FINRA fined a financial institution for systemic failures to preserve electronic records, certain e-mails and instant messages in the required manner for a period of at least 10 years. FINRA found that from 2002 to 2012 the firm failed to maintain necessary records, including order and trade ticket data, trade confirmations, blotters, accounts and other similar records, in non-rewriteable, non-erasable format (also referred to as "Write-Once, Read-Many" or "WORM" format). See: FINRA Action against Firm; Press Release.

The SEC issued corrections to outdated cross-references in Securities Act Rule 602 ("Securities Exempted") and Investment Company Act Rule 12b-1 ("Distribution of Shares by Registered Open-End Management Investment Company"), and is correcting an inadvertent error in Investment Company Act Rule 17d-1 ("Applications Regarding Joint Enterprises or Arrangements and Certain Profit-Sharing Plans"). See: Text of Technical Rule Amendments.

The SEC issued its annual staff report on the findings of examinations of credit rating agencies registered as nationally recognized statistical rating organizations (NRSROs). The report noted that the staff found one or more NRSROs lacked comprehensive procedures governing ratings placed under review. The staff also found that oversight of the process for developing new rating methodologies and criteria was not sufficient at one or more NRSROs to ensure independence from business and market share considerations. Other observations from the annual report included: The number of NRSROs rose to

The SEC has approved a series of proposed rule changes to consolidate FINRA's supervision rules in the FINRA Rulebook. The rule changes will adopt FINRA Rules 3110 ("Supervision"), 3120 ("Supervisory Control System"), replacing NASD Rules 3010 ("Supervision"), and 3012 ("Supervisory Control System"). Lofchie Comment: There is more going on here than merely a consolidation and renumbering of rules. Given the number of rule changes, compliance departments will have to deal with a lot as they revisit their procedures and manuals. In some cases, rules have been tightened; in other cases, rules

The SEC issued a no-action letter that provided clarification of the requirements under Exchange Act Rule 17Ad-17(a)(1) ("Lost Securityholders and Unresponsive Payees") with respect to holders of variable annuities. The relief permits an insurance company issuer of variable annuities, acting on behalf of a broker-dealer, to conduct database searches for lost securityholders. The letter stated that if the insurance company obtains a securityholder's new address, the securityholder is no longer deemed a lost securityholder. See: SEC No-Action Letter.