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IAR CE Deadline!

We are writing to inform you about the new Continuing Education (CE) requirements for certain Registered Investment Advisers (RIAs), effective under NASAA’s Model Rule for Investment Adviser Representative (IAR) Continuing Education. These requirements impact RIAs in certain states and are designed to ensure financial professionals remain up-to-date on current regulations and best practices.

Key Points:

  • Rule: NASAA’s Model Rule mandates 12 hours of continuing education annually for IARs.
  • Applies to:
  • State-registered IARs in states that have adopted the NASAA Model Rule.
  • SEC-registered IARs if they are required by their state of registration.
  • RRs Outside RIA Business Activities:  If your registered representatives also operate their own RIA away from the broker-dealer, FINRA Rule 3270, FINRA Rule 3280, and FINRA Rule 3110 require that your firm supervises and ensures compliance with these new CE requirements for dual registrants. Broker-dealers must maintain appropriate oversight of their registered representatives’ external business activities, including independent RIAs, to ensure compliance with these continuing education obligations.

States Where the CE Requirement is Effective:

The requirement is already effective or will become effective in the following states:

  • Effective in 2022: Maryland, Mississippi, Vermont
  • Effective in 2023: Arkansas, Kentucky, Michigan, Oklahoma, Oregon, South Carolina, Washington D.C., Wisconsin
  • Effective in 2024: California, Florida, Hawaii, North Dakota, Nevada, Tennessee, Colorado
  • Effective in 2025: Nebraska, New Jersey, Rhode Island, U.S. Virgin Islands

CE Content Requirements:

  • 12 hours of CE annually:
  • 6 hours focused on Products and Practices.
  • 6 hours focused on Ethics and Professional Responsibility.

Approved Providers and Online Course Availability:

The CE requirements can be fulfilled through NASAA-approved courses, many of which are available online for convenience. Some recommended providers include:

Deadlines:

  • Completion by December 31st annually: IARs must complete the required CE by the end of each calendar year.

Additional Considerations:

  • Failure to meet the CE requirements may result in the inability to renew your registration.
  • IARs who are also registered representatives with FINRA may be able to count some of their FINRA Regulatory Element CE towards the NASAA IAR CE requirement.

Please ensure your firm’s IARs are aware of these requirements and complete the necessary education to remain compliant. Feel free to reach out to us with any questions or for assistance in navigating these new requirements.

SIPC Email Scam – Alert!

In an effort to protect its clients, Thornton & Associates, LLC (TAA) would like to inform you of a recent email fraud scheme targeting broker-dealers regarding SIPC filings. This scheme involves unauthorized correspondence impersonating SIPC officials to solicit responses from recipients.

We have become aware that fraudulent email correspondence has been sent to broker-dealers under the name of Josephine Wang, President of the Securities Investor Protection Corporation (SIPC). This email claims that a SIPC disclosure has been issued to the recipient, urging them to respond directly by replying to the provided email address.

Please be advised that the URL included in these emails, “mail-sipc.com,” is not associated with SIPC. SIPC does not and has never used this URL for communications. Additionally, for the past year, SIPC has corresponded with broker-dealers exclusively through its secure SIPC Portal.

If you receive an email that appears suspicious or includes unfamiliar URLs, we strongly encourage you to reach out to SIPC directly at (202) 371-8300 or access the SIPC Portal at SIPC – Broker-Dealer Portal to confirm any recent correspondence.

TAA is committed to supporting our clients’ security and compliance, and we are here to assist if you have questions regarding this matter. Please remain vigilant and notify us if you encounter any fraudulent communications.

FINRA Adopts Amendments to Rule 3240

Regulatory Notice 24-12

Summary

FINRA has adopted amendments to Rule 3240 (Borrowing From or Lending to Customers) to strengthen the rule’s general prohibition against borrowing and lending arrangements between registered persons and their customers, narrow some existing exceptions to the general prohibition, modernize the “immediate family” definition, and enhance the notice and approval requirements related to permissible arrangements. The amendments will become effective on April 28, 2025.

For more information click here: https://www.finra.org/rules-guidance/notices/24-12

Questions concerning this Notice should be directed to:

  • Ilana Herscovitz Reid, Associate General Counsel, Office of General Counsel, at (202) 728-8268 or by email; or
  • Carrie Jordan, Principal Counsel, Office of General Counsel, at (212) 858-4210 or by email.

Annual Certified Audit Information

1. Regulatory Notice 21-05: Certain broker/dealers who submit the annual certified audit through the EDGAR system may be eligible for a 30-day submission extension. More information regarding the Regulatory Notice 21-05 can be found at www.finra.org/rules-guidance/notices/21-05

2. Facing Page – Form X-17A-5: Only the PFO/FinOp or a registered principal are permitted to sign. More information regarding Form X-17A-5 can be found at https://www.sec.gov/files/formx-17a-5_3.pdf

3. Exemption Provision Assertion: AICPA exemption report examples can be found at AICPA.

4. Broker Dealer Annual Audited Financial Statement Compliance Checklist.

5. Commitments & Contingencies – Sample below (if none to report in the audited year):

“As of December 31, 20xx, the Company had no commitment, contingency or guarantee that might result in a loss or a future obligation, as well as any claim of which the firm was aware that might be asserted against it as of the audit opinion date.”

Note: The information provided is a generic guide. Please contact your CPA or TAA for the specific filing requirements for your firm.

FINRA Shares Practices Firms Use to Protect Customers From Online Account Takeover Attempts

Regulatory Notice 21-18

Summary

FINRA has received an increasing number of reports regarding customer account takeover (ATO) incidents, which involve bad actors using compromised customer information, such as login credentials (i.e., username and password), to gain unauthorized entry to customers’ online brokerage accounts.

To help firms prevent, detect and respond to such attacks, FINRA recently organized roundtable discussions with representatives from 20 firms of various sizes and business models to discuss their approaches to mitigating the risks from ATO attacks.

This Notice outlines the recent increase in ATO incidents; reiterates firms’ regulatory obligations to protect customer information; and discusses common challenges firms identified in safeguarding customer accounts against ATO attacks, as well as practices they find effective in mitigating risks from ATOs—including recent innovations—which firms may consider for their cybersecurity programs.

This Notice does not create new legal or regulatory requirements, or new interpretations of existing requirements. A firm’s cybersecurity program should be reasonably designed and tailored to the firm’s risk profile, business model and scale of operations. There should be no inference that FINRA requires firms to implement any specific practices described in this Notice.

Questions regarding this Notice should be directed to:

  • David Kelley, Director, Member Supervision Specialist Programs, at (816) 802-4729 or by email; or
  • Greg Markovich, Senior Principal Risk Specialist, Member Supervision, at (312) 899-4604 or by email.

View Full FINRA Notice Here:

FINRA Updates Private Placement Filer Form Pursuant to FINRA Rules 5122 and 5123

Regulatory Notice 21-10

Summary

FINRA has updated the form that members must use to file offering documents and information pursuant to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) (Filer Form). The updated Filer Form will be accessible in the FINRA Gateway beginning  May 22, 2021, and includes new and updated questions that will facilitate review of the filed material.1 Beginning on May 22, 2021, members will be required to complete the updated Filer Form for all new filings, as well as for new amendments to filings.

See Attachment A for a copy of the updated Filer Form. In addition, this Notice informs members about the information that may be requested during a FINRA examination concerning the member’s private placement business. See Attachment B for a copy of the “Unregistered Offering List” template.

Questions regarding this Notice may be directed to:

  • Minh Le, Director, Corporate Financing, at (240) 386-4638 or by email;
  • Janet Boysen, Manager, Corporate Financing, at (240) 386-5101 or by email; or
  • Kathryn Moore, Associate General Counsel, Office of General Counsel, at (202) 728-8200 or by email. 

View Full Notice Here:

Cybersecurity Alert: Measures to Consider as Firms Respond to the Coronavirus Pandemic (COVID-19)

Information Notice FINRA – 3/26/20

Summary:

As work processes adjust in response to COVID-19, firms and their associated persons should take appropriate measures to address increased vulnerability to cybersecurity attacks and to protect customer and firm data on firm and home networks, as well as devices.

This alert provides firms and associated persons with measures they may use to help strengthen their cybersecurity controls in areas where risks may increase in the current environment. In particular, FINRA understands the resource challenges that small firms may face, but hopes that the information included below may help them address possible cybersecurity issues associated with remote work.

However, this alert does not provide an exhaustive list of steps that firms and associated persons should consider. Further, the alert is not intended to express any legal position, and does not create any new legal requirements or change any existing regulatory obligations.

FINRA is committed to providing guidance, updates and other information to help stakeholders stay informed about the latest developments on FINRA’s COVID-19/Coronavirus Topic Page. New information will be posted on that webpage as it becomes available.

Questions concerning this Notice should be directed to:

Dave Kelley, Director, Member Supervision Specialist Programs, at (816) 802-4729.

View Full Notice Here:

FINRA: Small Firms Will Be Permitted To Spread Out Payment of the Annual Assessment

FINRA announced the below information:

FINRA recognizes the current economic turbulence the spread of COVID-19 has caused small firms, in particular. With that in mind, we are providing temporary relief for small firms with respect to 2020 Gross Income Statements and Personal Assessments (Annual Assessments).

Generally, payment of Annual Assessments is due in full within 30 days of receipt or in four quarterly installments. In 2020, FINRA is permitting small firms—identified under the FINRA By-Laws as having no more than 150 registered persons—to treat 2020 Annual Assessments as billed as of August 1, 2020, rather than as due upon receipt in April. Further, small firms that choose to do so will be allowed to pay 50 percent of the amount due on September 1, 2020, and the remaining 50 percent on December 1, 2020. If a small firm does not submit payment within 30 days of receipt, FINRA will assume the firm has chosen to make payment to FINRA via the two September 1 and December 1 installments. In addition, small firms that exit FINRA membership before September 1, 2020, will not be expected to pay the Annual Assessment for this year.

Please review the related FAQ on FINRA’s COVID-19 page for more information, including guidance on how small firms should treat the deferred payments for net capital purposes.