At the heart of this strategy sits a broader data collection effort and more comprehensive risk- assessment process. Rather, we are pointing out representative products that raise concerns, often for a host of reasons, when marketed and sold to retail investors.
Regulatory Notice discusses a number of topics within this context. FINRA recommends that firms reassess their policies and procedures to ensure they are adequate to protect customer assets from such risks see Regulatory Notice Since business and regulatory environments are fluid, FINRA continually tracks new risks and concerns and integrates them into the scope of its regulatory programs.
Pricing of Illiquid, Hard-to-Value Securities The pricing of illiquid and hard-to-value securities, such as private-label mortgage-backed securities and various structured products, continues to raise concerns.
We have identified a number of issues surrounding quoting infractions—ranging from market makers quoting below the required percentages to, in the most extreme cases, the inappropriate use of the short sale locate exemption where firms are quoting, but 2012 level thresholds writing a letter always excessively wide and attempting to take advantage of the benefits afforded to a market maker.
Business Conduct and Sales Practice Concerns for Retail Customers The challenging economic environment can lead individual retail investors to be susceptible to recommendations to chase yields without necessarily understanding the risk-versus-reward tradeoffs, particularly as more esoteric or complex products find their way into retail portfolios.
With respect to any issues discussed below that are applicable to your firm, we advise you to assess whether your internal controls, supervisory systems and risk management practices properly address the matters discussed. The credit quality of the underlying issuer and its true financial condition are often not transparent.
FINRA has consistently maintained that certain core regulatory requirements apply to all communications with the public, irrespective of the medium or device used to communicate.
SEA Rule 15c Compliance SEA Rule 15c Market Access Rule became fully effective in November and applies to broker-dealers that provide customers with access to an exchange or alternative trading system ATS and to trading activity on an exchange or ATS for the proprietary account of the broker- dealer or for more traditional agency activities.
FINRA published Regulatory Notice to assist firms in the process of reviewing their internal controls relating to preventing or detecting unauthorized trading, and FINRA expects broker-dealers to establish adequate controls and a system to regularly assess the effectiveness of such controls.
However, they can be complex, and have cash flow characteristics and risk-adjusted rates of return that are uncertain or hard to estimate.
For both pending arbitrations and lawsuits, firms should document the basis for any liability accrual or lack thereof. Although not a new requirement, the rule also codifies and makes clear interpretations of the predecessor suitability rule requiring that persons who make securities recommendations perform reasonable diligence to understand a recommended product or strategy and then determine whether it is suitable for at least some investors based on that understanding.
These concerns may be more acute in certain cases, such as with 2012 level thresholds writing a letter participants APs or other key players in the creation and redemption process, due to potential access to material information and the ability to interact directly with the ETF issuer.
As part of their anti-money laundering AML responsibilities, member firms are obligated to monitor for suspicious activity and to file Suspicious Activity Reports where warranted. In these situations, firms must adequately assess the sufficiency of such collateral, the valuation and liquidity of this collateral as well as the concentration of collateral in a specific security or class of securities, in a single customer account and across all customer accounts.
These products often have long holding periods and significant surrender fees, making them unsuitable for investors who have a need for liquidity. Transparency of Cash Flows and Financial Condition — Transparent and accurate financial details should be available at the time an investment is made to ensure that investors are making an informed decision.
Branch Office Inspections The branch inspection process is a critical component of a comprehensive risk-management program and can help protect investors and the interests of the firm. Overall, member firms did a tremendous job of preparing for the new requirements as evidenced by high industry compliance rates in key areas such as exchange route matching almost immediately following implementation.
Investors may be unaware of the substantial credit and market risk they are assuming with such investments. As many high-profile companies have elected to remain private, secondary trading markets have emerged for their securities.
The source and nature of the underlying revenue streams of the issuer that are required to service the instruments are often less than clear.
Pursuant to the Market Access Rule and other supervisory obligations, Market Regulation examiners also will conduct reviews to determine if firms that offer algorithms to customers or otherwise utilize algorithms to trade have reasonable policies, procedures and controls to ensure that algorithms are being designed, tested and monitored both before and after implementation for proper functioning in the marketplace.
Liquidity — The lack of a deep secondary trading market for certain investments make them unsuitable for many retail investors who have strong liquidity needs. For example, exchange-traded funds ETFs that employ optimization strategies using synthetic derivatives can expose individual investors to the risk of significant tracking errors.
Cash Flow Characteristics — The timing of anticipated cash flows should be in line with investor time horizons. Certain issuers seek to raise capital by offering unregistered securities in private placements.
InFINRA brought cases against several broker-dealers that charged such excessive fees in the form of postage and handling charges that were unrelated to actual costs, 7 and we will continue to investigate firms that appear to be taking advantage of investors through fee schemes.
With some municipal securities, however, the lack of timely disclosures and complete financials often inhibit individual retail investors from making informed investment decisions, and may preclude associated persons from having a reasonable basis to recommend such a security.
Many of these issues have only come to the surface as a result of the financial crisis where portfolio markdowns, margin calls and resulting investor losses have shed light on the potentially damaging practice.
The RCA content is risk-based and does not seek to test compliance with specific rules and regulations. These securities, which may offer a high rate of return, have complex pay-out structures often tied to a "knock-in" level, and involve elements of options trading.May 15, · I know that there won't be any sub levels in the writing marks and that it's just going to be a level 3, level 4 etc but does anyone know what the thresholds are for these levels?
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I am writing this letter to clarify some issues around the reporting and use of the Key Stage 2 results and also to bring to your attention what we know so far about Level threshold tables Level thresholds for the tests of reading and mathematics (externally marked) and the writing test (whether internally or externally marked.
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The problem is that I have just moved schools, and because I thought I had nor been teaching long enough, due to a few part time years so did not collect evidence.Download