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The Wagner Law Group

The Wagner Law Group is a nationally recognized practice in the areas of ERISA and employee benefits, estate planning, employment, labor and human resources, investment management, immigration and family law.

 

 

Established in 1996, The Wagner Law Group is dedicated to the highest standards of integrity, excellence and thought leadership and is considered to be amongst the nation's premier ERISA and employee benefits law firms. The firm has eight offices across the country, providing unparalleled legal advice to its clients, including large, small and nonprofit corporations as well as individuals and government entities worldwide. The Wagner Law Group's 34 attorneys, senior benefits consultant and seven paralegals combine many years of experience in their fields of practice with a variety of backgrounds. Nine of the attorneys are AV-rated by Martindale-Hubbell and six are Fellows of the American College of Employee Benefits Counsel, an invitation-only organization of nationally recognized employee benefits lawyers.  Five of the firm's attorneys have been named to the prestigious Super Lawyers list for 2017, which highlights outstanding lawyers based on a rigorous selection process. The Wagner Law Group is certified as a woman-owned and operated business by the Women's Business Enterprise National Council.

 

 

 

 

 

 

Contact Info

The Wagner Law Group

 

  Integrity | Excellence

  

Boston 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110

 

Washington, D.C.

Tel: (202) 969-2800

 

Fax: (202) 969-2568

 800 Connecticut Avenue, N.W.

Suite 810

Washington, D.C. 20006

 

Chicago

Tel: (847) 990-9034

Fax: (847) 557-1312

190 South LaSalle Street

Suite 2100

Chicago, IL 60603

 

  

Palm Beach Gardens 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418

   

Tampa

Tel: (813) 603-2959

Fax: (813) 603-2961

101 East Kennedy Boulevard

Suite 2140
Tampa, FL  33602 

  

San Francisco

Tel: (415) 625-0002

Fax: (415) 358-8300

300 Montgomery Street

Suite 600

San Francisco, CA 94104

  

St. Louis

Tel: (314) 236-0065

Fax: (314) 236-5743
25 W. Moody Avenue
St. Louis, MO  63119

 

Lincoln, MA

Tel: (617) 532-8080

Fax: (617) 532-9090

55 Old Bedford Road

Lincoln, MA 01773

 

 

 

www.wagnerlawgroup.com

 

 

 

May 22, 2018

 

Investment Management

Law Alert

 

 

Recent FINRA Notices 

Seek Comment on
Proposed Amendment to 

Quantitative Suitability and
Efficacy of Supervision Rule

 

 

 

On the heels of the Security and Exchange Commission's (the "Commission") April 18, 2018 release of the proposed Regulation Best Interest rule package ("Regulation BI") (which was covered in our April 20, 2018 Law Alert), the Financial Industry Regulatory Authority ("FINRA") on April 20, 2018 issued Regulatory Notice 18-13 ("Notice 18-13") seeking comment on its proposed amendments to the quantitative suitability obligation under FINRA Rule 2111.

Under Rule 2111, quantitative suitability requires a broker who has control over a customer's account to have a reasonable basis for believing that a series of recommended transactions is not excessive or unsuitable for the customer, although the individual transactions may be suitable when viewed in isolation. The element of control in this requirement may be evidenced by actual or de facto control. If the broker does not control the customer's account, however, the quantitative suitability obligation is not triggered.

FINRA proposes to remove the element of control from Supplementary Material .05(c) of Rule 2111 in order to better address instances of excessive trading, sometimes referred to as "churning." From FINRA's perspective, the rationale for the amendment is threefold. First, the original basis for requiring the control element is rooted in the perceived need to ensure that culpability for excessive trading was attributed to the individual initiating the transaction. Since the rule requires a showing that the broker is the recommending party, the concern simply is not present under the rule. Second, FINRA is concerned that the control element has been or may be used as a shield for brokers engaged in excessive trading. The third reason is FINRA's consideration of the Commission's Regulation BI. Regulation Best Interest also includes a prohibition on excessive trading, but excluded the control element. The comment period for the amendments to Rule 2111 expires on June 19, 2018.

Although many firms have existent supervisory policies in place with regard to churning activity, it would be timely to review and consider an update to such policies, especially where the element of control is not clearly defined.  

 

 

FINRA Regulatory Notice 18-14

 

FINRA conducts retrospective reviews of its rulemaking on a regular basis in order to ensure that the rules themselves are meeting investor protection goals and that the process to administer such rules continues to be effective. On April 24, 2018, FINRA released Regulatory Notice 18-14 ("Notice 18-14") announcing its retrospective review of Rule 3110(a)(7) and Supplementary Material .04 (Annual Compliance Meeting), which requires each registered representative and registered principal to participate in an annual interview or meeting at which compliance matters relevant to the individual are discussed. A broker-dealer firm is not required to hold an in-person meeting; however, if the compliance meeting is conducted by using another method (e.g., on-demand webcast, video conference, classroom, telephone or electronic), each registered person must attend the entire meeting, and the firm must ensure that registered persons are able to ask questions and receive answers in a timely fashion. FINRA is seeking comments to six specific questions set forth in Notice 18-14. The questions relate to whether the rule has been effective, registered individuals' experience with the implementation of the rule, the rule's economic impacts such as the cost and benefits of the annual meetings, and asks whether FINRA can make the rules, interpretations and administrative processes more efficient and effective. FINRA also invited comments on any other aspects of Rule 3110. The comment period expires on June 19, 2018.

 

Please contact Stephen Wilkes or Livia Aber if you have any questions.

 

 

 

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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.