The following brief updates exemplify trends and areas of current focus of relevant regulatory authorities:
FINRA Focused on Form U4 Disclosures
In FINRA’s 2015 Regulatory and Examination Priorities Letter (the “FINRA Priorities Letter”), FINRA noted that its examiners will be reviewing the completeness, accuracy, and timeliness of U4 disclosures, as well as whether firms have policies and procedures in place to ensure timely filings and to determine whether public record reviews are occurring. In addition to criminal, regulatory, and investment-related matters, Form U4 further requires registered persons of a broker-dealer to disclose personal financial matters, including compromises with creditors, bankruptcy filings and outstanding judgments or liens. Finally, the FINRA Priorities Letter stated that it expects firms to investigate representatives that fail to report appropriately.
SEC Scrutiny of Fixed-Income Markets
The SEC’s fiscal 2016 budget proposal, released in February, indicated that the Division of Trading and Markets (“Trading and Markets”) will seek to improve market structure for fixed-income securities, including corporate and municipal bonds. Among other things, Trading and Markets is developing best execution guidance for the corporate and municipal bond markets and developing SEC rule proposals intended to enhance pre-trade price transparency in these markets.
Federal Reserve May Initiate Rulemaking Affecting Fund Secured Transactions
In a recent speech, Daniel Tarullo, a member of the Federal Reserve Board, said that the Federal Reserve is likely to issue a notice of proposed rulemaking to implement minimum collateral requirements for securities financing transactions (including reverse repurchase agreements and securities lending) involving bank extensions of credit to certain non-bank institutions. The margin rules are likely to be based on the collateral requirements recommended in October 2014 by the Financial Stability Board, which can be found here.