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New SEC/FINRA alert on Broker-Dealer Branch Inspections and Broker Supervision

By  of Shustak Reynolds & Partners, P.C. posted on Wednesday, November 30, 2011.

On November 30, 2011, the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) issued a Regulatory Risk Alert outlining effective policies and procedures for broker-dealer branch inspections and broker supervision. The alert serves as a reminder of existing Securities Exchange Act and FINRA rules requiring broker-dealers to conduct branch office inspections with vigilance. The Risk Alert identifies practices that are characteristic of effective supervisory procedures and branch office supervisory systems, including but not limited to:

– Using risk analysis to identify whether branches should be supervised more frequently than FINRA’s required three-year cycle;

– Using surveillance reports and employing current technology to help identify risk;

– Conducting unnanounced branch inspections;

– Using examiners with sufficient expertise to understand the business being conducted at the branch;

– Providing branch office managers with the firm’s internal inspection findings and requiring them to take and document corrective action.

The joint guidance offered by the SEC and FINRA in this Risk Alert is particularly relevant to many customer investment disputes. Our firm consistently represents institutional and retail investors who have been victims of firms’ broker supervision deficiencies, which often result inunsuitable investment recommendations. If you think you may have a similar claim, feel free to contact our managing partner, Erwin J. Shustak, at (619) 696-9500 or visit our website and inquire about our free initial consultations.

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