The Financial Industry Regulatory Authority’s 2022 regulatory and exam priorities will focus on cryptocurrency sales practices, Regulation Best Interest amendments and a continuation of complex product sweep exams, CEO Robert Cook told industry executives during a SIFMA Q&A late yesterday.
At the core of much of Finra’s regulatory and exam initiatives this year “will be protecting the surge in retail investors who have entered the market in recent years,” Cook told SIFMA CEO Kenneth Bentsen.
That includes “looking at a reg notice about the rules around the sale of crypto assets by or through our members' firms and in particular advertising and disclosure requirements,” he said. The rules will look at what is going on today but also “how should those rules evolve to make sure we’re protecting investors appropriately.”
Finra will also be looking at “how some of our rules need to be re-evaluated since they were adopted before Reg BI was in existence,” Cook said. The sweeping Securities and Exchange Commission’s rules control all aspects of retail investment advice offerings by broker-dealers and dually registered advisors.
The regulator is also planning to propose amendments to Finra’s high-risk firm regime that goes live in February, giving Finra the ability to restrict the activities of broker-dealers found to be repeat offenders.
On tap is a proposal to require broker-dealers who are restricted by the rule to disclose their status on BrokerCheck, Cook said. “We’ll probably be issuing a notice in the coming weeks about the first evaluation date for that rule,” Cook added.
Bentsen asked if Finra plans to go forward with an expungement proposal that was withdrawn last year. The proposal would have established new rules regarding brokers and dually registered advisors’ ability to ask in arbitration that false customer complaints and other disciplinary events be removed from their BrokerCheck records.
“We [withdrew the proposal] after conferring with SEC staff and wanted to take more time to analyze and modify the proposal,” Cook said. But it is “definitely still on the regulatory agenda.”
Finra is planning to issue a white paper on expulsions and is planning to propose a new system for expulsions, he said.
“First, we want to work with other stakeholders on determining if there is another way to reimagine how expungement decisions are made. We’ve had longstanding and ongoing discussions with NASAA and state regulators. We want to figure out is there a way to make sure we make sure we’re achieving the purposes of the expungement and striking the right balances around all the relevant interests,” Cook said.
“One of the things we want to do on that track is issue a paper, which we expect to do in the coming months where we provide some data and statistical analysis and discussion about what’s going on today in the expungement space and then suggesting some alternative approaches to expungements,” he added.