each office to which those records relate. Not only must they retain certain record types, but electronic records must be preserved exclusively in a non-rewriteable and non-erasable format.  
     
  • NASD Rules 3010, 3110: NASD 3010 requires that member firms establish and maintain a system to "supervise" the activities of each registered representative, including transactions and correspondence with the public. In addition, NASD 3110 requires that member firms implement a retention program (“Books and Records”) for all correspondence involving registered representatives.
     
  • FINRA Rule 3130: This rule requires that each member shall designate and specifically identify one or more principals to serve as a chief compliance officer to establish compliance processes. This includes creating, maintaining, reviewing, testing and modifying written compliance policies and written supervisory procedures in order to achieve compliance with applicable FINRA rules.
     
  • FINRA Regulatory Notice 10-06 (January 2010): FINRA stipulates that social media needs to be captured if it is used by registered representatives to communicate with clients. Based on FINRA’s guidance, compliance departments need to capture and retain all communications from any public website, pre-review static content on social media sites, while also supervising dynamic content (like status updates and tweets) and customer complaints.
     
  • FINRA Regulatory Notice 11-39 (August 2011): Since the publication of FINRA Regulatory Notice 10-06, many firms have raised additional questions regarding the application of the rules. This Notice responds to those questions and provides further clarification about the application of the rules to new technologies. It does not alter the principles or the guidance provided in the January 2010 Notice.