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The SEC has approved a series of proposed rule changes to consolidate FINRA's supervision rules in the FINRA Rulebook. The rule changes will adopt FINRA Rules 3110 ("Supervision"), 3120 ("Supervisory Control System"), replacing NASD Rules 3010 ("Supervision"), and 3012 ("Supervisory Control System"). Lofchie Comment: There is more going on here than merely a consolidation and renumbering of rules. Given the number of rule changes, compliance departments will have to deal with a lot as they revisit their procedures and manuals. In some cases, rules have been tightened; in other cases, rules

The SEC has announced charges against two Houston-based investment advisory firms for engineering thousands of principal transactions through their affiliated brokerage firm without informing their clients. Parallax and its chief compliance officer are also charged with violations of the "custody rule," which requires firms to undergo certain procedures to safeguard and account for client assets. According to the SEC's orders, the CCO was aware that the custody rule required Parallax to either undergo an annual surprise exam to verify the existence of the fund's assets, or obtain fund audits

The SEC released notification of an immediately effective FINRA filing which revises the content outline and selection specifications for the Investment Company and Variable Contracts Products Representative (Series 6) examination program. The SEC is soliciting comments which should be submitted on or before 21 days from publication in the Federal Register. We previously reported this FINRA rule filing on October 16, 2013. See : SEC Notice . See also : Text of Proposed Rule Change.

The SEC sanctioned investment advisory firms Modern Portfolio Management Inc., Equitas Capital Advisers LLC and Equitas Partners LLC for repeatedly ignoring problems with their compliance programs. The enforcement actions arose from the SEC Compliance Program Initiative, which targets firms previously warned by SEC examiners about compliance deficiencies and violations of Investment Advisers Act Rule 206(4)-7 ("Compliance Procedures and Practices"). Many of the compliance failures involved either significant mis-statements to clients or direct injury to clients; e.g., over-charging. See: SEC

The NFA issued an Interpretive Notice regarding NFA Compliance Rule 2-9 ("Supervision") and its requirement for all financial institutions, including futures commission merchants ("FCMs") and IBs, to establish anti-money laundering ("AML") programs. The purpose of the Interpretive Notice is to highlight the minimum standards of AML programs and provide NFA Member FCMs and IBs with additional guidance on satisfying the requirements of NFA Compliance Rule 2-9(c). Compliance Rule 2-9(c) states that AML programs must, at a minimum, include internal policies, procedures, and controls; a designated