New SEC Exam Initiative

Time to get ready for a new era of examination for those Investment Advisers that have been deemed lower risk. Today the Securities and Exchange Commission announced that it is launching an initiative directed at investment advisers that have never been examined before, focusing on those that have been registered with the SEC for three or more years. Please click here to read the complete press release.

FINRA Proposes CARDS Data Repository

FINRA is currently accepting comments on a purposed rule to add a CARDS data reporting system requirement for all broker dealers so that FINRA can have access to more client information for auditing purposes.

Once CARDS is implemented, clearing firms (on behalf of introducing firms) and self-clearing firms would submit in an automated, standardized format specific information relating to their customers’ accounts and the customer accounts of each firm for which they clear. Such information would include, at a minimum:

• Account Information: This information identifies account types associated with account activity, firms and their branches and associated persons responsible for supervision and sales
• Account types and categories (e.g., retirement, brokerage, cash, margin, options, discretionary, day trading)
• Customer investment profile information (e.g., investment objective, date of birth)
• An identifier for beneficial owners or control persons
• Servicing registered persons and locations (e.g., registered person CRD number and branch CRD number)
• Account Activity Information: In conjunction with account information, account activity information serves as the primary basis for risk identification related to suitability reviews, fraud detection, anti-money laundering and other sales practice related reviews.
• Details of account activity (e.g., purchases and sales transactions, event dates)
• Additions/withdrawals, securities and account transfers
• Margin and balances
• Security Identification Information: Security identification information is required for FINRA to determine the characteristics of securities.
• Description of securities (e.g., CUSIP, symbol, description, name, ISIN, SEDOL)

This is a lot of information and may prove to be difficult to provide. Everyone should review the notice and send a letter to FINRA with either support or reasons for changing this. The comment period has been extended to March 21, 2014. Please click here to read the full Notice.