Securities Law Blog

The SEC has adopted the FINRA communication rule, which has some noticeable changes from the previous NASD rule, according to the article on Mondaq.com. One noticeable change was the consolidation of the six communication categories into three- institutional communication, retail communication and correspondence. The article further illuminated the difference between retail and institutional correspondence, per FINRA and The SEC.

There are also many other requirements set forth by FINRA and the SEC putting forth standards for retail and institutional communication as well as review procedures for such communication. The article also states that a "public appearance" is no longer a separate category and will fall under the new guidelines and requirements of the communication rule.

Continue reading "SEC ADOPTS NEW FINRA COMMUNICATION RULE" »

"Bond funds" and "income funds" are terms used to describe a type of investment company (mutual fund, closed-end fund or unit investment trust (UIT)) that invest primarily in bonds or other types of debt securities. Depending on its investment objectives and policies, a bond fund may concentrate its investments in a particular type of bond or debt security--such as government bonds, municipal bonds, corporate bonds, convertible bonds, mortgage-backed securities, zero-coupon bonds--or a mixture of types. The securities that bond funds hold will vary in terms of risk, return, duration, volatility and other features.

Continue reading "SEC EXPLAINS BOND FUNDS AND INCOME FUNDS" »

According to a recent Reuters.com article, July 2, 2012 will be the launch date for a new FINRA program that will allow more flexibility in large arbitration cases. The new program will be for claims $10 million dollars or more and allow them to shape their cases and bypass some of the FINRA arbitration rules, the article explains.

While the majority of FINRA arbitrations are not dealing with disputes at the $10 million dollar mark, those roughly 6,500 cases are very time consuming and expensive going through the traditional FINRA process. If the program is a success, FINRA plans on asking the SEC to formalize it.

Continue reading "FINRA TO LAUNCH NEW ARBITRATION PROGRAM" »

The SEC approved two proposals to alter trading curbs meant to curtail volatility in the U.S. stock market, according to a Bloomberg.com article.

A  limit-up/limit-down system that prevents trades at prices outside a specified band has been approved. The article stated that also the SEC has supported changes to broaden circuit breakers instituted after the 1987 market crash. Both programs will be implemented for a one year pilot period, to start next on February 4, 2013.

FINRA oversees more than 4,400 brokers and introduced the curbs for individual stocks in May 2010 and later asked for and received permission to test the limit-up/limit-down system.

Continue reading "SEC AND FINRA INTRODUCE ADJUSTMENTS TO US TRADING CURBS" »

According to a FINRA press release Morgan Stanley, UBS, Wells Fargo and Citigroup have all been fined by the financial regulatory authority.

For a year and a half, the firms did not have adequate systems in place to supervise the sale of leveraged and inverse ETFs.  FINRA also found that the firms did not conduct adequate due diligence in determining the risks and features of the ETFs.  The press release further stated that the firms kept investors in ETF holdings for much longer than they should have been in, especially with the volatile market during the relevant time period.

Continue reading "FINRA SANCTIONS FOUR FIRMS $9.1 MILLION OVER ETF SALES" »

According to this article on law.com, the Financial Industry Regulatory Authority (FINRA) reported an increase in discplinary actions and fines during the year 2011.  FINRA, which oversees brokerage firms, stepped-up its enforcement, with nearly 1,500 actions filed in 2011.  According to the article, FINRA banned 329 individuals from practicing in the industry during 2011, up from 288 in 2010.

FINRA identifies five primary areas of enforcement concern:  advertising, short selling, auction rate securities, suitability, and improper filings.  FINRA's suitability rule requires that a brokerage firm have a reasonable basis for recommending a customer's purchase or sale of a security.  In 2011, FINRA reported $7.7 million worth of suitability fines from 106 cases involving suitability allegations (up from 53 such cases in 2009).

Continue reading "FINRA SEES SPIKE IN REGULATORY ACTIONS AND FINES IN 2011" »