Published: 07/24/2009
As the Financial Industry Regulatory Authority ("FINRA") continues its efforts to consolidate the National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") codes, changes to the FINRA Manual seem to be issued faster than ever before. Chances are good that the nice blue FINRA Manual you have sitting on your bookshelf is so outdated that you would be better served using it as a doorstop than as a guide to appropriate conduct. Whether you are working directly with clients or running your own boutique, keeping up with the constant change of regulatory developments can be almost overwhelming. Between the changes in rules and the multitude of uncomfortable situations in which investors have found themselves lately, securities suits filed in the first quarter of 2009 are up 38% on an annualized basis from 2008. See Securities Litigation Surges in 2009 — An Advisen Quarterly Report — Q1 2009, a full copy of which is available at https://www.advisen.com/. Staying on top of your regulatory requirements is a must in today's environment. Thankfully, FINRA has taken steps to ease the burden on its members by providing them with access to several electronic and, more importantly, automatically updated resources that can be used to stay abreast of the current state of FINRA regulations. This article is a brief overview of the tools FINRA has provided and how you can use them to stay up-to-date in the daily press of business concerns.
The FINRA Website
The most important tool you can use for keeping up with the current regulatory environment is the FINRA website itself: http://www.finra.org. Throughout this website, professionals and investors can access information on anything from broker/dealer history to instructions for properly filling out a U5. The site is fairly user-friendly, intuitive, and can answer many of the most basic to some of the most complicated questions that might arise in the operation of your brokerage business. For those trying to stay current on their regulatory obligations, FINRA offers two relatively easy ways for industry professionals to stay up-to-date on not only proposed rule changes but enacted rule changes as well.
Rule Filings
The first way to find out what is going on in the regulation arena is to access the Industry Professionals link from the FINRA homepage. Upon selecting this link, you will be presented with a catalogue of recent FINRA news, issues, and four tabbed subcategories of information: Regulation, Compliance, Education, and Enforcement. Selecting the first of the four tabs, Regulation, will lead you to an index of information about current and proposed rules. Selecting the Rule Filings and then the FINRA Rule Filings hyperlinks will take you to a summary list of the most recent Rule Filings in effect at FINRA today.
Though we are only seven months into 2009, FINRA already has posted 41 new Rule Filings. Change is in the air. The Rule Filings are listed in chronological order with alerts next to those that are new or have been recently updated. The list of Rule Filings contains one- or two-sentence summaries on the subject matter of the filing. Clicking on the hyperlink of any of the Rule Filings will take you to a more detailed summary of the filing with the option to download a pdf version of the filing. Rule Filings contain everything from proposed to enacted rule changes, from calls for comments to codification of NASD Interpretive Materials. Are you aware that NASD Interpretive Material 2110-7 has been codified as FINRA Rule 2140 (taking effect on June 15, 2009)? If not, it is likely because you have not surfed over to FINRA's Rule Filings page and reviewed Rule Filing SR-FINRA-2008-052. If you want to know what is about to change or what changes have already passed you by, try visiting FINRA's Rule Filings database. If you are like me and have a hard time remembering to check back, set an appointment on your calendar to remind you to visit the site on a regular basis.
Audio Series
A second way to access information about the current state of FINRA regulation changes is through the use of FINRA's well-designed audio series. Over the last few years, FINRA has produced several short (three- to ten-minute), "audio news files." For those who wish to stay up-to-date but do not have the time to sit down and read the mass of Rule Filings that have been issued in 2009 alone, the audio news files can help you focus your attention. These files are downloadable and play just like your favorite radio news report, with a focus on FINRA regulation. They cover a broad range of topics. I regularly listen to and find most of the following reports useful and educational: the Monthly Recap, a report that revisits "the latest FINRA notices, compliance resources and news" on a monthly basis; the latest special series, which is reviewing the "2009 FINRA Examination Priorities"; and the Rulebook Consolidation report, which reviews the latest rule changes about to go into effect, on a semi-regular basis. The reports are well produced, easy to listen to while you eat your lunch, and even contain professional background music queues á la National Public Radio to signal topic changes. Concerned about that over-the-counter trade ("OTC") you are thinking about recommending? Did you meet your FINRA obligations in researching the issuer? If you were a regular listener of the Monthly Recap, you would know that NASD Rule 2315 ("Recommendations to Customers in OTC Equity Securities") has been amended and codified as FINRA Rule 2114 with significant changes to the scope, definitions, and exemptions covered by the rule, and it went into effect June 15, 2009! To catch up on these and other important changes, tune in today.
FINRA Podcasts—For the iTunes Users
Perfect, right? Less reading, more learning and if you hear about something you want to learn more about, you know where to access the Rule Filings now, so you are all set. "But wait, how do I access these marvelous audio news files?" Okay, here is the truth: They are not really called "audio news files." That is just a term I made up to get you excited about FINRA Regulations and continuing education. These files are actually called "podcasts," in reference to the ubiquitous iPod. You can play these files through your iTunes with ease and move on to servicing your clients professionally and within the obligations set upon you by FINRA. For those of you familiar with iTunes, just jump onto the iTunes store, search for "FINRA podcasts," and subscribe to the resulting podcast. It's that simple. If properly configured, your iTunes will update itself with the latest FINRA podcast anytime a new one comes out so you can listen to it simply by accessing it through the podcast section of your iTunes library.
FINRA Web Audio Files—For the Rest of Us
I realize that some of you are saying, "Sounds great! What else do you have?" But I know what the rest of you are thinking: "I do not have iTunes, I am not interested in iTunes, I am comfortable listening to my music the way it was intended, via 8-Track." Fear not, my regulatory conscious comrade, FINRA has taken into account the inherent fear many of us have of such technology and made listening to their updates as easy as one, two, three.
One: Back at the Industry Professionals' page (or any page you accessed therefrom) select the third tab we discussed earlier, Education. Two: Select the Online Learning hyperlink from the menu on the left side of the resulting screen. Three: Select the Compliance Podcasts from the menu in the middle of the resulting screen. You will be presented with a summary index of the audio files available for your listening pleasure. The summary gives you a good idea of what topics will be covered in the audio file, lets you know when it was produced, and how long the audio file is. Okay, okay, so there is a step four. Four: Once you have found a podcast that you are interested in, select the Listen Now/Download hyperlink for that podcast. A new webpage will open where the audio broadcast should start playing. Congratulations, you are listening to your first podcast. Make sure you mention me when you Twitter about this new experience.
Practical Significance
All levity aside, staying current on regulatory obligations in today's fast-paced environment is your own personal responsibility. The time it takes can be taxing on the most attentive broker, office manager, or compliance officer, but it is a must. I can tell you from experience, it takes far less time to surf over to the Rule Filings website and read about the latest rule changes or to fire up and listen to the latest FINRA podcast than it does to defend yourself against a customer complaint because you inadvertently violated a new FINRA obligation. Visit the FINRA.org website today. Set a calendar appointment to remind yourself to review the latest Rule Filings. Have a regularly scheduled meeting with your staff and listen to the FINRA podcasts. Use the tools FINRA provides to stay on top of your industry obligations. I do, and it takes me less than an hour a week while I munch away at my ham and cheese on rye.
I have only covered the tiniest portion of the amazing resources the FINRA website has to offer. Read the reports FINRA provides, listen to the updates FINRA produces, make sure you are one of the people who knew about and was prepared for the fact that NASD Interpretive Material 2110- 5 ("Anti-Intimidation/Coordination") has been codified as FINRA Rule 5240 and went into effect on June 15, 2009.
For more information, please contact RJ&L partner, William D. Nelson, at 719-386-3057 or wnelson@rothgerber.com.