Welcome to Financial Advisor IQ
Follow

Finra Report Cards Meant to Cut Broker Fraud

May 19, 2017

The success of Finra’s use of report cards given out to brokers to cut down on trading fraud means the regulator will expand their use to other areas of surveillance, the Wall Street Journal writes.

Since Finra started issuing the report cards on potentially misleading trades last year, it saw a 68% drop in the number of alerts for “layering,” which pushes stock prices in favor of a trader through fake buy or sell orders, the paper writes. Finra plans to start using report cards in other areas by the end of the year, Robert Cook, Finra’s chief executive, tells the Journal.

The regulator is also drafting a report on common problem areas it’s picked up through its examination programs, ThinkAdvisor writes. Finra has noticed issues in volatility ETFs and security-based letters of credit, Susan Axelrod, executive vice president of regulatory operations, said at Finra’s annual conference this week, according to the publication. The regulator issues individual reports to member firms after an examination, but a new report will present its findings more broadly to help member firms “address any potential deficiencies” prior to their own exams, Cook said later at the same conference.

Finra has been evaluating its current programs since August. Earlier this month, the regulator requested comment from its members on rules governing outside business activities and private securities trading.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.
  • To read the Wall Street Journal article cited in this story, click here if you have a paid subscription.