Regulatory Roundtable at the NRS Compliance Conference

These are my notes from the NRS Fall Compliance Conference

Lance Burkett, District Director for FINRA
Michelle Wein Layne, Regional Director for the SEC
Andrew Hartnett, Securities Commissioner in Missouri and representing NASAA

Each panel member went through list of enforcement and risk priorities that are currently high on their organization’s list.

NASAA

• Broker Dealer Fee disclosures. There is a working group trying to come up with a model fee disclosure.
• Model disaster recovery plan and guidelines
• Cybersecurity
• Senior clients – over 60% of his state investment fraud cases involve seniors

FINRA

• Implementing a new risk-based exam program
• “Exams that matter”
• Suitability. Does the firm understand the product?
• Recidivist brokers

SEC

• Visit SEC.gov and review the rich trove of information
• Broken windows. The SEC is not just pursuing big problems. The SEC will consider a discovery of a small problem to be an indication of undiscovered bigger problems.
• Identify who at the firm is at higher risk for getting into trouble.
• Cybersecurity
• “Don’t tolerate liars, cheaters or stealers in your organization, no matter how much revenue they generate.

All mentioned a higher focus on fraud aimed at seniors. The baby boomers are rapidly becoming the retiring boomers looking to manage their assets as they enter retirement.

More than one mentioned a focus on high-yield products. They want to make sure that there is proper disclosure of the higher risks that come with the bigger coupon.

More than one mentioned a focus on ETFs. As they become more exotic, there will be a increased focus on suitability and risk disclosure.