RegEd Announces COVID-19 Resource Center

The site will support industry firms’ ability to manage the influx of new regulatory activity resulting from the COVID-19 pandemic.

RegEd, the leading provider of compliance technology solutions to the financial services industry, today announced that it has established the RegEd COVID-19 Resource Center, which aggregates regulatory activity impacting the financial services industry, related to the scope of regulations that RegEd products and services cover.

“At RegEd, nothing is more important than the health and well-being of our clients, employees, and our community. We’re committed to providing the support and resources to navigate this challenging time and support them in their day-to-day roles.” said John M. Schobel, RegEd CEO and Founder. “Our clients now must keep up with an increased volume of new regulatory updates related to COVID-19.  We’ve created this resource to ease the burden of doing so.”

While firms may already receive updates from industry organizations, regulators and other third parties, the RegEd COVID-19 Resource Center provides a single source of COVID-19 updates that specifically relate to the scope of regulations that RegEd products and services cover.

As some updates may have implications for the rules that drive specific RegEd solutions, RegEd Product Management will continue to use its standard methods to communicate any changes to RegEd solutions that support regulatory agency rule changes related to COVID-19.

Technology-Enabled Regulatory Change Management and Regulatory Intelligence Comes to the Forefront

There are more than 5,000 insurance and securities regulatory changes each year, which will increase significantly with the addition of COVID-19 related updates. RegEd’s Enterprise Regulatory Change Management solution delivers fully analyzed requirements and provides the most efficient means of managing the implementation of new requirements. Learn more.

About RegEd

RegEd is the market-leading provider of RegTech enterprise solutions with relationships with more than 200 enterprise clients, including 80% of the top 25 financial services firms.

Established in 2000 by former regulators, the company is recognized for continuous regulatory technology innovation with solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables our clients to cost-effectively comply with regulations and continuously mitigate risk.

Trusted by the nation’s top financial services firms, RegEd’s proven, holistic approach to RegTech meets firms where they are on the compliance and risk management continuum, scaling as their needs evolve and amplifying the value proposition delivered to clients.

Leverage Pre-Audit Questionnaires to Improve Efficiency and Reduce Risk of Non-Compliance

The introduction of RegEd’s Pre-audit questionnaire (PAQ) functionality for Audit Management has enabled compliance and audit professionals to ensure that all pertinent data collected via questionnaires is automatically populated, reducing the need for manual transfer and significantly improving audit cycle time, while reducing the risk of input error.

With PAQ’s, auditors and audit schedulers can complete their audit cycle workflows from within a unified tool – schedule audits, designate auditees, assign pre-audit questionnaires, or make changes to distribution recipients from within the solution, for example.

With pre-audit questionnaires, compliance programs are able to benefit from:

  • Reduced travel requirements, amount of time required onsite
  • Increased reach (program-wide and per audit)
  • Improved advisor/rep satisfaction (reduced disruption, time required outside of core activities, etc.)
  • Reduced risk of erroneous or untimely data
  • Increased time spend on core functions outside of audits

Three examples of how clients are using PAQ functionality to enhance their audit processes:

  1. Firm uses PAQ’s to deliver iterative sections of an audit module to intended recipients ahead of an audit. The firm is able to save time by allowing auditors to capture data without the need to schedule meeting time with those representatives that respond prior to the day of the audit. Additionally, any representatives that have scheduled unavailability (out of office, travel plans, etc.) or are otherwise remote have an extended window of time to provide the responses necessary to complete the audit.
  2. Firm utilizes PAQ’s to conduct their branch inspections. By using PAQ’s in combination with the Audit Management solution, the firm is able to collect, analyze and report on all of the necessary elements of the branch inspection module. This significantly reduces the amount of time required on-site per branch inspection, while allowing branch examiners the flexibility to prioritize onsite visits based on the results of the pre-audit questionnaire(s), associated risk of exposure, and potentially resultant heightened supervision status.
  3. Enterprise clients benefit from delivering a pre-defined number of pre-audit questionnaires to multiple audit modules ahead of the onsite audit to capture information that is not considered time sensitive. This provides firms with the capability of collecting vital information ahead of the audit cycle while assuring unannounced audits can be performed as often as required to maintain compliance with evolving regulations.

Advertising Review: Leverage Next Gen Annotation Tools to Streamline the Review Process

RegEd is excited to announce expanded support for annotations within the industry-leading Enterprise Advertising Review solution.  Reviewers and submitters can now annotate materials using their browser of choice (Internet Explorer 11, Chrome v75+, Firefox v62+, Edge v44+) to allow more flexibility according to their preferences. 

Additionally, users may now optionally ‘lock’ annotation comments such that only the individual that submitted the comment will be permitted to delete it, regardless of when created in the review process. 

The enhanced annotation tool allows reviewers to easily provide specific feedback on review items by adding comments, highlighting and leveraging various markup tools. Subsequently, the tool allows the submitter to respond and make any corrections as necessary, all within the solution – thus eliminating the need to rely on historical emails or other external means of collaboration.

RegEd’s PDF Annotation Tool

Advertising Review now enables you to submit and track audio and video annotations to both simplify the review process and improve turnaround times. Leverage multiple methods of reviewing material that can be utilized based on the review content and your preferred annotation method for your optimized submission and review experience using Advertising Review!

RegEd’s Audio/Video Annotation Tool

If you have questions about updating your instance of Advertising Review to include these exciting new features, please reach out to your Relationship Manager.

If you’re not currently utilizing RegEd’s Advertising Review solution, please contact sales@reged.com to learn more!

Want to see more? Watch this short 2-Minute video to see how Advertising Review can help your firm.

CE Council Fall 2019 Firm Element Advisory Topics

Every year, RegEd reviews the latest guidance on CE Council Firm Element topics.  Several times a year, the CE Council, established by FINRA to oversee the continuing education rules, writes the regulatory element exams and issues guidance on what they consider appropriate FE training topics.  

Following are some highlights of new or updated topics as they appear in the recent Fall Advisory.

Alternative Investments

  • Digital Assets: Updated for Reg. Notice 19-24: Encourages firms to keep FINRA abreast of their activities related to digital assets.
  • Cryptocurrencies: An alert to warn investors to be cautious when considering shares of companies that tout the high returns associated with cryptocurrency-related activities without the business fundamentals and transparent financials to back up such claims. (RegEd Course 912)
  • Supervision: Complex Products: FINRA Notice 12-03. Identifies characteristics that may render a product “complex” for purposes of determining if a product is subject to heightened supervisory and compliance procedures and gives examples of heightened procedures. (RegEd Course 916)

Anti-Money Laundering

  • Suspicious Activity Reporting: Updated for Reg. Notice 19-18 on red flags. (2020 AML Update course, 35AU20)

Communications   

  • FINRA Regulatory Notice 19-31 (September 19, 2019): Disclosure Innovations In Advertising And Other Communications With The Public.
  • Communications Related To Departing Registered Representatives: Updated for Reg. Notice 19-10. FINRA Provides Guidance on Customer Communications Related to Departing Registered Representatives.

Cybersecurity

  • Imposter Websites: Updated for Info Notice April 29, 2019. FINRA Provides Guidance to Firms Regarding Suspicious Activity Monitoring and Reporting Obligations. (We will add this info to our existing Cybersecurity courses 876_2 and 897)
  • FINRA Information Notice: October 2, 2019: Cybersecurity Alert: Cloud Based Email Account Takeovers.
  • Fraudulent Phishing Emails: Updated for Info Notice February 13, 2019.  FINRA Warns of Fraudulent Phishing Emails Targeting Member Firms.

Financial Responsibility Rules for Broker-Dealers

  • Capital, Margin and Segregation Requirements: New. Discusses SEC Rel. No. 34-86175. The SEC adopted capital and margin requirements for security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs), segregation requirements for SBSDs, and notification requirements with respect to segregation for SBSDs and MSBSPs. (We will update course 922, which addresses the current status of Dodd-Frank.)

Fixed Income

  • Supervision: Municipal Advisors: Updated for FINRA Reg. Notice 19-28 on Guidance Regarding Member Firms’ Supervisory Obligations When Participating in Investment-Related Activities with Municipal Clients. (Covered in the 2020 Supervision Update.)

Margin

  • Exchange Traded Notes: New. Discusses FINRA Reg. Notice 19-21 on new higher strategy-based margin requirements for ETNs and options on ETNs.

Municipal Securities

  • General: New. Discusses MSRB Reg Notice 2019-15. SEC Approves Amendments to MSRB Rules and Data Collection Related to Primary Offering Practices. (2020 Municipal Securities Update)
  • General: Advertising Rule Changes: New. Discusses amended Rule G-21 on advertising by brokers, dealers, or municipal securities dealers. (2020 Municipal Securities Update.)
  • General: Best Execution Rule: Updated to discuss MSRB Reg Notice 2019-5 amending implementation guidance on MSRB Rule G-18. (2020 Municipal Securities Update)

Obligations to Customers (New)

  • Regulation Best Interest: New. The SEC is adopting a new rule, Reg BI, establishing a standard of conduct for broker dealers and natural persons who are associated persons of a broker-dealer when they make a securities recommendation to a retail customer. Enhances the standard of conduct beyond existing suitability obligations, and aligns it with retail customers’ reasonable expectations. (Course 923, Regulation Best Interest & Form CRS)
  • Suitability: Know-Your-Customer and Suitability Obligations.  Same discussion of Rules 2090 and 2111 as contained in the last FE Advisory.

Observations From FINRA’s January 2020 Disciplinary Actions Report

Outside business activities and private securities transactions were a focus of FINRA’s January 2020 Disciplinary Actions Report with at least nine (9) cases being cited within the report.  Several registered persons were sanctioned for failure to notify and obtain prior written approval from their member firm before engaging in an outside business activity or private securities transactions.  

Those who failed to cooperate with FINRA’s investigation by refusing to provide on-the-record testimony have been barred from the industry. 

For those who did cooperate in the FINRA investigation, all but one received fines.  Fines ranged from $10,000 to $30,000.  (A fine was not issued in one case due to the registered representative’s financial status.)  All received suspensions ranging from three (3) months to eighteen (18) months.  The most egregious case resulted in a $30,000 fine and an eighteen (18) month suspension.  This case involved outside business activities that took place at the member firm branch office and involved customers of the member firm, private securities transactions as well as false statements on annual compliance and branch office questionnaires.   Several other cases also involved false statements on compliance questionnaires.

Sanctions around outside activities vary based on facts and circumstances.  FINRA’s 2019 Sanctions Guidelines provides information on principal considerations and sanctions:

Outside Business Activities

  • Principal considerations in determining sanctions include:
    • Whether the outside activity involved customers of the firm.
    • Whether the outside activity resulted directly or indirectly in injury to other parties, including the investing public, and, if so, the nature and extent of the injury.
    • The duration of the outside activity, the number of customers and the dollar volume of sales.
    • Whether the respondent’s marketing and sale of the product or service could have created the impression that the employer (member firm) had approved the product or service.
    • Whether the respondent misled his or her employer member firm about the existence of the outside activity or otherwise concealed the activity from the firm.
    • The importance of the role played by the respondent in the outside business activity.
  • Monetary fines range from $2,500 to $77,000 (disgorgement could also be considered).
  • Suspensions range from ten (10) days up to two (2) years (or could include a complete bar in lieu of suspension). 

Private Securities Transactions

  • Principal considerations in determining sanctions include:
    • The dollar volume of sales.
    • The number of customers.
    • The length of time over which the selling away activity occurred.
    • Whether the product sold away has been found to involve a violation of federal or state securities laws or federal, state or SRO rules.
    • Whether the respondent had a proprietary or beneficial interest in, or was otherwise affiliated with, the selling enterprise or issuer and, if so, whether respondent disclosed this information to his/her customers.
    • Whether respondent attempted to create the impression that his or her member firm sanctioned the activity, for example, by using the employer’s premises, facilities, name and/or goodwill for the selling away activity or by selling a product similar to the products that the member firm sells.
  • Monetary fines range from $5,000 to $77,000 (disgorgement could also be considered).
  • Suspensions range from ten (10) days to twelve (12) months based on extent of selling away (dollar amount of sales, number of customers, length of time over which selling away occurred).

Although FINRA’s 2020 Risk Monitoring & Examinations Priorities Letter did not flag outside activities specifically as an examination priority (other than a digital asset footnote), their January 2020 Disciplinary Actions Report certainly evidences an ongoing regulatory focus on outside activities.

How confident are you in your compliance program around outside business activities and private securities transactions?  When was the last time you trained your registered persons on how to report such activities to your firm for approval?  Are you adequately supervising the activities you do approve or condition? How are you documenting your supervision of these activities?  If you’ve denied activities, do you monitor to ensure activities aren’t taking place?  Do you have best practices in place to validate the information you receive in response to your annual compliance questionnaires and branch office questionnaires?  Do you require your non-registered persons to report such outside activities as a best practice?

RegEd is ready to assist with your compliance challenges.  Our solutions deliver proven, robust, compliance-optimized capabilities that enable extraordinary efficiency and strong compliance oversight, dramatically reducing the risk of non-compliance.  If you’d like to learn more, schedule a personalized consultation with our solution and subject matter experts. We’ll provide an overview of how RegEd’s enterprise platform enables our clients to improve efficiency, effectiveness and transparency across the enterprise.

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