Regulatory Groups Update Remote Exam Requirements

Published On June 16, 2020

In light of the Covid-19 pandemic, the Financial Industry Regulatory Authority (FINRA), Certified Financial Planner Board of Standards (CFP), and the Securities and Exchange Commission (SEC) continue to adjust regulatory and exam requirements. An industry-wide effort to reduce unnecessary fees compelled FINRA to announce a “significantly” reduced-fee mediation program designed to attract more mediators. FINRA is enhancing its drive for protection against the latest wave of fraud, and the SEC is also warning the regulatory community of a rise in Coronavirus-related scams.

The North American Securities Administrators Association (NASAA) and FINRA agreed in early May to finalize the requirements for online testing with other regulators, which so far includes online delivery of the Securities Industry Essentials (SIE), Series 6, Series 7, Series 63, Series 65 and Series 66 exams. The CFP Board has canceled or postponed several of its exams for rescheduling in the fall due to the coronavirus. Even with the 63 percent pass rate from the last March CFP exam, CFP board’s CEO Kevin Keller noted that exams will continue as planned “only if they can be conducted without compromising the health of exam candidates.”

FINRA’s reduced-fee mediation program allows parties to use remote mediation at significantly reduced costs through August 31. Thus far, more than 85 mediators have agreed to participate in the program, with the following features: parties receive a random list of 10 national mediators along with their Mediator Disclosures for ranking, the mediator payment for their services is set at $100 an hour split between the parties, and all mediation filing and administrative fees will be waived. In addition, FINRA Dispute Resolution Services will offer virtual hearing services via Zoom to parties in all cases by joint agreement with the mediator.

Under the newly established COVID-19 Fraud Task Force, FINRA’s National Fraud and Financial Crimes Detection Programs (NCFC) has referred more than 50 potentially fraudulent Coronavirus scams by public companies to the SEC. The referrals have culminated in the SEC suspending trading in the shares of more than 20 public companies by early May. FINRA recently hired Greg Ruppert, former head of Charles Schwab’s Financial Crimes Risk Management group, to head the NCFC, which provides surveillance, investigations, and examinations of potential fraud associated with the pandemic. Under Ruppert’s directive, the NCFC has assembled a task force of 15 FINRA groups tasked with monitoring COVID-19 related frauds.

Members of the task force share regulatory intelligence with the SEC’s COVID-19 Fraud and Insider Trading task forces, as well as with the FBI and NASAA. “This regulatory intelligence was shared with NCFC’s AML and Cause Exam teams as well as with FINRA’s Enforcement Department which, collectively, reviewed the information and opened exams and investigations,” said the NCFC after recently identifying suspected COVID-19 fraud at several firms. FINRA also warned broker-dealers of phishing emails that claim to be from other regulators in Regulatory Notice 20-12, which states that the scam is “a widespread, ongoing phishing campaign that involves fraudulent emails.”