Report from FINRA Board of Governors Meeting – May 2018

Board Approves Rule Proposals and Previews Annual Financial Report

WASHINGTON – FINRA’s Board of Governors held its second meeting of 2018 on May 9-10 in New York, where it approved two new rule proposals and previewed a draft of the organization’s Annual Financial Report, which FINRA issues each year to provide transparency into its finances. The 2017 report will be published in June.

The FINRA Board, which meets five times annually, also met with three officials from the Securities and Exchange Commission (SEC): Pete Driscoll, Director of the SEC’s Office of Compliance Inspections and Examinations (OCIE); Kevin Goodman, Associate Director of OCIE’s FINRA and Securities Industry Oversight (FSIO) group; and Helene McGee, Deputy Associate Director of FSIO. FINRA has hosted senior leaders from the SEC at each of the last three meetings.

“The SEC’s ongoing, rigorous oversight of FINRA is a critical part of ensuring FINRA’s effectiveness and efficiency as a self-regulatory organization,” said FINRA CEO Robert W. Cook. “We appreciate that Pete, Kevin and Helene could join us to continue the discussion around our ongoing relationship with the Commission.”

Throughout the two-day meeting, FINRA staff provided the Board with various operational updates, including progress reports on the ongoing FINRA360 organizational improvement initiative and the consolidation of FINRA’s Enforcement Department, and updates on FINRA’s high-risk registered representative examination program and cross-market surveillance program. In addition, the Board discussed the regulatory landscape, including the SEC’s proposed Regulation Best Interest. The Board also heard a report regarding the work of the Consolidated Audit Trail (CAT) consortium, of which FINRA is a member.

The Nominating and Governance Committee of the FINRA Board also held discussions related to FINRA’s governance and membership engagement. The committee discussed whom it would nominate for election to fill upcoming Board vacancies, with an announcement planned in the coming weeks via an Election Notice. In addition, that committee conducted its annual review of the membership of FINRA’s advisory committees. The terms of new advisory committee members begin on June 1, 2018.

Rulemaking

The Board approved two rule proposals to be published by FINRA for comment or filed with the SEC:

Discovery of Insurance Information in Arbitration – FINRA’s Board of Governors approved the publication of a Regulatory Notice seeking comment on proposed amendments to the Discovery Guide’s Firm/Associated Persons Document Production List to require firms and associated persons, upon request, to produce documents concerning third-party insurance coverage. The proposal seeks to address firms’ concerns about prejudice by limiting the circumstances under which insurance coverage information could be presented to arbitrators.

TRACE Dissemination of Agency Debt Securities – The Board also approved proposed amendments to Trade Reporting and Compliance Engine (TRACE) rules to expand the definition of Agency Debt Security to address a new issuance structure by government-sponsored enterprises and modify dissemination protocols to apply the $5 million volume dissemination cap to all Agency Debt Securities.

About FINRA

FINRA is dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org