MSRB Regulatory Notice 2021-06 Request for Comment on Application of Regulation Best Interest to Bank-Dealers
The Municipal Securities Rulemaking Board (“MSRB” or “Board”) seeks comment on a draft amendment to MSRB Rule G-19, on suitability of recommendations and transactions, that would require bank dealers1 to comply with Rule 15l-1 (“Regulation Best Interest”) of the Securities Exchange Act of 1934 (the “Exchange Act” or the “Act”) when making recommendations of securities transactions or investment strategies involving municipal securities to retail customers (the “request for comment”). In response to the recent adoption of Regulation Best Interest by the Securities and Exchange Commission (the “SEC” or the “Commission”), the draft amendment is intended to promote regulatory parity in the municipal market by extending the investor protections afforded by Regulation Best Interest to retail customers that receive a recommendation from a bank dealer regarding a municipal security.
FINRA Regulatory Notice 21-08 FINRA Alerts Firms to Phishing Email Using “finra-online.com” Domain Name
FINRA warns member firms of an ongoing phishing campaign that involves fraudulent emails purporting to be from “FINRA Membership” and using the email address “firstname.lastname@example.org”. The email asks the recipient to respond to an issue of “regulatory non-compliance for which your immediate response is required” and then asks the recipient to click on a link or document.
FINRA Regulatory Notice 21-05 SEC Grants FINRA Request for 30-Day Filing Extension for Smaller Broker-Dealers
The SEC has issued an Order that permits specified FINRA members an additional 30 calendar days for filing their annual reports as required pursuant to SEA Rule 17a-5(d), subject to certain conditions. The SEC’s Order is in response to a request by FINRA that is designed to ease potential burdens that smaller members may face in obtaining audit services. Members that meet the conditions set forth in the SEC’s Order and wish to avail themselves of the 30-day extension must provide notification to FINRA as described further in this Notice.
The Municipal Securities Rulemaking Board (MSRB) filed a proposed rule change with the U.S. Securities and Exchange Commission (SEC) on February 17, 2021 to extend the compliance date for amended Form G-32 from March 31, 2021 to August 2, 2021 in order to provide brokers, dealers and municipal securities dealers (“dealers”) additional time to operationalize compliance with obligations under Rule G-32 to implement amended Form G-32. The rule change became effective upon filing pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
MSRB Regulatory Reminder 2021-03 MSRB Reminds Dealers of the March 31, 2021 Compliance Date for the Revised Interpretive Notice of Underwriters’ Fair Dealing Obligations to Issuers
The Municipal Securities Rulemaking Board (“MSRB”) received approval from the U.S. Securities and Exchange Commission (“SEC”) on November 6, 2019 (the “SEC approval order”) to amend and restate the MSRB’s August 2, 2012 Interpretive Notice regarding the fair dealing obligations underwriters owe to issuers of municipal securities under MSRB Rule G17, on conduct of municipal securities and municipal advisory activities.
MSRB Information Notice 2021-02 MSRB to Retire Select Interpretive Guidance for Dealers and Municipal Advisors
The MSRB is undertaking a retrospective review of the catalogue of interpretive guidance in its rule book. The goal of this comprehensive review is to streamline and modernize the rule book by clarifying, amending and/or retiring guidance that no longer achieves its intended purposes. The MSRB believes that this multi-year initiative will complement the MSRB’s other retrospective rule review initiatives and will be an impactful way to support compliance and reduce unnecessary costs and burdens for regulated entities, while fulfilling the MSRB’s regulatory obligation to protect investors, municipal entities, obligated persons, and the public interest.
FINRA Regulatory Notice 21-03 FINRA Urges Firms to Review Their Policies and Procedures Relating to Red Flags of Potential Securities Fraud Involving Low-Priced Securities
Low-priced securities tend to be volatile and trade in low volumes. It may be difficult to find accurate information about them. There is a long history of bad actors exploiting these features to engage in fraudulent manipulations of low-priced securities. Frequently, these actors take advantage of trends and major events—such as the growth in cannabis-related businesses or the ongoing COVID-19 pandemic—to perpetrate the fraud. FINRA has observed potential misrepresentations about low-priced securities issuers’ involvement with COVID-19 related products or services, such as vaccines, test kits, personal protective equipment, and hand sanitizers. These misrepresentations appear to have been part of potential pump-and-dump or market manipulation schemes that target unsuspecting investors. These COVID-19-related manipulations are the most recent manifestation of this type of fraud.
FINRA Regulatory Notice 21-02 FINRA Modifies TRACE Dissemination Protocols for Specified Pool Transactions
FINRA has modified its Trade Reporting and Compliance Engine (TRACE) dissemination protocols applicable to agency pass-through mortgage-backed securities and Small Business Administration (SBA)-backed asset-backed securities traded in specified pool transactions. The amendment will become effective on May 17, 2021.
MSRB Information Notice 2021-01 Designation Information Regarding Mandatory Participation in Business Continuity and Disaster Recovery Testing
Annually, the Municipal Securities Rulemaking Board (MSRB) publishes a notice establishing the criteria for designating participants for its mandatory business continuity and disaster recovery testing consistent with Regulation Systems Compliance and Integrity (Regulation SCI), which was adopted by the U.S. Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934. The SEC requires the MSRB, as an entity subject to Regulation SCI, to, among other things, require certain brokers, dealers, municipal securities dealers and municipal advisors registered with the MSRB (collectively, “MSRB Registrants”) to participate in the testing of the operation of the MSRB’s business continuity and disaster recovery plans (BC/DR Plans), in the manner and frequency specified by the MSRB, provided that such frequency shall not be less than once every 12 months. To facilitate this Regulation SCI requirement, the MSRB adopted MSRB Rule A-18, on mandatory participation in business continuity and disaster recovery testing, on November 2, 2015.
FINRA is issuing this Notice to help firms review, reconcile and respond to their Final Statements in E-Bill, as well as view the reports that are currently available in CRD/IARD for the annual registration renewal process. The payment deadline is January 22, 2021.
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