At FINRA's 2019 Annual Meeting in Washington, DC, senior FINRA staff indicated that the organization hopes to close all district office locations over the next several years as leases expire in order to cut real estate costs to the self-regulatory organization. Specific mention was made to indicate that FINRA hopes to run the entire organization out of Washington, DC.
Also at the Annual Meeting, there was discussion regarding FINRA’s upcoming rule revision that will permit broker/dealers to conduct branch reviews remotely. No final rule has been issued as of this date.
Regulatory Roundup – 2nd Quarter 2019
The following are some, but not all, of the notices issued by regulatory authorities in the 2nd quarter 2019.
FINRA
FINRA Rule 4110(a) states in part: “When necessary for the protection of investors or in the public interest, FINRA may, at any time or from time to time with respect to a particular carrying or clearing member or all carrying or clearing members, pursuant to authority exercised by FINRA's Executive Vice President charged with oversight for financial responsibility, or his or her written officer delegate, prescribe greater net capital or net worth requirements than those otherwise applicable, including more stringent treatment of items in computing net capital or net worth, or require such member to restore or increase its net capital or net worth. In any such instance, FINRA shall issue a notice pursuant to Rule 9557.”
This means that if FINRA believes a broker/dealer has too many rogue brokers or brokers with a less than stellar ‘scorecard’, FINRA may unilaterally raise the broker/dealer’s net capital requirement by issuing notice to such firm. Firms that receive such a notice only have two business days to request a hearing regarding the increase in net capital.
Thus far FINRA has not issued any ‘safe harbor’ provisions for avoiding a net capital requirement increase.
http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=8769
FINRA is seeking comments through September 7, 2019 on a proposal to expand the alternative trading system (ATS) volume data that it publishes on its website to include information on transactions in corporate bonds and agency debt securities that occur within at ATS and are reported to FINRA’s Trade Reporting and Compliance Engine (TRACE).
https://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-19-22.pdf
Broker/Dealers are reminded of their obligations under SEA Rule 15c2-11 and FINRA Rule 6432 regarding quotations in the securities of foreign private issuers that rely on SEA Rule 12g3-2(b).
http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-19-09.pdf
FINRA issues guidance regarding communications related to departing registered representatives.
http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-19-10.pdf
FINRA updated the Interpretations of Financial and Operational Rules relating to SEA Rule 15c3-1 regarding Underwriting Backstop Agreements.
http://www.finra.org/sites/default/files/Regulatory-Notice-19-11.pdf
Guidance has been issued regarding suspicious activity monitoring and reporting obligations.
http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-19-18.pdf
SEC
Auditor Independence with respect to certain loans or debtor-creditor relationships.
https://www.sec.gov/rules/final/2019/33-10648.pdf
SEC issues final Regulation Best Interest (Reg BI) Rule.
https://www.sec.gov/rules/final/2019/34-86031.pdf
Amendment to single issuer exemption for broker/dealers.
https://www.sec.gov/rules/final/2019/34-86073.pdf
MSRB
MSRB eliminated Rule G-29 effective June 3, 2 019.
http://msrb.org/~/media/Files/Regulatory-Notices/Announcements/2019-12.ashx??n=1
Request for comment on MSRB Rule G-23 on activities of dealers acting as financial advisors. Comments due by August 19, 2019.
http://msrb.org/~/media/Files/Regulatory-Notices/RFCs/2019-13.ashx??n=1
