FINRA Seeks Comment on Proposals for Consolidated Rules Governing Financial Responsibility, Supervision, Books & Records, Investor Education
The four areas covered by the proposals are Financial Responsibility, Supervision and Supervisory Controls, Books and Records and Investor Education and Protection. In addition, FINRA shortly will be submitting a filing to the Securities and Exchange Commission (SEC) proposing to move NASD marketplace and procedural rules into the new FINRA rulebook. This filing - series 4000 through 10000 and series 12000 through 14000 - would transfer these rules without material change in terms of substance, though many rules would be renumbered and reorganized into a more logical and more user-friendly framework.
Series 4000 through 7000 generally involve regulatory requirements and fees for quoting, trading, reporting, clearing and comparing over-the-counter transactions in NMS stocks, OTC equity securities and certain eligible debt securities. Series 8000 involves investigations and sanctions. Series 9000 involves disciplinary procedures. Series 10000, 12000, 13000 and 14000 involve Dispute Resolution (arbitration and mediation) procedures. After the filing is made, the SEC will seek public comment on the proposal.
Following are the rule proposals FINRA is posting for public comment today. The deadline for submitting comments is June 13, 2008.
- Financial Responsibility. As part of the process to develop a new consolidated rulebook FINRA is requesting comment on a proposed set of financial responsibility rules based in part on existing NASD and Incorporated NYSE Rules and would govern members' financial responsibility requirements. They would also afford registered firms served with a notice under the financial responsibility rules an expedited review proceeding. For details, see Regulatory Notice 08-23.
- Supervision and Supervisory Controls. FINRA is requesting comment on proposals that would provide firms with greater flexibility as to the manner (but not the substance) in which they can meet their supervisory and supervisory control procedures obligations . For details, see Regulatory Notice 08-24.
- Books and Records. FINRA is requesting comment on proposals that would rewrite existing books and records provisions with three goals in view: to streamline the books and records rules to make them as clear as possible; to group books and records requirements along similar subject matter lines to make finding them a more intuitive process and to provide firms with a better understanding of the regulatory scheme; and, to eliminate those books and records requirements contained in the current NASD and NYSE Rules that have become obsolete or otherwise duplicative. For details, see Regulatory Notice 08-25.
- Investor Education and Protection. FINRA is proposing to adopt a new FINRA rule based on NASD Rule 2280 that would require member firms, with certain exceptions, to provide customers with FINRA's Web site address and information regarding FINRA's BrokerCheck program at least once every calendar year. The proposal slightly narrows the exceptions currently in the rule. For details, see Regulatory Notice 08-26.
FINRA was created last July through the consolidation of NASD and the member regulation, enforcement and arbitration operations of NYSE. Currently, the more than 5,100 FINRA-registered securities firms must comply with NASD rules. The nearly 200 firms that are also registered with the NYSE must also comply with the NYSE member conduct rules that were incorporated by FINRA pursuant to the consolidation. The creation of a single, unified rulebook is viewed as one of the major efficiencies the securities industry will enjoy as a result of the regulatory consolidation.
Creation of a single, unified FINRA Rulebook will be accomplished in phases, with substantial completion over the next year. The process for rulebook consolidation is outlined in a FINRA Information Notice posted in March.
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business-from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.finra.org.