By

David M. Katz

09 February 2021

FINRA Issues 2021 Report on its Examination and Risk Monitoring Program

Released on February 1, the Financial Industry Regulatory Authority (FINRA) 2021 Report on its Examination and Risk Monitoring Program (Report) provides a roadmap for member firms to use to prepare for examinations and to review and assess compliance and supervisory procedures related to business practices, compliance, and operations. The Report replaces two of FINRA’s prior annual publications: (1) the Report on Examination Findings and Observations, which provided an analysis of prior examination results, and (2) the Risk Monitoring and Examination Program Priorities Letter, which highlighted areas FINRA planned to review in the coming year.

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01 October 2020

SEC Issues No-Action Letter for Certain Alternative Trading Systems Trading Digital Asset Securities

On September 25, the U.S. Securities and Exchange Commission (SEC)’s Division of Trading and Markets issued its first no-action letter (Letter) to the Financial Industry Regulatory Authority, Inc. (FINRA),1 related to digital asset securities. Based on the Letter, the SEC staff (Staff) would not recommend enforcement action pursuant to SEC Rule 15c3-3 (the Customer Protection Rule) under the U.S. Securities Exchange Act of 1934 (Exchange Act) if a registered broker-dealer operates a noncustodial alternative trading system (ATS) that trades digital asset securities issued and/or transferred using blockchain technology, subject to certain conditions. The Letter elaborates on the July 28, 2019, joint statement (Joint Statement) issued by the staffs of the SEC and FINRA,2 which discusses a broker-dealer’s ability to comply with the Customer Protection Rule with respect to digital asset securities and outlines potential noncustodial broker-dealer models for digital assets, including operating an ATS3 that only matches buyers and sellers of digital asset securities but does not custody such securities for the account of customers.

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