Broker Dealer Regulatory Digest

Editor's Note
The following newsletter provides a roundup summarizing enforcement actions, guidance, rulemakings, and other public statements taken by a federal and/or state financial services regulatory agency, specifically focusing on: (1) the source of the development (regulator, legislative body, etc.), (2) the subject matter (consumer lending, money transmission, capital markets, etc.), and (3) the general issue covered.

If you would like Financial Services communications from us, subscribe here.

Regulatory Developments

• Securities and Exchange Commission. Swaps. SEC adopted a set of rules and forms (see fact sheet) under the Securities Exchange Act of 1934 that would create a regime for the registration and regulation of security-based swap execution facilities and address other issues relating to security-based swap executions generally. The rule is effective 60 days after publication in the Federal Register, and the compliance dates are specified in Section XVI of the rule. Separately, Chair Gensler provided remarks in support of the rulemaking, while Comm'r. Uyeda issued a brief dissent.
• Commodity Futures Trading Commission. Futures Commission Merchants (FCMs) & Derivatives Clearing Organizations (DCOs). CFTC proposed a rule (see fact sheet) to amend its regulations governing the types of investments that FCMs and DCOs may make with funds held for the benefit of customers trading futures, foreign futures, and cleared swap transactions. The deadline for comments is January 17, 2024. Chairman Behnam and Comm'r. Pham issued statements of support, while Comm'r. Goldsmith Romero and Comm'r. Johnson supported the proposal with caveats.
• Department of Labor & White House. Retirement Savings Advice and "Junk Fees." DOL's Employee Benefits Security Administration proposed a retirement security rule updating the definition of an investment advice fiduciary under the Employee Retirement Income Security Act. The deadline for comments is January 2, 2024. Separately, the White House released a fact sheet on the rulemaking.

Enforcement and Litigation

• Securities and Exchange Commission. Fraud and Cybersecurity. SEC charged a firm and its CISO over allegations of fraud and internal control failures of supposedly known cybersecurity risks and vulnerabilities.
• Financial Industry Regulatory Authority. Securities & Cybersecurity. FINRA announced that a company proposed a settlement of allegations that violated Rule 30 of Reg S-P, 17 C.F.R. § 248.30(a) (the Safeguards Rule), and FINRA Rule 2010 by failing to establish and maintain a supervisory system reasonably designed to safeguard customer records and information.
• Financial Industry Regulatory Authority. Broker Dealer. FINRA issued an order to a company to resolve allegations that the firm violated Sec. 17(a)(1) of the Securities Exchange Act of 1934, Exchange Act Rule 17a-14, and FINRA Rule 2010 stemming from deficiencies and failures to update Form CRS.
• Financial Industry Regulatory Authority. Securities & Anti-Money Laundering (AML). FINRA released an order to a firm to resolve allegations that the company violated portions of FINRA Rules 3110 and 2010 related to internal AML compliance deficiencies.

Research and Analysis

• Financial Industry Regulatory Authority. Securities & Quantum Computing. FINRA issued a report entitled "Quantum Computing and the Implications for the Securities Industry."

Michael Buckalew is a regulatory analyst with Davis Wright Tremaine LLP.