More On Legal & Compliancefrom The Advisor's Professional Library
- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
FINRA is soliciting comments on a proposed Comprehensive Automated Risk Data System (CARDS), an automated system that gathers data from broker-dealers and clearning firms which the regulator can then use to spot potential problems with sales practices of individual BDs, branches and reps prior to onsite FINRA exams.
CARDS' first phase is designed to allow FINRA to better protect investors by using automated analytics on brokerage data to find problematic sales practice activity. The intent is for FINRA to analyze CARDS data before going onsite to examine firms, allowing the agency to find risks earlier and shift work away from the onsite exam process.
Susan Axelrod, FINRA's executive vice president of regulatory operations, said in a statement that "the information collected through CARDS will allow FINRA to run analytics that identify potential 'red flags' of sales practice misconduct and help us identify potential business conduct problems with firms, branches and registered representatives."
In its regulatory notice seeking comment, FINRA has not included specific rule language, since it's soliciting design comments as well as information on potential related costs as part if its effort to reduce unnecessary industry burdens being imposed by the system. That effort is under the guidance of the core principles in the regulator's recently released Framework Regarding FINRA's Approach to Economic Impact Assessment for Proposed Rulemaking.
CARDS would impose account reporting requirements that would allow FINRA to collect, on a standardized, automated and regular basis, account information, as well as account activity and security identification information, that a firm maintains as part of its books and records.
Once CARDS has been phased in, FINRA said that clearing firms, on behalf of introducing firms, and self-clearing firms would submit, in an automated standardized format and on a regular basis, specific information relating to their customers' accounts and the customer accounts of each member firm for which they clear.