FINRA Sends Background Check for New Hires Rule to the SEC
The Financial Industry Regulatory Authority is moving ahead with a rule change that would mandate that broker-dealers do a better job of vetting new hires. The SRO sent a rule to the Securities and Exchange Commission that would obligate brokers to implement written procedures to confirm the accuracy of information provided in an applicant’s U4 form.
Already, firms must review applicants for jobs. However, under the new rule, they would have to look into their public records.
FINRA says that because a lot of firms already have a system for background checks the rule shouldn’t be too expensive to implement. Some, however, feel that this could prove costly for smaller and medium-sized broker-dealers, who would likely have to hire a third-party provider.
Meantime, FINRA is going to review all financial public records in a one-time sweep to make sure its BrokerCheck database of representatives is current. There are about 630,000 brokers registered with the agency.
The SEC has 90 days to approve the rule change after the Federal Register publishes it. Meantime, it is soliciting public comment.
SEC Prepares Rules to Enhance Oversight of Mutual Funds, Hedge Funds
The SEC is in the process of developing new rules to improve oversight of firms, including mutual funds and hedge funds, as part of its attempt to obtain greater insight into whether the asset management industry presents any risk to the financial system. The requirements are likely to compel asset managers to provide regulators with more information about their mutual-fund portfolio holdings and require stress tests on funds to assess how well they would do in the event of economic turmoil.
The SEC is worried that derivatives are being used by certain mutual funds to enhance their returns. Officials are also interested in restricting the hedge fund-like tactics of alternative mutual funds, which include trading futures contracts and betting certain stocks against other stocks.
The potential rules would not be unlike the requirements placed on large financial institutions that regulators think might present a risk, should the economic or financial systems collapse. According to The Wall Street Journal, asset managers might have to limit using derivatives in the mutual funds bought by small investors. Firms would have to implement policies to manage certain product risks.
Oxfam Sues SEC to Incite Changes to Dodd-Frank Enforcement
Oxfam America wants the SEC to hurry its enforcement of certain Dodd-Frank Wall Street Reform and Consumer Protection Act provisions that impact oil companies and their disclosure of overseas payments. The international development charity filed its lawsuit in federal court.
OxFam says that the agency needs to speed up the finalization of a rule related to public disclosure of payments that companies, registered with the SEC, make to governments in return for mining and drilling rights. Until the rule is finalized the SEC can’t enforce it.
Oxfam America sues federal Securities and Exchange Commission to spur changes in Dodd-Frank enforcement, Business Journal, September 19, 2014
Rule proposal for new hire background checks moving to SEC, InvestmentNews, Septemer 18, 2014
SEC Preps Mutual Fund Rules, The Wall Street Journal, September 7, 2014
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