FINRA: Moving in the Right Direction

The past year has been a time of significant change not only for our industry, but for our regulators, as well. In particular, FINRA – where Robert Cook took over as CEO in September 2016 – has made a concerted effort to adapt to the shifting financial services landscape in order to better serve Main Street investors and provide more effective oversight of its member firms.

From Mr. Cook’s first days as CEO, he has emphasized his desire to listen to FINRA’s members, as well as to investors and the public, in order to understand these groups’ views and ensure that FINRA is pursuing its goals of investor protection and promoting market integrity as efficiently as possible.

After a year of consistent dialogue with Mr. Cook and his team on behalf of our members, the Financial Services Institute (FSI) is pleased to say that FINRA’s leadership has followed through on this goal – and we believe they are poised to make further progress in 2018.

FINRA’s Engagement Initiative – Delivering Positive Results

In March, FINRA published a Special Notice requesting feedback from interested parties on steps it could take to drive greater effectiveness in its member engagement programs, including various advisory committees, initiatives to solicit and incorporate member feedback in the rulemaking process, and other outreach efforts.

In the comment letter we submitted in response, we focused on several key themes, including: increasing transparency around FINRA’s examinations, rulemaking and general member communications; expanding opportunities for advisors and others to be directly involved in FINRA’s rulemaking and advisory committees; and ensuring consistent interpretation and application of various rules in the exam and enforcement processes, among others.

Nine months later, it is clear that FINRA took our feedback – and the input of other industry members – seriously.

In response to requests to enhance opportunities for advisors and other members to participate on its advisory committees, for example, FINRA will publish an annual notice about the application process for interested individuals to be considered. It will also publish more information on the selection process, broaden the distribution of election-related notices and introduce an online portal where members can submit indications of interest for serving on various committees.

FINRA also recently published a report on its examination findings in order to increase transparency in the overall exam process. The report provides FINRA’s observations on commonly-occurring issues that could have significant impacts on investors or the markets, including cybersecurity trends and findings regarding outside business activities.

By providing greater visibility into the trends it is seeing through its examination process, FINRA is helping our members and other firms strengthen their compliance practices, and to identify potential problem areas prior to an exam. FINRA has also indicated that it is considering further steps to improve predictability and consistency in examinations and enforcement.

Driving Further Improvements through Ongoing Dialogue

We are very encouraged at the positive steps Mr. Cook and his team have taken this year to enhance FINRA’s effectiveness and efficiency in providing oversight for our industry.

In order to provide ongoing, focused input to help the regulator drive further progress in 2018, we are forming a Board-level task force to deliver insights from across our membership on additional potential enhancements in the key areas FINRA has targeted for improvement.

Each member of our Board will appoint a representative from their firm’s executive leadership team to serve on the task force. Our financial advisor Board members – including our incoming Chair, Dean Harman – will serve on the task force personally to the extent possible.

The task force will form working groups to examine crucial issues that FINRA will be considering throughout the year and supply input on potential enhancements to its rules and processes that could aid in our members’ compliance efforts while bolstering their ability to serve clients.

Key areas of focus for these working groups may include adjustments to the particular arbitration issues; FINRA’s retrospective review of its rules governing outside business activities; and input on enforcement processes and policies. We will, of course, be guided by FINRA’s priorities and our ongoing dialogue with the regulator in establishing these working groups.

As the new year begins, we commend Robert Cook and his team at FINRA for following through on the goals they laid out at the beginning of 2017 to listen to their members and others in order to enhance FINRA’s effectiveness. We look forward to working with Mr. Cook and his team in 2018 to continue to build on the momentum they have created.


from Financial Services Institute


Little could Scott Schutte have imagined it at the time, but an off-hand remark to a colleague about his son led to the creation of a nationwide program that has benefited thousands of children across the country dealing with the trauma of cancer treatments.

It was early in 2009 when Schutte, an employee with Boston-area financial services firm and FSI member firm Commonwealth Financial Network, mentioned to a co-worker that his eldest son Beck, then five years old, had been diagnosed with a brain tumor and was undergoing chemotherapy treatments at the Dana Farber Cancer Institute in Boston.

Schutte described the difficulty Beck was having in dealing with hair loss from the treatments. “I learned then that there was a group of employees in our Waltham, Mass., home office who were taking a knitting class together,” recalled Schutte, now a financial advisor with Lightship Wealth Strategies, a Commonwealth-affiliated advisory firm. “After I shared my story, we reached out to Dana Farber to see if the hospital would have an interest in receiving hats for some of the kids.”

And so “Chemo Caps for Kids” was born — a grassroots effort created by Commonwealth Financial Network employees that to date has led to the creation of more than 4,200 custom-made hats for children undergoing chemo treatments at 16 different hospitals across the country. Commonwealth itself got involved by publicizing the group across its employee and advisor community and by providing funding to further its mission. Today, Beck is a happy, healthy teenager. He’s a good student, plays soccer, runs track, and is also involved in charity work.

Chemo Caps for Kids is now one of more than 40 philanthropic programs at Commonwealth, which, like many FSI member firms, prides itself on a history and culture of giving back to the communities in which it operates and to causes across the country.

This rich heritage was recognized in September by the Invest in Others foundation, which honored the broker-dealer with its 2017 Corporate Philanthropy Award in the Financial Institutions category. Founded in 2006, Invest in Others (IIO) is the leading non-profit dedicated to recognizing and supporting the charitable work of financial advisors and the retail advisory industry.

IIO’s Corporate Philanthropy Award is given to firms that demonstrate “an ongoing commitment to encouraging philanthropic activities amongst their employees, financial advisors and senior leaders.”

“Giving back is an essential part of who Commonwealth is and always has been,” said Paula O’Shaughnessy, Manager of Employee Relations at Commonwealth, who for the past 19 years has been known in the firm as one of the leading drivers of its philanthropic efforts. She noted that philanthropy has received even greater attention and focus at Commonwealth in recent years.

In 2010, the firm launched Commonwealth Cares, an umbrella 501(c)(3) charity, to maximize the impact of all the philanthropic endeavors underway among its home office employees and advisors. O’Shaughnessy currently serves as one of five board members of Commonwealth Cares. About two years ago, she said, Commonwealth added ‘giving back’ to the five ‘pillars’ or core values that define the company’s priorities and culture.

“Giving back is an essential part of who Commonwealth is and always has been.”

As a result of these initiatives, Commonwealth has successfully nurtured a mutually-reinforcing culture of giving back, in which employees and advisors enjoy company support for grassroots programs they are passionate about — like Chemo Caps for Kids — and in which firmwide or management-driven initiatives like the firm’s annual Volunteer Time Off Day — during which employees are encouraged to use paid time to volunteer in their communities — enjoy substantial support and engagement from employees and the advisor community.

The firm’s areas of focus are children and education; the empowerment of women; and natural disaster relief efforts. Employees and advisors recently raised more than $100,000 in support of American Red Cross hurricane relief efforts.

Filed under: independent financial advisors

from Financial Services Institute


Bitcoin Fraud On the Rise

Bitcoin is the hot new investment – or the hot new variation on a Ponzi Scheme. Either way, there are potential problems down the road, on the investment side, as well as on the technology side with mining operations and investment sites being hacked.

Read my post at for more on these developments, and if you have Bitcoin losses, give me a call – 212-509-6544.

Source: The Securities Law Blog: Bitcoin Fraud On the Rise


FINRA Considering Rule Changes for Non-Attorneys In Arbitration

FINRA Requests Comment on the Efficacy of Allowing
Compensated Non-Attorneys to Represent Parties in

FINRA Rules do not prohibit non-attorneys from representing parties in arbitrations, although some states do have such a prohibition. While there are some representatives who provide competent advise to parties, there have been a number of issues over the years regarding these non-attorneys.

FINRA is now reviewing this policy and is seeking comment from members and interested parties regarding the use of non-attorneys in arbitrations.

The Regulatory Notice discussing the issue is 17-34.

Interested parties can submit their comments using
the following methods:
0 Emailing comments to

Read the entire notice before submitting a comment, and please note that the Comment Period Expires December 18, 2017


FINRA Broker Compensation Sweep Continues

finra arbitration

FINRA periodically conducts sweeps on particular regulatory topics. In its most recent Annual Priorities Letter, FINRA claimed that conflicts of interest represent a recurring challenge that contribute to compliance and supervisory breakdowns which can lead to firms and registered representatives, at times, compromising the quality of service they provide to clients. FINRA seems to be fixated on compensation, despite the complete lack of published statistics or facts to support its conclusion that there is in fact an issue.

Regardless, our firm, and our clients must deal with the premise, and FINRA’s fixation.

Source: The Securities Law Blog: FINRA Broker Compensation Sweep Continues

Best Practices for Working with Senior Investor Seminar

Older woman computer graph
Recent industry trends show that there is an increasing concern regarding the investments being requested by and recommended to, senior citizens.

Firms need to carefully review the types of securities being sold to seniors, to train their RRS on specific senior issues, including aging, diminished capacity, elder abuse the exploitation.

The attorneys of Sallah Astarita & Cox have represented brokers and firms as well as senior investors for decades, and are available to conduct a seminar at your firm or organization regarding these issues.

Contact Mark Astarita at 212-509-6544 to learn more about our free seminar for your firm or organization.