The new director of FINRA District #4 (Iowa, Kansas, Missouri, Minnesota, Nebraska, South Dakota, and North Dakota) along with the Deputy Regional Chief Counsel shared excellent insights today on FINRA's priorities and concerns in both the exam and enforcement arenas. Speaking to a small group of attorneys and industry members, District Director Scott DeArmey stated that the best word to describe FINRA is “change.”
According to Mr. DeArmey, the current priorities for FINRA's examiners include:
Short sales and Reg. SHO
Fraud detection
High frequency trading
Municipal securities
Private security transactions
Hiring and compensation practices.
Mr. DeArmey stressed that FINRA's examiners were applying a more stringent risk-based focus in order to respond more effectively with limited resources1.
Beyond FINRA industry exam issues, Mr. DeArmey announced and described FINRA's new office of Fraud Detection and Market Intelligence (OFDMI) and its whistle blower hotline. Finally, he noted that the FINRA rulebook consolidation process was “85% complete.”
Mr. DeArmey was followed to the podium by Deputy Regional Chief Counsel Jeff Ziesman. Mr. Ziesman gave a refreshingly candid review of issues with which FINRA enforcement is currently grappling. Beyond the noteworthy (and unproductive) conduct engaged in by enforcement targets from time to time, Mr. Ziesman gave a detailed explanation of the inner-mechanics of the enforcement process as well as the standards for awarding subject cooperation. Finally, Mr. Ziesman provided specific examples of prior cases in which members and their representatives were sanctioned for violating Rule 2010 as a result of their conduct during arbitration proceedings and settlements.
The Bar Association of Metropolitan St. Louis (BAMSL) hosted the event, and the chicken and green beans were superb.
1There are four types of FINRA exams: cycle examinations, cause examinations, trading and marketing surveillance examinations, and sweeps.
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