As the regulatory landscape is constantly evolving, Compliance Risk Concepts (“CRC”) is issuing its monthly review and summary of various FINRA, SEC, NFA, and FinCEN publications to assist our clients in keeping abreast of notable regulatory developments and deadlines in an effort to strengthen their compliance and regulatory initiatives.
Regulatory Notices
Per Regulatory Notice 25-01, FINRA’s Renewal Program supports the collection and disbursement of fees related to the renewal of broker-dealer (BD) and investment adviser (IA) registrations, exempt reporting and notice filings with participating self-regulatory organizations (SRO) and jurisdictions. During this program, FINRA announces renewal fees BD and IA firms owe via Preliminary Statements issued in November. FINRA publishes Final Statements in January to confirm or reconcile the actual renewal fees BD and IA firms owe after January 1, 2025.
FINRA is issuing this Notice to help firms review, reconcile and respond to their Final Statements in E-Bill as well as view the reports that are currently available in the Central Registration Depository (CRD) and Investment Adviser Registration Depository (IARD) systems for the annual registration renewal process.
The deadline to remit payment for any additional amounts owed and to report any discrepancies to FINRA is January 24, 2025. It is critical that firms ensure they pay in full or report discrepancies by this deadline. More information about reporting discrepancies, as well as key dates, is provided below.
Firms should also refer to the following web pages for additional information and resources:
Questions concerning this Notice should be directedto the FINRA Support Center at (301) 869-6699.
Per Regulatory Notice 25-02, FINRA recognizes that member firms and their personnel have been experiencing significant disruptions to their business operations due to the devastating impact of the California wildfires, which started on January 7, 2025. The wildfires have also had a major impact on customers. For instance, customers may be unable to communicate with their financial professional or receive mail during this time. This Notice provides guidance to those members and other affected persons, including relief from certain regulatory requirements, in such areas as emergency office relocations, regulatory filings and inquiries, fees, customer communications, holding customer mail, delivery of customer checks, donations, examination windows and registered personnel engaged in active military duty.
FINRA will continue to closely monitor the impact of the California wildfires and may provide additional relief, as appropriate. Members or other affected persons with questions or requiring additional assistance are encouraged to contact FINRA for further guidance.
Final Rules
Per Release No. 33-11361, the SEC is adopting technical amendments to various rules and forms under the Securities Act of 1933 and the Securities Exchange Act of 1934. These amendments correct errors that are technical in nature, including typographical errors and erroneous cross-references in various SEC rules and forms.
Proposed Rules
There were no proposed rules in January.
Interim Final Rules
There were no interim final rules in January.
Interpretive Releases
There were no interpretive releases in January.
There were no policy statements in January.
Notices to Members
Notice I-25-01
January 8, 2025
Notice of Annual Meeting of NFA Members and Board and Nominating Committee Election
Notice of Annual Meeting
NFA will hold its Annual Meeting of Members on Tuesday, February 4, 2025 at 10:00 a.m. (CST), via video conferencing. The agenda of the meeting is:
To register for the Annual Meeting of Members, please email your name, NFA ID and contact email to membermeeting2025@nfa.futures.org. Registration is due by Tuesday, January 28, 2025. NFA will then provide you with an invitation to the Annual Meeting.
Board and Nominating Committee Election
On October 22, 2024, NFA notified all Members of the candidates that the 2024 Nominating Committee nominated for election to NFA's Board of Directors and 2025 Nominating Committee and advised Members of the procedures by which additional candidates could petition to be nominated for election (Notice I-24-17). No Members have petitioned for nomination of a candidate for election to the Board of Directors or Nominating Committee. Accordingly, NFA's Board of Directors, pursuant to Article VII, Section 3(a) and NFA Bylaw 709, will elect the nominees to the Board and Nominating Committee in February 2025.
Notice I-25-02
January 13, 2025
CPO Members—Update Regarding FinCEN beneficial ownership information reporting requirements
NFA issued two Notices to Members on December 3, 2024, and December 16, 2024, regarding certain compliance deadlines related to the Financial Crimes Enforcement Network's (FinCEN) beneficial ownership information requirements (BOI) and the subsequent court order staying those compliance deadlines. Because of ongoing litigation, NFA encourages CPO Members to continually review FinCEN's updates on its dedicated BOI webpage for the latest information regarding these reporting deadlines. Members can also subscribe to FinCEN Updates to stay informed via email.
Notice I-25-03
January 21, 2025
Member obligations under NFA Bylaw 1101 and Compliance Rule 2-36(d) with respect to CPOs/CTAs exempt from registration
The CFTC requires any person that claims an exemption from CPO registration under CFTC Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5), an exclusion from CPO registration under CFTC Regulation 4.5 or an exemption from CTA registration under 4.14(a)(8) (collectively, exemption) to annually affirm the applicable notice of exemption within 60 days of the calendar year end. Persons that fail to file the affirmation notice by March 3, 2025, will be deemed to have requested a withdrawal of the exemption and, therefore, may be required to be registered and NFA Members.
Since exempt CPOs/CTAs have until March 3, 2025, to complete the affirmation process, NFA recognizes that it may be difficult for a Member to conclusively determine prior to that date whether a previously exempt CPO/CTA continues to be eligible for a current exemption.
Therefore, Members that take reasonable steps to determine the registration and membership status of these previously exempt persons will not be in violation of NFA Bylaw 1101 or Compliance Rule 2-36(d) if, between January 1 and March 31, 2025, they transact customer business with a previously exempt person that fails to become registered and an NFA Member, file a notice affirming its exemption from CPO/CTA registration, or provide a written representation as to why the person is not required to register or file the notice affirming the exemption.
How to identify whether an exempt CPO/CTA has affirmed its exemption
Members should compare their list of exempt CPO/CTAs with which the Member transacts customer business to the information NFA makes available to assist Members in determining whether an exempt CPO/CTA has affirmed its exemption(s).
Members can review exemption information in two ways. Individuals with access to the Member Questionnaire can access the CPO and CTA Exemption Notice Filings List by clicking the "Click here to see a list of the entities that have exemptions that must be reaffirmed each year" link at the bottom of the Filing Index page. This list is updated nightly and includes all persons or entities with an exemption(s) that requires an annual affirmation, as well as the most recent affirmation date, if applicable, and the affirmation due date. If the affirmation due date is March 3, 2025, the exemption has not yet been affirmed. Once the exemption has been affirmed, the affirmation due date will change to March 2, 2026. Any exemptions not affirmed after March 3, 2025, will be withdrawn.
Alternatively, Individuals with access granted to them by an NFA Member can view the CPO and CTA Exemption Notice Filings List via the Membership and Directories page on NFA's website. This list is updated nightly and includes all persons or entities with an exemption(s) that requires an annual affirmation, as well as the most recent affirmation date, if applicable, and the affirmation due date. If the affirmation due date is March 3, 2025, the exemption has not yet been affirmed. Once the exemption has been affirmed, the affirmation due date will change to March 2, 2026. Any exemptions not affirmed after March 3, 2025, will be withdrawn.
Expectations for Members transacting customer business with an exempt CPO/CTA that has not affirmed its exemption
NFA expects any Member transacting customer business with a person that previously claimed an exemption from CPO/CTA registration under the regulations listed above, and that has not filed a notice in NFA's Exemption System affirming the exemption, not filed a notice of exemption for another available exemption, or not properly registered and become an NFA Member by December 31, 2024, to promptly contact the person to determine whether the person intends to file a notice affirming the exemption.
If the Member learns that the person does not intend to file a notice affirming the exemption, or the person does not file a notice affirming the exemption by March 3, 2025, then the Member must promptly obtain a written representation as to why the person is not required to register or file a notice of exemption and evaluate whether the representation appears adequate. If the Member determines that this written representation is inadequate and the person is required to be registered, then the Member must put a plan in place (e.g., liquidation-only trades) to cease transacting customer business with the person or risk violating NFA Bylaw 1101 or Compliance Rule 2-36(d).
Any Member that acts in accordance with the information provided in this Notice will not be charged with violating NFA Bylaw 1101 or Compliance Rule 2-36(d). Members should be aware, however, that this Notice does not relieve their regulatory obligations pursuant to the Commodity Exchange Act and the CFTC's Regulations.
NFA News Releases
There were no NFA News Releases in January.
FinCEN News Releases
FinCEN Convenes Virtual Summit of Financial Intelligence Units to Combat Nature Crimes in the Amazon Region
January 17, 2025
WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) convened a virtual summit to counter the transnational criminal organizations (TCOs) that illicitly profit from nature crimes in the Amazon region. The summit marked a milestone in operationalizing a partnership among the financial intelligence units of Brazil, Colombia, Ecuador, Guyana, Peru, Suriname, and the United States.
Environmental crime is among the most lucrative criminal activities globally, generating around $110 to $281 billion in criminal gains each year, according to the Financial Action Task Force Report Money Laundering from Environmental Crime, issued in July 2021. Nature crimes fuel corruption, threaten biodiversity, damage fragile ecosystems, and impact public health and the economy.
“Illicit finance is not confined to national borders, and financial activity tied to nature crimes is no exception,” said FinCEN Director Andrea Gacki. “Transnational criminal organizations that facilitate such crimes often exploit international boundaries to inhibit law enforcement from disrupting this illicit activity. Cooperation with our partners is a key countermeasure in preventing such organizations from profiting from their crimes.”
The summit delivered on a key commitment by Secretary Janet L. Yellen, who announced an Amazon region partnership last July. Participants discussed a range of topics, including illegal deforestation; illegal mining; gold smuggling; timber trafficking; wildlife trafficking; illegal, unreported, and unregulated fishing; and the role of transnational criminal organizations in such activity.
FinCEN has published resources to help stakeholders identify and combat environmental crimes and associated illicit financial activity. In 2021, FinCEN published FinCEN Notice FIN-2021-NTC4, which provides financial institutions with specific Suspicious Activity Report filing instructions and highlights illicit financial activity related to several types of environmental crimes such as wildlife trafficking and illegal logging, fishing, or mining. FinCEN also issued a Financial Threat Analysis report in 2021 on illicit finance related to wildlife trafficking, and has convened FinCEN Exchange events on environmental crimes and related financial activity. Transnational criminal activity, including wildlife trafficking, is among FinCEN’s Anti-Money Laundering and Countering the Financing of Terrorism National Priorities.
In the final days of January FINRA published its 2025 annual regulatory oversight report. This report is intended to provide firms with insight into the findings of FINRA’s regulatory operations programs. New topic areas in this year’s report include the third-party risk landscape, registered index-linked annuities, and extended hours trading. There were also updates to various existing topics, such as manipulative trading, books and records, and Reg BI. In addition, FINRA continued to explore considerations and risks of artificial intelligence tools – from both the perspective of deploying the technology as well as emerging risks from its uses by bad actors.
Reports like this are an excellent opportunity for firms to leverage industry experience to assess and strengthen their compliance programs.
Firms should review the findings, observations, and effective practices presented in the report to identify those that are relevant to their business. These items can then be used to conduct a gap analysis to understand the extent to which the firm’s current compliance program addresses each issue. In addition, firms should evaluate how new content can inform the firm’s ongoing training and risk management processes.
Regulators continue to demonstrate their commitment to protecting investors by aggressively pursuing bad actors and reviewing and updating regulations to guard investors against constantly evolving threats.
The best approach to regulatory compliance is a proactive one. Staying ahead of the curve by taking note of statements and guidance released by regulators and using them as a barometer to assess the current regulatory climate can help ensure that a firm is prepared for a regulatory exam. Rather than scrambling to rectify issues or meet deadlines, a thorough, active compliance program that considers and incorporates regulatory developments is in a better position to satisfy regulators and preserve operations so they can best serve their clients.
For more information, please contact:
Mitch Avnet
p. (646) 346-2468
David Amster
p. (917) 568-6470
Sources:
