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Self-Regulatory Agency Asks Brokerages To Regulate Themselves—Or Else

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The Financial Industry Regulatory Authority put out its annual list of New Year's resolutions yesterday, and one of them is a pledge to keep an eye on the brokers on its naughty list and the people who hire them (often en masse).

"Finra is concerned about the potential risks posed by brokers who formerly worked at one or more firms that have been severely disciplined by Finra, and who may bring unethical or illegal practices to a firm," the regulator said in its priority list….

"In 2013 we were more focused on the activity of brokers; I think [in] 2014…we'll be also looking at firms and ask them questions: 'Do you know who you are hiring? Do you know what they are selling?'"

"Where we see clusters of brokers who we are concerned about, we are pretty quickly focusing on that firm," she said. "We'll be all over them with exams and enforcement."

In its free time, between sending the cockroaches scurrying, FINRA plans to rain on the frontier markets parade.

"Heightened risks associated with investing in foreign or emerging markets generally are magnified in frontier markets," Finra said in its priority list. "In many cases, these markets have relatively few companies and investment opportunities, and the local securities market may not be fully developed. This could mean less liquidity and lower investor protection standards."

Clients haven't been filing many complaints or arbitration claims related to such frontier funds. But just as last year Finra anticipated greater risk related to bonds and rising interest rates, this year frontier funds "are our way to look forward," Mr. Ketchum said.

Finra to Crack Down on Brokers With High Number of Complaints [WSJ]
Wall St watchdog puts spotlight on firms hiring risky brokers [Reuters]


Vera Kratochvil,

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