In a recent post by RegTech firm Saifr, the company outlined some of the key regulatory changes in the US during Q2 of 2023.
Allison Lagosh, director and compliance advisor at Saifr, stated that as the industry navigates the ever-changing regulatory environment in the United States, keeping a finger on the pulse of policy updates is key for both strategic decision-making and understanding the potential impacts on your firm.
This Q2, the sector has seen several notable regulatory developments from the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) that have captured our attention, Lagosh highlighted.
It’s evident that crypto remains at the forefront of regulatory attention, along with the persisting significance of recordkeeping and Regulation Best Interest (Reg BI). Additionally, a new wave of attention is being directed towards consumer protection, notably with the proposed amendments to the Consumer Protection Rule (CPC).
At a specialised summit held in May, FINRA and the National Futures Association (NFA) turned the spotlight on crypto assets. The event, Lagosh remarked, attended by crypto and blockchain specialists, discussed investor protection, potential risks, and the reporting and supervisory obligations surrounding crypto activities. The summit has accelerated the integration of crypto and blockchain into current regulatory frameworks, with each organisation agreeing to extend their Memorandum of Understanding (MOU) to encompass crypto activities within their regulatory purview.
In terms of recordkeeping, the SEC fines are escalating. Two prominent broker/dealer firms were penalised for substantial and long-term violations in maintaining and preserving electronic communications. The penalties, totalling $22.5m, underscore the necessity for firms to manage off-channel communications and enforce stringent recordkeeping supervision.
FINRA recently expelled a broker-dealer registered firm for excessively trading customer accounts in contravention of Reg BI. It’s the second expulsion involving Reg BI violations. The CEO was also suspended, signalling that the duty of supervision ultimately lies at the top. This incident highlights the firms’ obligation to prioritise the client’s best interest in terms of care, disclosure, conflict, and compliance.
On the consumer protection front, Lagosh mentioned that the SEC has proposed changes to Rule 15c3-3 (the Customer Protection Rule). These proposed amendments mandate certain broker-dealers to perform daily computations of the net cash owed to customers and other broker-dealers, as opposed to weekly. This proposal is intended to safeguard customers in the event of a broker/dealer failure.
Lagosh concluded by stating that the regulatory updates from Q2 2023 underline regulators’ commitment to enforce compliance with existing regulations, adapt to current economic cycles, and develop protective measures for consumers in emerging sectors like crypto.
Read the full post here.
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