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2015 SILA National Education Conference

FINRA Testing & Continuing Education, Registration &

Disclosure Roadmap and Member Relations Updates October 5, 2015 • Nashvillle, TN

Future Directions for Qualification Examinations and Continuing Education

2015 SILA National Education Conference October 2015 Copyright 2015 FINRA

￭ Regulatory Element Continuing Education Program

• Started in 1995 – S101 only

• Introduction of the S106 and S201 Programs

• Redesign of the Regulatory Element Program 2007 – 2010

• Launch of S901 for Operations Professionals

• Introduction of Web Delivery – 2015

￭ Qualification Exams

• Long history – starting in 1956 with the Series 1

• Exams have been added as the industry has grown and new products have

been created.

2

Evolution of CE and Qualification Exams


Qualification Examination History

Examination Implementation Timeline

1955 1960 1970 1980 1995 2000 2005 2010 2012


19751965 201119901985

1956: Series 1

implemented as fi rs t required exam

1963: Series 2 (SECO) implemented under

SEC Rule 15b8-1

1/1964: Series 12 implemented as

NYSE Branch Manager exam

1/1965: Series 16

implemented for NYSE Supervisory Analysts

9/1965: Series 40

implemented as supervisory exam for Branch Office

Managers

1/1970: Requirement

change - A candidate must hold the Series 2 registration for at least two years , to be

exempt from Series 1 requirement


the General Securi ties

Registered Representative exam

1977: SEC

approves

MSRB rules to set forth

guidelines for qualification exams

3/1975: Series 7 replaces Series 1

as general securities exam.

Series 1 only

applicable to DPP and Investment

Company bus iness


Options Principal Exam

4/1977: Put

options are added to Series 4

11/1978: State and municipal

content added to the Series 7

1/1979: Series 24 implemented as the General Securi ties Principal exam

4/1979: Series 40

reti red and replaced

with Series 24

6/1979: Series 26 implemented as the

Variable Products/ Contracts Principal exam

2/1980: Series 53

(MSRB) implemented as the Municipal Securi ties Principal exam


DPP exam _________________

Series 22 replaces the Series 1 as a prerequisite to the Series 39

11/1980: Series 54 (MSRB)

implemented as the Municipal

Securi ties FINOP

exam


the Interest Rate Option Exam


the Foreign Currency Options

exam

6/1988: Interest rate and foreign Currency

Options added to the Series 4

6/1989: Foreign

Current and Index Options are added to the Series 7

9/1989: Series 14

implemented as the NYSE Compl iance Official exam

1/1990: Series 11

implemented as the Ass istantRepresentative exam

4/1991: Series 12

reimplemented

as supervisory exam for floor

brokers

5/1995: IRT

scoring implemented for the Series 7


the Registered Options

Representative

exam


the Canadian Module (without

options) of the Series 7

9/1996: Series 2

i s retired

4/1998: Series 72 i s

implemented as the Government Securi tiesRepresentative exam_________________Series 72 is added as a prerequisite for the

Series 42

8/1999: Series 8 i s reti red

01/2000: Series 63, 65, and 66 (NASAA) adopt

waiting periods between failed exam attempts

10/2000:

Deadline for ini tial opt-in to the Series 55 registration

5/2001: Series 82

implemented as the Limited Representative -

Private Securities Offering exam (in response to Gramm-Leach-

Bl i ley Act of 1999)

1/2003: Series 51 (MSRB) implemented as the

Municipal Fund Securities Limited Exam

3/2004: Series 87

implemented as the Research Analyst Exam -Regulations

Module

11/2008: Series 15

i s retired

11/2009: Series 79

implemented as the Limited Representative -Investment

Banking exam

3/2010: Series 5

is retired


the Proprietary Trader exam

10/2011: Series 99

implemented as the

Operations Professional exam

(SEC mandate in response to Bernie Madoff scandal)

11/2011: Series 7 i s no longer

accepted by the MSRB as an alter to the Series 52 ___________________Series 7 i s no longer an acceptable

prerequisite for the Series 53___________________

Moving forward, MSRB

mandates that individuals must pass the Series 52 to act as a

Municipal Securities Representative

12/2011: Deadline for member fi rms to identify

Day-One Operations Professionals (Series 99)

10/2012: Deadline

for Day-One Operations Professionals to obtain Operations

Professional registration (Series 99)

4/1984: Series

12 reti red since Series 8 covered same content

4/07: Series 12

reti red as content was duplicative of

Series 10

7/2012: Series 56 replaced

Series 44, 45, 48 and 49

5/2010: End of "opt in" period for

Series 79


the Research Analyst exam-

Analysis Module

4/2003: Series 24 and 26 no longer accepted as qualifying registrations

for individuals that act as principals for municipal mutual funds activities

7/2003: Series 23 implemented as the General Securi ties Principal Sales

Supervisor module 8/1999: Series 9 and 10 are

implemented as General Securities

(and Options)

Supervisor exams


Limited Representative -

Equity Trader exam

4/1996: Series 37

implemented as the Canadian Module (with options) of the Series 7

7/1995: Series 66

(NASAA) implemented as the Uniform Combined State

Law exam

5/1995: Foreign

currency options,

interest rate options, and index options are added to the Series 8


the Limited Registered

Representative

exam (UK), a subset exam of

the Series 7


Introducing Broker-Dealer FINOP exam

1/1990: Series 54 i s

reti red and replaced with the Series 27

9/1989: Series 65 (NASAA)

implemented as the Uni form

Investment Advisor Law exam

6/1988: Series 18 reti red


Corporate Securities Representative exam

12/1981: Series 8

implemented as the General Supervisory exam

7/2007: NASD and NYSE merge

to create FINRA


Investment Co. exam _________________

Series 6 replaces the Series 1 as a prerequisite to the Series 26

7/1980: Series 1

i s retired6/1979: Series 39

implemented as DPP Principal exam

4/1979: Series 63 (NASAA) implemented

as the Uniform Secs. Agent State Law Exam

1/1979: Series 27 implemented as the FINOP exam (result of retiring

Series 40)

11/1978: Series 52 (MSRB) implemented

as the Municipal Securi ties Registered

Representative exam

5/1977: Put options are

added to Series 7

6/1977: Series 7 i s added as a

prerequisite for the Series 40

4/1975: Cal l

options are added to Series 7

4/1973: CBOE

created

1975: MSRB created by act

of Congress

1956

3



￭ Restructuring of Qualification Exams

￭ Continuing Education

• Introduction of CE Online – October 2015 and January 2016

• Projected Evolution of CE

– Availability via tablet, smartphone

4

Future

CE Online


￭ Project underway to migrate the Regulatory Element Program to an

online, Web-delivered format

￭ Conducted industry outreach to seek feedback

• Industry Focus Groups

• Firm Survey

￭ Pilot test conducted July 21 - August 20, 2014

• 2,073 participants responded overwhelmingly positive to Web delivery of CE

• Participants completed a brief survey at end of pilot to provide feedback

￭ Post-pilot analysis

• Follow up survey to firms

• Outreach to firms that were opposed to Web delivery

• Reviewed Call Center logs/mailbox questions/comments

• On-going conversations with CE Council and content committees

6

CE Online – Project Overview


CE Online – Tech Updates

￭ Develop technology to support production implementation

• Use data and lessons learned from outreach and pilot test

￭ Participant accesses CE Sessions through links on FINRA.org

and CECouncil.com

￭ System check runs to verify supported browsers and versions

after clicking on link

• Will not be able to start session, if browser is not supported

￭ Supported Browsers:

• Internet Explorer: Versions 9 and higher

• Firefox: Versions 20 and higher

• Chrome: Versions 27 and higher

• Safari: Versions 5 and higher (MAC only- no tablet support at this time)

￭ Updated Captcha Software

7


CE Online – Firm Notifications

￭ Automatic CRD messaging to firms re 120-day window status

continues

• CE Contacts continue to receive standard CRD CE alerts at 90/30/10 day

intervals and notice if an individual goes CE Inactive for not completing

within the 120-day window

￭ CRD will allow firms to track candidates’ sessions

• Status of session - Will appear under “Appointment Status”

• Candidates must show proficiency in 4 modules

• Displays number of modules successfully completed

• Web Delivery will be listed under “Vendor

￭ Report Center

• No anticipated changes to quarterly reports

8


CE Online – Advantages

9

￭ Increased productivity - elimination of travel to test centers

• Advantages for both firms and candidates

￭ No onerous test center security measures

￭ Ability to access CE Online anytime/anywhere

– No session time restriction of 3.5 hours

– Candidate can satisfy requirement anytime within 120 day window

￭ Bookmarking allows candidates to complete at their own pace

and return to last location in session

￭ No requirements for firms to proctor sessions

• Flexibility as to amount of involvement/oversight

• WSPs may define where/when/how candidates take CE Online sessions


CE Online – Sessions

￭ Participant clicks on link located on FINRA.org or CECouncil.com

to begin session

• Logs in using first name / last name / CRD #

• System randomly requests candidate to enter either

first 5 or last 4 of Social Security Number (SSN) and date of birth (DOB)

– SSN and DOB will NOT be stored

• Matched against CRD and discarded

• Responds to Captcha entry

• 30-minute lockout period if participant enters information incorrectly 3x

￭ Acknowledges Data Privacy Policy

￭ Agrees to Code of Conduct

￭ Participant must enter firm email address to receive CE

completion certificate

10


CE Online – Open Sessions

￭ Returning to session

• Participant skips verification if same user/machine (IP Address) within 3

hour window

• Session timeout after 30 minutes of inactivity

￭ Participants can repeat modules until they show proficiency

• Participants cycle through cases in module until proficiency achieved

• Only repeat module(s) they are having trouble with

• No additional charges

￭ Open session closes when CE window closes

￭ CE Online session fee is charged at time of completion

￭ For CE inactive reps

• Any open session will be closed at end of 120 days

• Will have to take entire session again

11


CE Online – Transitioning from Test Centers

￭ Phase 1 (October 1, 2015)

• In-Firm Delivery sites transition began

• Participants access CE Online for S201/S106/S901 Programs

• S101 continues to be administered at test centers

￭ Phase 2 (January 4, 2016)

• Participants can access CE Online for S101

– Personalized S101 content rolls out

• S501 retires as a program and is subsumed into Trading Module of

S101

– Complete In-Firm Delivery transitions

￭ Phase 3 (June 2016)

• 100% of CE sessions completed on Web

12


CE Online – Communications Plan

￭ Rule Filing Approved by SEC

• Changes to Rule 1250

– Removed language related to In-Firm Delivery sites

– Eliminated Proctor registration

– Fee for CE Online reduced to $55

– Regulatory Notice

13

2015 SILA National Education Conference October 2015 Copyright 2015 FINRA 14

CE Online – Rollout Plan

Q2 2015 Q1 2015 Q1 2016 Q3 2015

S101 -

Personalization

Goes Live

Q4 2015

S106, S201,

S901 Programs

Go Live

Q2 2016 Q3 2016

*S501 Program

Merged into

S101 Program

100% Web

Delivery

Planning next generation of CE

Continue Communications to the Industry: Reg. Notice,

Rule Filing, Committee/Council Meetings, etc.

Exam Restructuring


Today’s Representative-Level Exams

Series 7

Series 6 Series 79

Series 42

Series 11

Series 55

Series 86

Series 87

Series 62 Series 72

Series 82

Series 99

Series 56

Series 17

Series 37 Series 38

Series 22

Series 99

16


Respond to industry and regulatory changes

Reduce the redundancy of content across

exams

Streamline the exam process

Minimize impact and change to the registration

rules

Ensure registered reps have a solid breadth of

understanding of the industry

17

Qualification Exam Restructuring


Revised Exam Structure

Essentials Exam

Series 6

Series 7

Series 22

Series 57

Series 79

Series 82

Series 86/87

Series 99

18


Securities Industry Essentials Exam Content

￭ Securities Industry Essentials Exam content would include

knowledge all securities industry registrants should understand,

including but not limited to:

–Structure and functioning of the securities industry

–Regulatory agencies and their functions

–Basic economics

–Product knowledge (stocks, bonds, mutual funds)

–Regulated and prohibited practices

–Professional conduct

Content would be largely stable and subject to little change over

time (i.e., the characteristics of products are constant)

19


FINRA would introduce two new features for the Essentials Exam:

• A person would not need to be associated with a member firm to take the

Essentials Exam

• A passing score on the Essentials Exam would be valid for four years from

the date the person passes the exam

Passing the Essentials Exam alone would not qualify a person to

hold a registered position

20

Essentials Exam Eligibility


Current:

Future/Proposed:

Example: Current vs. Future (Conceptual Illustration)

Path to Registered Representative Registration

General

Securities

Representative

+

Revised

Series 7

150

Questions

Essentials

Exam

100

Questions

General

Securities

Representative

21


￭ Series 11 Exam (Order Processing Assistant) – FINRA

considering the impact of retiring exam and registration category

￭ Series 17/37/38 Exams – FINRA analyzing whether UK and

Canadian certifications have a high enough overlap of content

with the Essentials Exam to exempt certificate holders

￭ FINRA would retire the Series 42 (Options Representative), Series

62 (Corporate Securities Representative), and Series 72

(Government Securities Representative) exams

22

Other Features of the Proposal


￭ Current representative-level registrants would maintain

registration without additional testing

￭ Most current registrants would be considered to have passed the

Essentials Exam and it would be valid for 4 years upon leaving

the industry

• If the registrant returns within 2 years, she would regain registration without

the need to take the Essentials or top-off exam

• If the registrant returns between 2 and 4 years later, she would not need to

take the Essentials Exam, only the top-off exam for the registration position

• If the registrant returns more than 4 years later, she would need to take

both the Essentials and the top-off exam

23

Effect on Current Registrants


￭ New exam structure will give firms an opportunity to employ new

business models for onboarding staff

￭ Targeted training for Essentials and top off exams will allow reps

to gain a more thorough understanding of products and

associated rules

￭ Allowing non-registered staff (e.g., administrative, back office) to

take Essentials Exam will help them gain a better understanding

of the securities industry

￭ With current rep population aging, new exam structure will create

a larger pool of potential new reps

24

Industry Opportunities


￭ Published May 27, 2015, with a 60 day comment period

￭ FINRA received 20 comment letters – almost all commenters

support the proposal

￭ Commenters believe proposal will make exam program less

burdensome, less costly and more efficient

￭ Commenters support 4 year validity period for Essentials exam –

some suggest a 5 or 6 year period of validity

￭ Commenters support retiring exams which have lost utility

25

Regulatory Notice 15-20 Concept Release


￭ Many commenters believe allowing non-firm associated persons

to take the Essentials will encourage younger people to come

into the securities industry

￭ A few commenters expressed concern that persons who pass

only the Essentials may hold themselves out to public as

qualified to do business

￭ Content on Essentials exam should be tailored to test concepts

at an appropriate level

26

Regulatory Notice 15-20 - Comments


￭ Present proposal to FINRA Board for approval to file with SEC

￭ Make registration rule, fee and qualification exam filings with the

SEC in early to mid 2016

￭ Implement Essentials and top off exams in early 2017

￭ FINRA is looking at principal level qualification examination

program to identify an opportunity for restructuring

27

Next Steps


TEST SECURITY An Overview

Questions

28

Registration & Disclosure Roadmap


Topics of Discussion

￭ Review of the 2015-2016 Registration & Disclosure (RAD) Program

Roadmap

• Web CRD, Investment Adviser Registration Depository (IARD), BrokerCheck

and Investment Adviser Public Disclosure (IAPD)

￭ 2015 RAD System Highlights

￭ What’s Next?

￭ 2016 Renewal Program

￭ User Testing

30


2015 – Q2 2016 RAD Program Roadmap

Q4 2015 Q1 2016 Q3 2015 Q2 2016

Web CRD, IARD, and PFRD Release 2015.09 (September 12, 2015) • Modernize system

functionality that is associated with individual form filings

• Support mixed-case data entry on all individual filings

• Allow firms to upload U4/U5 DRPs through Web EFT

• Weekend CRD processing

BrokerCheck Release 2015.10 (October 24, 2015) • Implement a “What’s

New” Banner/Alert

Public Disclosure programs

Registration programs

Web CRD, IARD, and PFRD Release 2015.10 (October 24, 2015) • New Form U4

completeness checks Form U4 and report functionality to safe guard personal identifying information

• New Back Office fingerprint email notifications

• Minor bug fixes

Web CRD, IARD, and PFRD Release 2016.04 (April 2016) • SEC-mandated

updates to Form PF • State and industry

enhancements • Minor bug fixes

IAPD Release 2016.01 (December 2015) • Usability

Enhancements • IAPD mobile-

compatibility

BrokerCheck and IAPD Quarter Release (TBD) • BrokerCheck usability

enhancements (TBD)

31

Web CRD Release Highlights (Q1) Deployment Date: March 15,2015


Online Snapshot

￭ Former FINRA registered representatives were given the ability to

update their CRD residential information via the Online Snapshot

site

￭ The Online Snapshot was enhanced to include an individual’s

most recent answers to the Form U4 Disclosure Questions

(Section 14)

33

http://www.finra.org/snapshot



Form U4 – Change Office of Employment End Date

￭ Firms were given the ability to submit a Form U4 Amendment

filing to change Office of Employment end dates in the General

Information section of Form U4 (Section 1)

• Select Edit

34


Form U4 – Change Office of Employment End Date

(cont.)

￭ Provide updated End Date details

35


Form U4 – Create CRD Records for Foreign Associates

￭ Firms were given the ability to create CRD records for individuals

(foreign associates) who do not have a Social Security Number

(SSN)

36


DRPs – Completeness Check Changes

￭ A Judgment/Lien Disclosure Reporting Page (DRP) completeness

check was relaxed to allow users to file a DRP when the date the

individual learned of the lien (question 4.b.) is a more recent date

than the disposition date (question 7.a.). However, a warning

message will display advising users to review/confirm the dates

provided.

￭ The Bankruptcy Disclosure Reporting page (DRP) allows users to

file a new DRP for an event that is already beyond 10 years.

37


DRPs – New URL Field added for Reg Actions

￭ State users were given the ability to add a URL to Regulatory

Action DRPs that will link to the Internet posting of the

enforcement action(s) filed by the reporting jurisdiction

38


NRF – Auto Populate Billing Code

￭ Firms were given the ability to auto-populate the office of

employment address based on Billing Code for all Non-

Registered Fingerprint (NRF) filings

￭ NOTE: This enhancement is consistent with functionality that is currently

available for registered reps on section 1

39


NRF – Amend Termination Dates

￭ Firms were given the ability to amend Non-Registered Fingerprint

person (NRF) termination dates

40


View Individual – Taping Rule 3170

￭ An indicator was added to the following sections of the Pre-hire

and Regular View Individual pages for individuals that are

currently or have previously been registered with disciplined

firms:

• Registrations Summary

• Registrations with Current Employers

• Registrations with Prior Employers

41


View Individual – Taping Rule 3170 (cont.)

￭ Firms were provided with the ability to request a new Taping Rule

Report that identifies any of their representatives that have

previously been registered with a disciplined firm

42


View Individual – Taping Rule 3170 (cont.)

￭ The Individual Snapshot report was enhanced to indicate when

individuals have previously been registered with a disciplined

firm

￭ This field is visible to firms users

43

Web CRD Release Highlights (Q2) Deployment Date: June 27, 2015


Web CE Delivery

￭ Updates were made to CRD to accommodate Web delivery of the

CE Regulatory Element

• Note: Online delivery of the S106, S201& S901 began on October 1, 2015.

Delivery of S101 begins on January 4, 2016.

45


Web CRD, IARD & PFRD Session Timeouts

￭ The session timeout for Web CRD, IARD and PFRD was reduced

to 30 minutes.

46


Other Web CRD Highlights

Impacted Area Description of Change

Printer-Friendly When using the Printer Friendly option in Web CRD, the

font size on the printout will be increased.

47

Web CRD Release Highlights (Q3) Deployment Date: September 12, 2015


Individual Forms

￭ Extensive behind-the-scenes work was done to modernize the

CRD individual form filing code base. Impacted forms are:

• U4

• U5

• NRF

• Individual U6

￭ As a result, users now experience several look-and-feel upgrades

while completing forms online

• The Web EFT form filing schemas were also rewritten, including adding the

ability to upload DRPs via XML for the first time

￭ This release prepares us for the eventual individual forms rewrite

on the long-term roadmap

49


Individual Forms (cont.)

￭ Web CRD was updated to no longer automatically convert text

entered on individual forms to all capital letters. The system will

preserve the case as entered by the user.

• Firms are not required to go back and resubmit previous filings in mixed

case. It is understood that we will have mismatched records for some time.

Current version:

New version:

50



￭ All country and state free text fields have been converted to

dropdown boxes with a standard list of values

• Where possible, existing state and country data will be mapped to the

corresponding dropdown value

￭ Specifically for U4 Section 9, the ‘State/Province of Birth’ text

field was split into two separate drop-down boxes

• Filers will be required to complete either one field or the other, not both

51



￭ Entries on sections that contain multiple list items have been

added or edited in re-sizeable pop-up windows, not new browser

pages

￭ Postal codes entered must now be valid for the state selected

52



￭ Upgraded calendar controls are now available on long date fields

53



￭ Links were added for the individual Disclosure Reporting Page

(DRP) categories that display on the main form navigation panel

Current version: New version:

54



￭ The 'Not on List' option in the state dropdown in the Customer

Complaint DRP was replaced with the value 'N/A'

Current:

New:

55



￭ The print preview function on pending U4, U5 & NRF filings now

includes a redline mode to further assist users with identifying

changes from the previous filing

56


Weekend CRD Processing

￭ The frequency of nightly Web CRD processing jobs was

increased to run after system shutdown on Fridays. This

includes:

• Accounting processing

• Organization Termination processing

• Firm Notifications

• Web EFT Daily reports

￭ Now updated data and notifications are available on Saturday,

rather than waiting until Monday.

57

BrokerCheck Release Highlights


BrokerCheck – Initial Launch

￭ BrokerCheck continues to evolve from its initial launch in 2007.

59


BrokerCheck - Enhancements

60


BrokerCheck – Now

￭ In 2015 BrokerCheck went through a significant redesign

• Search functionality was revamped and optimized to be more effective

• Summary pages were reorganized to make information easier to read

and understand

• Disclosure events, years of experience, qualifications, and current

registration information is clearly displayed

￭ The redesign was accompanied by a nationwide multi-

media campaign (print, Web and television)

61


BrokerCheck – Now (cont.)

62

What’s Next?


Web CRD Release 2015.10 – Go-Live October 24, 2015

Impacted Area Description of Change

Individual Forms • Add checks to Form U4 to ensure SSN is not provided in

Bankruptcy/Judgment Lien –Docket Case# field (if PII

checkbox is not selected) & U4 Other Business field

• Display an alert on the Form U4 jurisdictions registrations

page when firms select the Mark All AG box to prevent users

from erroneously selecting all jurisdictions and paying

associated fees(CIFER 247)

Reports • Add PII Terms& Conditions to all the CRD & IARD reports –

includes adding the T&C when you elect to View a report and

also within the report

Notifications • Include back office individuals in fingerprint related email

notifications

64


Upcoming Changes

Description of Change Targeted Release Go-Live

• Allow staff to manually upload RAPP sheets

and send notifications to firms/regulators

December 2015

• IAPD Usability Enhancements

• Modernize the interface

• Make the application mobile-compatible

January 2016

• Hold AG approvals until Fingerprint results

are posted on Web CRD

April 2016

65

2016 Annual Renewal Program


2016 Renewal Highlights

￭ Preliminary Statements become available on November 16, 2015

￭ Full payment is due Friday, December 18, 2015

￭ Detailed information is available at: www.finra.org/renewals

67

http://www.finra.org/renewals

User Testing


User Testing

￭ What is user testing?

• Current users volunteer to test new and changed system features before

they are implemented

• Participants are required to already have production access to the system

they would like to test

￭ Why participate?

• Gain a better understanding of what is changing in an upcoming release

• Have an opportunity to provide your feedback

￭ If you are interested, send your name and Firm CRD number to:

Application Contact

Web CRD and IARD [email protected]

Web EFT [email protected]

PFRD [email protected]

69



￭ Testing and Measurement Brown Bag

Session

￭ December 2013

Questions

70

Firm Resources


Resources for Firms

￭ Firm Gateway

￭ Compliance Resource Provider Program

￭ FINRA Conferences

72

Firm Gateway


Firm Gateway Enhancements

1

2

74


User Feedback Community

75


User Feedback Community

￭ Firms can sign up to give feedback on FINRA systems

￭ Benefits

• Firms view beta (test) versions of enhancements

• Firms give early feedback on new systems/features

• Provides firms training on new systems/features

• Firms ability to participate in User Testing

￭ Provides FINRA teams the opportunity to hear feedback directly

from the firms who use these systems every day

76


FINRA Systems Information Page

Firm Gateway

System Hours: 5am-11pm, EST Mon- Sun

Call Center: 1-800-869-6699

Online Resources

User Administration

System Hours: 7am-9pm, EST Mon-Sun

Call Center: 1-301-836-6699

Online Resources

Systems: Enterprise Web Security (EWS)

Information Requests


Call Center: 1-800-321-6273

Online Resources

Systems

E-Bill


Call Center: 1-301-869-6699

Online Resources

Firm Profile


Call Center: 1-800-321-6273

Online Resources

Systems: FINRA Contact System

OATS


Call Center: 1-800-321-6273

Online Resources

Report Center


Call Center: 1-301-869-6699

Online Resources

IARD


Call Center: 1-240-386-4848

Online Resources

Web CRD


Call Center: 1-301-869-6699

Online Resources

Systems: Web CRD and Web EFT

Forms & Fillings


Call Center: 1-800-321-6273

Online Resources

Systems

77

Welcome to the new Systems Information Page

This page displays details on the systems and filings available via the Firm

Gateway including system availability and online resources

FINRA Call Center Support Hours: 8AM-8PM (ET) Monday-Friday

Compliance Resource Provider Program


FINRA Compliance Resource Provider Program

￭ FINRA works with the following organizations to offer FINRA

firms discounts on products and services that help them comply

with securities laws and regulations

• Message Archiving-Global Relay

• Disclosure Monitoring Services-Business Information Group (BIG)

• Electronic Fingerprint Submission- BIG

• Insurance Program- Mercer Consumer

• Next vendor-TBD

www.finra.org/complianceresourceproviders/

79

http://www.finra.org/complianceresourceproviders/

FINRA Conferences


FINRA Conferences

￭ FINRA Small Firm Conference-NEW

• November 11-12, 2015

• Santa Monica, CA

￭ FINRA Cybersecurity Conference-NEW

• February 11, 2016

• New York, NY

￭ FINRA Annual Conference

• May 23-25, 2016

• Marriott Marquis, Washington DC

http://www.finra.org/Industry/Education/ConferencesEvents/

81


FINRA Conferences

￭ Two ways to participate

• In Person

• Live Video Broadcast

￭ Mobile App available for In Person and Live Video Broadcast

• Event Schedule

• Panel Description and Materials

• Interactive Map

• Speakers & Bio

• Attendees

• Ask A Question

• Exhibitors

• Survey

82


Questions

Karrie Foley, Vice President

Member Relations and Education

[email protected]

(301) 509-5442

83

©2015 Financial Industry Regulatory Authority (FINRA). All rights reserved. Materials may not be reprinted or republished

without the express permission of FINRA. Individuals, firms and data mentioned in these materials are fictitious and are

presented exclusively for purposes of illustration or example.

mailto:[email protected]

2015 SILA National Education Conference

FINRA Registration & Disclosure Public Records Review,

Statutory Disqualification and BrokerCheck Updates October 5, 2015 • Nashvillle, TN


Topics of Discussion

Public Records Cross-Check Validation Project

Registered Representative Snapshot Feature

FINRA Rule 3110(e)

Late Filing Fee Relief

Current Status Public Records Cross-Check Validation

Statutory Disqualification

BrokerCheck Update

Questions

85

Public Records Cross-Check Validation Project


Public Records Cross-Check Validation History

• Data contained in CRD, which are derived from uniform forms, rely

largely on a self-reporting model.

• Certain ‘checks and balances’ do exist, such as CHRI obtained from

fingerprinting upon hire, arbitrations filed in FINRA’s Dispute

Resolution and FINRA regulatory proceedings.

• RAD conducted an informal survey and learned that most firms were

conducting background checks prior to submitting Forms U4.

• Firms generally must rely on the registered representative (RR) to

make disclosure of events (such as criminal, bankruptcies and

judgments/liens) that occur post-hire.

• While many firms periodically (e.g., quarterly, semi-annually or

annually) send questionnaires to RR inquiring about these events, in

these cases the firm is also relying on the RR to self-report.



• April 2014 – FINRA announced that it is searching public financial

records for all RRs to validate that bankruptcy filings and outstanding

judgments or liens are appropriately reported. In addition, criminal

public records will be searched for any RR not fingerprinted in the last

5 years.

• July 2014 – While we were seeking a public records data aggregator

(vendor) to do a bulk file comparison, RAD began sending one-at-a-

time letters requesting updated disclosure based on public records

findings.

• September 2014 – Separately, FINRA launched the RR Snapshot

feature. RRs can now obtain their own snapshot reports directly. The

link is on the FINRA website: www.finra.org/snapshot.



RR Ability to Validate His/her Own CRD Record

In FINRA’s Weekly email to Executive Reps, firms were advised to

communicate the existence of this feature to their RRs and asked that their

RRs periodically validate the information in their CRD records.

Note: Due to the terms and conditions of use, firms should not utilize this

RR Snapshot feature.

– For current employees: firms should use CRD,

– For prospective employees: firms should utilize the pre-registration

feature through which the firm acknowledges that it has permission from

the prospective RR to view his/her CRD record.



(cont.)



• December 2014 – RAD contracted a vendor for financial disclosures (e.g.,

bankruptcies, judgments, liens) and provided the vendor with the names,

Social Security numbers, CRD numbers and home addresses of all active RRs

to identify individuals resulting in a hit.

• First Quarter 2015 – Once we identified those resulting in hits, RAD compared

that information against CRD and filtered out matters already reported and

those that were never reportable, such as bankruptcies older than 10 years old

when the individual entered the industry, as well as judgments and liens that

were satisfied prior to the RR joining the industry.


Public Records Validation Requirement

December 2014 – SEC approved FINRA Rule 3110(e) effective July 1,

2015 requiring firms to:

• Ascertain by investigation the good character, business reputation,

qualifications and experience of an applicant

• Review a copy of the applicant's most recent Form U5

(or NFA Termination Notice Form 8-T, if applicable) within 60 days

• Establish and implement Written Supervisory Procedures (WSPs)

reasonably designed to verify the accuracy and completeness of the

information contained in an applicant's initial or transfer Form U4 within 30

days

– WSPs must, at a minimum, provide for a search of reasonably available

public records to be conducted by the member (or a third-party) to verify

the accuracy and completeness of the information on the U4.

In March 2015, FINRA Publishes Regulatory Notice 15-05 announcing

the rule.



• April 2015 – RAD began sending notices to firms in bulk. Each RR who may have an undisclosed event will have an individual disclosure letter in his/her CRD record for tracking purposes. Large firms with numerous potential unreported financial disclosures were provided letters through the Disclosure Letter Queue along with rosters available in Excel spreadsheet format for ease of sorting and filtering.

• April and May 2015 – RAD hosted a series of conference calls with firms that were impacted by the public records initiative. The calls provided firms with (1) background, (2) tools provided to the firms to assist with this initiative, (3) correspondence, in lieu of disclosure, (4) refunds, credits and adjustment of late disclosure fees, and (5) additional resources. The calls also provided a venue for firms to vet any questions they might have.

• June 2015 – For those unable to participate on the calls and as an extra resources, RAD published a document titled “CRD Public Records Validation Initiative.” That document, which can be found on FINRA.org, provides the aforementioned information and addressed the questions raised on the conference calls.


Public Records Validation - Late Fee Relief

Temporary relief of late filing fees will be provided for unsatisfied

judgments or liens (14M) for filings submitted between April 24, 2014

through December 1, 2015, if one of the following conditions is met:

– (1) the judgment or lien has been satisfied, and at the time it was

unsatisfied, it was under $5,000 and the date the judgment or lien

was filed with a court was on or before August 13, 2012; or

– (2) the unsatisfied judgment or lien was satisfied within 30 days after

the individual learned of the judgment or lien.

This temporary relief of certain late filing fees is provided pursuant to

FINRA Rule 3110.15, which became retroactive effective April 24, 2014

and sunsets on December 1, 2015.

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Public Records Validation - Late Fee Relief (cont.)

In addition, RAD will also refund Late Disclosure fees if the reporting

obligation resided with a previous employer (i.e. the RR had an

unreported lien that was satisfied before he/she joined their current firm).

In situations where the judgment/lien was more than $5,000 and satisfied

before January 2, 2013, RAD will assess the previous maximum Late

Disclosure fee of $300 (instead of the current $1,575).

RAD is proactively screening for filings that qualify for the late fee refund

and issuing those refunds automatically. Credit to a firms flex-funding

account usually takes 1 week. Firms can validate the credits by checking

the standard report “Accounting – Late Disclosure Fee Report and

Download.”

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Public Records Cross-Check Validation Current

Status

• RAD has completed the review of public records for both unreported financial

and criminal matters and has reached out to all impacted member firms for

disclosure. As a result, RAD is in the data-collection mode. Firms are

submitting either Form U4 amendments to report the event or providing written

explanation and/or documentation why the RR believes it is not reportable.

• Once RAD completes initial searches, RAD will continue to conduct periodic

reviews of public records to ascertain the accuracy and completeness of the

information available to investors, regulators and firms.

• Egregious under reporting may warrant referral for additional regulatory

review.


Resources

Individual Snapshot Reports Now Available Online – Information Notice (September 25, 2014) http://www.finra.org/industry/information-notice-092514

FINRA Rule Regarding Background Checks (Regulatory Notice 15-05) http://www.finra.org/industry/notices/15-05

CRD Public Records Validation Initiative http://www.finra.org/sites/default/files/CRD-PublicRecordsValidationInitiative_June.16.pdf

Late Disclosure Fee http://www.finra.org/industry/faq-late-disclosure-fee-frequently-asked-questions

CRD Filing Guidance & Policy page: http://www.finra.org/industry/crd/filing-guidance

Form U4 and U5 Interpretive Questions and Answers (Disclosure)

Disclosure Inquiry Letter Tracking Frequently Asked Questions (FAQ)

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http://www.finra.org/industry/information-notice-092514






http://www.finra.org/industry/notices/15-05




http://www.finra.org/sites/default/files/CRD-PublicRecordsValidationInitiative_June.16.pdf





http://www.finra.org/industry/faq-late-disclosure-fee-frequently-asked-questions














http://www.finra.org/industry/crd/filing-guidance





Questions

99

Statutory Disqualification


Overview of Statutory Disqualification

Article III, Section 3 of FINRA's By-Laws provides that no member shall be

continued in membership if it becomes subject to disqualification; and

that no person shall be associated with a member, continue to be

associated with a member, or transfer association to another member if such

person is or becomes subject to disqualification.

Article III, Section 3(d) of FINRA's By-Laws permits a disqualified person or

member to request permission to enter or remain in the securities industry.

FINRA Rules 9520 through 9527 set forth procedures for a member to

sponsor the proposed association of a person subject to disqualification or for

a member to obtain approval to remain a member notwithstanding the

existence of a disqualification. These actions are referred to as "Eligibility

Proceedings."

Generally speaking, a person who is subject to disqualification may not

associate with a FINRA member in any capacity unless and until approved in

an Eligibility Proceeding.

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Disqualification Defined

Article III, Section 4 of the By-Laws states that a person is subject to a

"disqualification" with respect to membership, or association with a member, if

such person is subject to any "statutory disqualification" as such term is

defined in Section 3(a)(39) of the Exchange Act.

Historic disqualifying events include: expulsions, denials, revocations, bars, and suspensions ordered by the SEC, the Commodity

Futures Trading Commission (CFTC), registered futures associations, foreign financial regulators, or self-regulatory organizations (SROs), Exchange Act § 3(a)(39)(A)-(B); a finding that the person was the cause of such expulsion, denial, revocation, bar, or suspension. Exchange Act § 3(a)(39)(C)-(D); or association with any person subject to such an event. Exchange Act § 3(a)(39)(E).

a finding that a member or person has “willfully” made certain false statements in applications or reports made to, or in proceedings before, an SRO (Exchange Act § 39a)(39)(F)) or foreign financial regulatory authority. Exchange Act §3(a)(39)(F) incorporating § 15(b)(4)(G).

certain foreign felony and misdemeanor, and all domestic felony, convictions for a period of ten years from the date of conviction. Exchange Act § 3(a)(39)(F) incorporating § 15(b)(4)(B).

temporary and permanent injunctions (regardless of their age) issued by a court of competent jurisdiction involving a broad range of unlawful investment activities. Exchange Act § 3(a)(39)(F) incorporating § 15(b)(4)(C).

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Expanded Definition of Statutory Disqualification

In 2009, FINRA adopted a revised definition of “disqualification” to conform to

the definition of “statutory disqualification” under Section 3(a) (39) of the

Exchange Act.

As a result, FINRA’s revised definition now incorporates the following three

additional categories of disqualification:

Willful violations of the federal securities or commodities laws, including failure to

supervise

Events added by the enactment of the Sarbanes-Oxley Act of 2002 (Sarbanes-

Oxley Act)

– Bars

– Final Orders with Fraud, Manipulative, Deceptive Conduct

Certain affiliated relationships (associated persons)

– any person directly or indirectly controlling, controlled by, or under common control with such

member, or an employee of such member.

– The term “person” means a natural person, company, government, or political subdivision,

agency, or instrumentality of government.


FINRA Registration and Disclosure’s Role

RAD staff:

Identifies persons (both individuals and firms) who are subject to

statutory disqualification under FINRA By-Laws, and determines

whether an eligibility proceeding is required.

Notifies the firm of the disqualification and requests that the firm:

file a membership continuance application (MC-400 to sponsor an individual

or MC-400A to sponsor itself); or

In certain instances provide evidence that an application is not required; or

terminate the individual’s association with the firm; or

file a Form BDW to terminate its own registration.

Revokes registrations of individuals, if any, and cancels firm

memberships, where there is no response to the notice of

disqualification. FINRA Rule 9522(a)(2) & (3).

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FINRA Member Regulation’s Role

Member Regulation is responsible for the following:

Evaluating the MC-400 and MC-400A Applications, for the purposes

of making a recommendation or final determination;

Preparing the written recommendations or final determinations;

Negotiating the terms and conditions of the plans of heightened

supervision – which is a requirement for disqualified individuals;

Representing Member Regulation in SD hearings - in cases where

Member Regulation is recommending approval or denial of the

application to the SD Committee; and

Notifying the SEC of decisions to allow a disqualified person to

associate with a FINRA member or to permit a disqualified firm to

continue in membership with FINRA.

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Statutory Disqualification Tiers

Tiers are risk assessment tools used for FINRA examination

purposes.

Tier I - Generally is assigned to firms/individuals subject to disqualification due to criminal or

regulatory actions involving violations of financial laws or regulations, theft (or analogous

misconduct), or the provision of false information.

Tier II - Generally is assigned to those subject to disqualification as a result of a domestic

felony conviction not covered under Tier I, for example felony drunk driving.

Tier III - Consists of those subject to disqualification who do not require special approval or

supervision. There are no special examination requirements associated with this Tier.

Members, and members associated with individuals, in Tiers I and II are subject to periodic

examinations, and to other examinations as FINRA staff deems appropriate.

Pursuant to its By-Laws, FINRA will assess a member $1,500 annually if it employs a person

in Tier I and $1,000 annually if it employs a person in Tier II.

More information about Tiers can be found on FINRA’s website at:

http://www.finra.org/sdprocess

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SD Status Codes & Tiers

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Recent Developments in SD


Municipalities Continuing Disclosure Corporation Initiative

(“MCDC Initiative”)

Arose out of an initiative by the SEC relating to the collective failures of firms acting as

underwriters of municipal securities offerings to conduct adequate due diligence in

determining whether the issuers of such securities substantially complied with their

continuing disclosure obligations pursuant to Rule 15c2-12 of the Exchange Act.

Cooperation Initiative (“MCDC Initiative”), the SEC offered certain settlement terms to

any underwriter that self-reported to the SEC its involvement in an offering where the

issuer of that offering failed to abide by its continuing disclosure requirements pursuant

to Exchange Act Rule 15c2-12.2

Based on these failures, the SEC found that the Firms willfully violated the antifraud

provisions of the federal securities laws, specifically Section 17(a)(2) of the Securities

Act, by offering and selling municipal securities on the basis of materially misleading

disclosure documents.

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MCDC Initiative

Pursuant to the Orders, Firms were fined between $60,000 and $250,000, and

each was required to comply with an identical set of undertakings.

Approximately 75 - 100 member firms will be required to file MC-400

Applications for MCDC

Three Phases

First Tranche - June/July

– FINRA’s processed 35 SD firms

Second Tranche – September/October

– FINRA processing 18 SD firms

Third Tranche – Late December

– SD Firms - TBD

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RAD High Level Processing Overview - MCDC MC-400

Applications

SEC issued Order and are posted to SEC.gov

RAD SD Analyst obtains document and performs SD

review

RAD SD Analyst drafts/mails the MC-400 Notification letter via certified mail

and email to the firm’s Contact Employee

(approximately 2 day turn-around time)

Upon receipt of MC-400 application the RAD SD Analyst will verify that the application is

complete and compile the application.

RAD SD Analyst will forwarded the application to FINRA Member Regulation and mail a copy

to the firm.

(approximately 4 day turn-around time)

Member Regulation reviews the application and files 19H-1 notices

with the SEC

(approximately 1 – 2 months from order date)

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MCDC Initiative

FAQs have been posted to FINRA.org

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BrokerCheck Updates


BrokerCheck

As part of FINRA’s ongoing effort to make BrokerCheck

information more visible and easier for investors to access, the

existing page content has been organized into a new layout.

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BrokerCheck

Between 2013 and 2014, RAD had focused much attention on moving pertinent information from the detailed report onto the summary page so that investors utilizing the tool can immediately get a good sense of the broker’s credentials – experience, disclosure, employment and registration.

FINRA engaged an outside vendor to assist with BrokerCheck’s “look & feel” with added icons and graphics, so that navigating through the tool was easy and intuitive.

FINRA launched two month-long advertising campaigns (June 2015 and September 2015) to expand our mission of investor protection. We are promoting BrokerCheck to the public as an indispensable, free tool to obtain critical information about brokers and firms.

The advertisements appeared on cable television with four different 15-second spots. The cable channels include CNBC, CNN, the Discovery Channel and ESPN. A print ad ran in The Wall Street Journal, while digital banner ads were featured on the leading financial news websites, including Bloomberg, CNN/CNN Money, CNBC, Forbes, Fortune, Reuters and WSJ.com.

The campaign was financed by a portion of the fines FINRA collected last year.

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Questions

116

©2015 Financial Industry Regulatory Authority (FINRA). All rights reserved. Materials may not be reprinted or

republished without the express permission FINRA. Individuals, firms and data mentioned in these materials are

fictitious and are presented exclusively for purposes of illustration or example.

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