On July 18, the Financial Industry Regulatory Authority (FINRA) published Regulatory Notice 19-24 (Notice), which encourages member firms to continue notifying their Regulatory Coordinators about their digital assets activities. The Notice extends the requested notification period originally set forth in Regulatory Notice 18-20 from July 31, 2019 to July 31, 2020. (For additional information regarding the amendment, please refer to the July 13, 2018 edition of Corporate & Financial Weekly Digest.) Member firms are encouraged to promptly notify their Regulatory Coordinators if its associated persons or affiliates currently engage in, or intend to engage in, any activities related to digital assets. Covered activities include, but are not limited to, purchases, sales and executions of digital assets transactions and the acceptance of cryptocurrencies from customers. FINRA is not requesting this information from firms that have already submitted a continuing membership application addressing their digital asset-related activities or have otherwise provided the covered information, unless a change has occurred.

The Notice is available here.

On July 17, the Financial Industry Regulatory Authority (FINRA) announced settlement arrangements with 56 member firms that failed to (i) waive mutual fund sales charges for eligible accounts and (ii) reasonably supervise the sale of mutual funds offering sales charge waivers. As part of the settlement, the member firms agreed to pay $89 million in restitution to nearly 110,000 charitable and retirement accounts that were eligible for, but did not receive, the sales charge waivers.

The announcement is available here.

On July 16, the Financial Industry Regulatory Authority (FINRA) published separate guidance related to the public offering review process (Public Offering Guidance) and private placement filings (Private Placement Guidance). FINRA rules impose a number of obligations on member firms participating in the distribution of shares in a public offering. The Public Offering Guidance outlines, among other items, the use of FINRA’s Public Offering System, the handling of potential conflicts of interest related to a public offering and the types of public offering reviews available from FINRA’s Corporate Financing Department. Similarly, the Private Placement Guidance summarizes FINRA rules related to private placements, including the corresponding filing requirements, and provides guidance with respect to compliance with the rules. Both sets of guidance also include an outline of FINRA’s review process and provide links to additional resources.

Continue Reading FINRA Publishes Guidance on Public Offering Review Process and Private Placement Filings

On July 12, the Financial Industry Regulatory Authority (FINRA) filed with the Securities and Exchange Commission a proposed rule change (Rule Change) to amend FINRA Rule 7470, which provides certain member firms with an exemption from certain order recording and data transmission requirements. The Rule Change extends for three years FINRA’s ability to exempt certain member firms from the recording and reporting requirements of the Order Audit Trail System Rules for manual orders received by such members. The Rule Change is intended to extend the exemption period such that it more closely syncs with the December 2021 deadline for all broker-dealers that are FINRA members or members of a national securities exchange to report order information to the Consolidated Audit Trail.

Continue Reading FINRA Proposes Rule Change Relating to Exemptions from Order Audit Trail System Recording and Reporting Requirements

Further to our various updates on the implementation of the Prospectus Regulation (the Regulation) in the UK and the European Union (EU) (which applies across the UK and the European Union from July 21, 2019), on July 12, 2019 the European Securities and Markets Authority (ESMA) published its guidance on the Regulation in the form of significantly revised and updated questions and answers (Q&As).

Continue Reading New EU Prospectus Regulation: Updated ESMA Questions and Answers

On July 15, 2019, the European Securities and Markets Authority (ESMA) published a consultation paper (the Paper) setting out draft guidelines on aspects of UK and EU investment firms’ compliance functions under MiFID II (the Draft Guidelines).

ESMA describes the compliance function as “a crucial function within firms, responsible for identifying, assessing, monitoring and reporting on the firm’s compliance risk.”

Continue Reading ESMA Consults on Compliance Function for UK and EU Investment Firms

On July 8, in response to questions raised by market participants regarding the application of federal securities laws and the Financial Industry Regulatory Authority (FINRA) rules to the custody of digital asset securities and transactions, the staffs of the Division of Trading and Markets (the Division) and FINRA issued a joint statement. The joint statement seeks to articulate and clarify various considerations pertinent to many of the questions raised, particularly with respect to the Securities and Exchange Commission’s Customer Protection Rule applicable to SEC-registered broker-dealers. Continue Reading Division of Trading and Markets and FINRA Staffs Issue Joint Statement on Broker-Dealer Custody of Digital Asset Securities

On July 9, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 19-22 (the Notice) requesting comment on a proposal to publish alternative trading system (ATS) volume data for corporate bonds and agency debt securities, in a format similar to that currently published for equity securities. The published data would include both the total number of transactions and aggregate dollar volume traded for transactions in a particular corporate bond or agency debt security executed within the ATS and reported to FINRA during the aggregation period. The ATS data would be aggregated on a monthly basis and published with a three-month delay. FINRA would not charge for the aggregated ATS fixed income data, which would be published on FINRA’s website. Continue Reading FINRA Issues Regulatory Notice Requesting Comment on a Proposal to Publish ATS Volume Data for Corporate Bonds and Agency Debt Securities

On July 11, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 19-23 (the Notice) to restate and supplement prior guidance regarding the circumstances by which a firm or individual may influence the outcome of an investigation by exhibiting extraordinary cooperation. The Notice incorporates FINRA’s prior guidance and further clarifies how FINRA defines “extraordinary cooperation” and whether a potential respondent’s cooperation rises to such a level, as distinct from the level of cooperation expected of all member firms and their associated persons. Continue Reading FINRA Issues Regulatory Notice Supplementing Prior Guidance on Credit for Extraordinary Cooperation

On July 3, the Financial Action Task Force (FATF) published an updated version (dated June 2019) of its anti-money laundering (AML) and counter-terrorist financing (CTF) standards.

This version includes a recently adopted interpretative note to recommendation 15 (new technologies), in which the FATF explains how its standards apply to virtual asset activities and virtual asset service providers (VASPs). Continue Reading FATF Publishes Updated Standards Include Interpretative Note on Virtual Assets