Fines increased 51% in 2011 on advisors who fall short of FINRA’s regulatory guidance. Fourteen percent more were forced out of the industry. This points to the need for firms to beef up their compliance efforts. There are five key areas identified by the law firm Sutherland Asbill & Brennan that are responsible for most breaches.
· Advertising, especially regarding Auction Rate Securities (ARSs)
· Municipals, based on the lack of comprehensive understanding of these securities and their special regulatory requirements
· Short selling, specifically marking shares and ensuring that acquisition and delivery occur before the short sale is put on
· Mutual fund cases increased significantly in 2011 and so did the fines associated with them
· Electronic communications, including email capture and retention. Social media is another area where firms must have a compliant policy in place which is consistently enforced.
With the regulatory scene becoming tighter overall, these five areas are the first points of focus. Falling short is only going to become more costly
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