FinTech Compliance Expertise

Seven Essential Takeaways from FINRA Rule 3110 and SEC Rule 17a-4 on Electronic Records

FINRA Rules 3110 (a) and (b) require that any brokerage firm that operates under Financial Industry Regulatory Authority have protocols to supervise all employees, from the executives to the newest employee. The brokerage must also comply with SEC Rule 17a-4(f) to properly store electronic records.

InnReg compliance experts highlighted these seven takeaways.

Check if your brokerage meets all the requirements?

Compliance Can Be the Ultimate Strategic Advantage

Fintech compliance regulations may seem like an unnecessary leftover from a pre-fintech world to some people. Especially in an innovative area such as fintech, many entrepreneurs consider dedicating resources to remaining compliant as a necessary evil at best. They see fintech as an opportunity to break free of the old world of slow-moving institutions and cumbersome regulations. But that perception is actually flawed. When planned and implemented properly, a robust regulatory compliance program helps fintechs find new sources of growth and revenue, ultimately resulting in a competitive advantage.

CCO Update: Regulation S-ID and Identity Theft Protection

Regulation S-ID, sometimes referred to as the “Red Flags Rule,” lays out specific SEC requirements for how broker-dealers should approach the risks of identity theft. Advances in electronic communications and current remote working conditions have made it easier than ever to collect, manage and transfer individuals’ private data. The ongoing challenge of protecting personal information calls for vigilant data security controls.

CCO Action Alert: Hiring Practices and Background Check Requirements

FINRA Rule 3110 (e) defines broker-dealer hiring practices and requires employee background checks. The Rule sets forth precise requirements about the steps that member institutions must follow to review applicant backgrounds, employment experience, and criminal and regulatory disciplinary histories before onboarding an employee.

CCO Action Alert: Following FINRA Suitability Rule Guidelines

Suitability obligations are critical to investor protection. FINRA Suitability Rule Guidelines are included in Rule 2111 and FINRA Rule 3110. These two rules state that brokerage firms must ensure investment recommendations, including options and private placements, are suitable according to each client’s individual profile. Failure to verify customer suitability, monitor account activity, and investigate investments like private placements can result in meaningful penalties.