Among other things, the report flagged new concerns for regulators, such as inadequate supervision to guard against manipulative trading, fair pricing practices in fixed-income markets, compliance with short-selling rules, and oversight of firms dealing in fractional shares.
It also pointed to an emerging financial crime risk involving the exploitation of senior investors.
The SRO called on firms to ensure they’re adequately monitoring for signs of criminal activity targeting senior investors, such as using specialized surveillance for red flags of elder exploitation.
The report also highlighted recent market manipulations involving small-cap IPOs, including so-called ramp-and-dump scams.
“FINRA has observed significant unexplained price increases on the day of or shortly after the IPO of certain small-cap issuers,” it said, noting that these price moves appear to be driven by manipulative orders and trading activity, and that some of these scams seem to be carried out through social media, similar to “fraudulent crypto-related investment schemes.”
The SRO called on firms to ensure they’re aware of potential indicators of these kinds of schemes, and to ensure their compliance and risk management programs “are monitoring for and addressing this threat.”
The report also addressed a range of other issues, including compliance with best-interest rules, disclosure and suitability when dealing in complex products, and the growing risks to…
