FINRA New Consolidated Rules Governing Supervision, Effective December 1, 2014: How to Apply and Comply

Why Should You Attend:

On March 19, 2014, FINRA issued Regulatory Notice 14-10, announcing that the consolidated supervision rules (The Consolidated Supervision Rules) approved by the SEC will become effective on December 1, 2014.

A key distinction between the current rules and the consolidated supervision rules, and a telling departure from past practice, is the inclusion of FINRA’s views as to elements of an effective supervisory structure. In the past, FINRA professed to not dictate to firms how they should structure compliance and supervisory systems, so long as they were reasonably designed, but FINRA takes a new approach in several instances in the new rules, providing specific presumptions as to what a reasonably designed supervisory structure should (or should not) include.

This presentation will clarify FINRA Regulatory Notice 14-10 and will provide you with all the key distinctions between the old and new rules. It will address the revisions and additions to existing rules.

It is extremely important to have a thorough understanding of these rules in order to manage, supervise and audit as per these significant changes. In this course, participants will be guided with best practices to ensure compliance with all the rules, regulations and guidance as it relates to new consolidated supervision rules, which in turn will ensure successful FINRA and SEC inspections.

Areas Covered in the Webinar:

• Provisions of FINRA Regulatory Notice 14-10
• Distinctions between the current rules and the consolidated supervision rules
• Regulatory expectations related to the new consolidated supervision rules
• Changes in a firm’s office and individual supervisory structure
• Which personnel are permitted to act as supervisors
• Which personnel may perform office inspections
• Branch inspection reports content requirements
• Applicable rules and regulations for content requirements

Who Will Benefit:

• Compliance Directors
• Supervisory Personnel
• Compliance Professionals
• Internal Auditors
• Branch Auditors
• Branch Office Managers
• Registered Representatives
• Senior Management
• Legal Department

Instructor Profile:

Donna Sardanopoli is the founding member of Regulatory Intelligence Compliance Solutions Inc. and a 24-year veteran of the securities industry.

The first eight years of her professional life were spent working for the New York Stock Exchange where she was a senior compliance sales practice examiner. For the next eight years, she was a first vice president at UBS Financial Services Inc. (formerly Paine Webber), in charge of managing all regulatory examinations for the broker-dealer.

While at the New York Stock Exchange, Ms. Sardanopoli planned, conducted, and supervised routine and special examinations of NYSE and NASD brokerage firms in order to determine compliance with SEC, NYSE, NASD, CBOE, and MSRB rules. She also assisted with ongoing training of new examiners.

At UBS Financial Services Inc., Ms. Sardanopoli mastered detail and organization, managing all regulatory examinations including focused exams. Upon completion of every exam, Ms. Sardanopoli would formulate the written response and implement corrective action in areas where the regulators found deficiencies.

After auditing hundreds of broker-dealers as a regulator, and leading the regulatory exam department for one of the world’s largest broker-dealers, and with over 20 years of deep audit experience, Ms. Sardanopoli now teaches and guides businesses on how to create audit programs, and perform continual compliance testing programs and training that enables the firms to be proactive instead of reactive to all regulatory requirements.

Topic Background:

FINRA rules require broker-dealer members to establish and maintain a system and written procedures to supervise the activities of their personnel, which are reasonably designed to achieve compliance with the federal securities laws and FINRA rules. As part of FINRA’s rulebook consolidation process, on December 23, 2013, the SEC approved FINRA’s proposal to consolidate several existing NASD and NYSE rules and interpretations relating to supervision into new FINRA rules. The Consolidated Supervision Rules will replace existing NASD Rules 3010 and 3012 (the NASD Supervision Rules) in the FINRA Consolidated Rulebook with FINRA Rule 3110 (Supervision) and FINRA Rule 3120 (Supervisory Control System). New FINRA Rules 3150 (Holding of Customer Mail) and 3170 (Tape Recording of Registered Persons by Certain Firms) replace NASD Rules 3110(i) and 3010(b)(2) (often referred to as the Taping Rule) respectively.

This announcement ends a nearly six year process from May 2008 by FINRA Regulatory Notice 08-24. Thus on March 19, 2014, FINRA issued Regulatory Notice 14-10, announcing that the consolidated supervision rules (the Consolidated Supervision Rules) approved by the SEC will become effective on December 1, 2014.

It may be easy and also tempting to disregard the new rules as simply the latest iteration of FINRA’s seemingly never-ending rule consolidation process. This would be very foolish: much in the new rules does certainly carry forward prior rules or industry practice, but new FINRA Rules 3110 and 3120 and new related Supplementary Material from FINRA also include areas of significant change that can affect any firm. The new requirements certainly will be front and center in FINRA’s 2015 risk control assessments and examinations in addition to the Security and Exchange Commission 2015 exam priorities.

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