News & Events – Bates Research

On February 15, 2021, FINRA issued an alert warning firms to pay attention to risks associated with low-priced securities activities. The Notice highlights the basic compliance tools that should be reviewed to address current concerns, including a review of red flag indicators of suspicious activity, adequacy of monitoring systems, and systems for consistent and accurate reporting. In light of their concern that bad actors, looking to take advantage of market urgencies like the COVID pandemic, will continue to perpetrate “pump and dump” and other schemes that exploit those attributes, FINRA underscores the risks of low-priced security transactions as a compliance priority.

Read the article to learn about FINRA's concerns and recommendations for your practice.

The SEC Division of Examinations announced its 2021 examination priorities today, focusing on climate-related risks, conflicts of interest for brokers (Regulation Best Interest) and investment advisers (fiduciary duty), and attendant risks relating to FinTech in its initiatives and examinations. Stay tuned for our annual commentary, coming soon.

Bates continues to track regulatory developments that have long-term impact. Here, we highlight in brief several ongoing matters that affect regulatory compliance, including:

• FINRA Small Broker Annual Report Filing Extension
• DOL Class Exemption
• Lessons from COVID-19 Pandemic
• FINRA Rule on Registered Member Being Named a Customer Beneficiary
• New York Investment Adviser Registration
• NASAA Model Rule on Continuing Education for IARs

Federal enforcement agencies and financial regulators have been warning of increased cyber risks to public and private databases, financial institution infrastructure and retail investors. As financial institutions embrace new fintech solutions while shifting more permanently to remote online work, the pressure to ramp up cybersecurity efforts continues to grow. New York’s influential Department of Financial Services recently estimated that the market for cyber insurance will be over $20 billion in 2025. In this article, we take a closer look at the NYDFS’ Cyber Insurance Risk Framework and note recent communications on cybersecurity federal and state regulators.

In a new publication combining its annual report on observations and exam findings with its report on risk monitoring and program priorities, FINRA is offering a “single authoritative source” for members to turn to for the purposes of adapting their compliance programs and preparing for “emerging issues for the coming year.” In this article we take a look at the highlights from the report and provide our updated annual Bates chart which keeps track of FINRA’s articulated priorities from year-to-year.

In May 2019, Bates Compliance published a review of the supervision, inspection and operational considerations for broker-dealer branch office compliance. Since then, FINRA has broadened its examination priorities, while the COVID-19 pandemic has heightened compliance risks. This updated white paper discusses the responsibilities placed on the supervisors of broker-dealer branches in light of FINRA's broadened priorities and recently updated guidance on remote supervision.

FINRA has announced the publication of the 2021 Report on FINRA's Examination and Risk Monitoring Program. The new Report combines and replaces two previously published annual reports, the Report on Examination Findings and Observations and the Risk Monitoring and Examination Program Priorities Letter.

The new Anti-Money Laundering Act (AMLA) became law on January 1, 2021, extending the “risk-based” AML approach to regulation and enforcement. AMLA is the most significant update to the Bank Secrecy Act rules since the USA PATRIOT Act in 2001. It incorporates substantial changes to the laws governing the combatting of money laundering and terrorist financing. Read the full article to learn about key final provisions that will lead to many changes in industry rules and practices going forward, and how Bates AML and Financial Crimes can support your.

Just prior to the new year, the SEC finalized significant changes to rules and forms governing advertising and cash solicitations under the Investment Advisers Act, replacing both the prior Advertising Rule and Cash Solicitation Rule with a single, broad, “modernized” marketing rule. The new rule also amends investment adviser registration Form ADV and the books and records rule to reflect the related changes. In this article, we detail key provisions of the new rule and how Bates will help your firm navigate and implement this significant rule change.

On December 2, 2020, federal law enforcement cracked down on money mules again in a joint operation involving nine federal law enforcement agencies to “disrupt the networks through which transnational fraudsters move the proceeds of their crimes.” Bates reviews the highlights and takeaways from the recent announcement by the DOJ and partner agencies. Read the full article to learn about this nationwide initiative and the variety of scams utilizing money mules targeting your financial firm, customers, and elder clients in particular.

Last month, OCIE released a Risk Alert urging SEC-registered investment advisers to consider the “unique risks and challenges presented by “employing a business model that includes numerous branch offices and business operations that are geographically dispersed.” Although COVID-19 was not the basis for the alert, the pandemic undeniably added urgency to issues around remote supervision and compliance, pushing the topic higher on the list of areas OCIE is continuing to monitor. Bates takes a closer look at OCIE’s findings and warnings to firms overseeing multi-branch office compliance.

On November 19, 2020, OCIE issued an alert on common deficiencies identified in recent examinations related to the obligations on investment advisers required by the Advisers Act (“Compliance Rule”). In this article, Bates takes a closer look at OCIE’s recent findings and the additional emphasis placed upon the role of CCOs by OCIE Director Peter Driscoll (pictured) in a related address.

The Financial Crimes Enforcement Network (FinCEN) continues its fast pace, issuing important new advisories, statements and rulemakings. Since September, FinCEN has issued advisories on ransomware, unemployment insurance fraud, and the money laundering aspects of human trafficking, an Order targeting certain residential real estate transactions based on geography, and has proposed specific amendments that affect recordkeeping and travel, as well as broad recommendations affecting Bank Secrecy Act regulations that make up the current anti-money laundering framework. Bates takes a look at the details you need to know.

On October 26, 2020, the SEC and FINRA staff held a remote public roundtable to discuss the implementation of Reg BI and Form CRS since mandatory compliance began on June 30, 2020. During the regulators' roundtable, staff reviewed the core obligations required by Reg. BI and Form CRS and their observations on firms' compliance with the new rules, including areas where firms require improvement.

Based on feedback from a retrospective rule review initiated in August 2019, FINRA proposed rule amendments intended to strengthen the ability of member firms to address suspected financial exploitation of seniors and other vulnerable individuals. The proposed amendments would permit a broker-dealer to impose a longer hold period on a senior investor's account and to expand coverage to include holds on transactions in securities. FINRA seeks comments by December 4, 2020. Please read the full article for a closer look.

We asked Bates Group experts and consultants with deep experience in fixed income and municipal securities to share some perspective on how the pandemic has impacted investors over the past six months. Here are some of their insights on recent market volatility, Federal Reserve intervention, credit ratings, and the likelihood of potential investor litigation going forward.