What specific FINRA rules should be a focus for modernization based on their economic costs and benefits; changes in markets, products, services, or technology; or otherwise? What groups of FINRA requirements should be a focus? Please include FINRA rules that may be mandated or derived from a statutory or other non-FINRA regulatory requirement applicable to FINRA or its members.
Rules 3110, 3120, 3130, 3210, 3270, 3280, 1010, 4590, 1210, 1220, and 1230 should be in focus.
What changes to FINRA’s rules or other requirements applicable to FINRA members would facilitate innovation and the development and deployment of new technologies and services that enable them to better serve markets and investors?
Lessening of barriers of entry. Much innovation comes from technology but today people with coding skills would rather work in tech than sit for Series exams that may not have much to do with their actual jobs. The rules seemed to be based on regulating salespeople more than other types of persons, so it would be a good idea to reassess why we have so many categories of registration.
There should be separate rulesets or clearer guidance how FINRA rules apply to firms with limited businesses. Another commenter introduced the idea of NCASFs, which seems like an approach that could work. Similarly, now that most proprietary trading firms must be FINRA members, it doesn’t make sense to apply FINRA’s rules that have their roots in customer protection to firms that have no customers. Many FINRA rules stem from measures to address specific bad behavior, which may or may not still be necessary in light of how business models have changed over time. If the original intent behind a rule is no longer a high concern, we should consider eliminating it. Similarly, FINRA should revisit the U4 process, particularly where the guidance concerning the form doesn’t quite align with FINRA rules. The filing process is quite antiquated and FINPRO seems like it could be the way of the future, but it also seems hamstrung by dependence on the existing way things are done.
Are there gaps, risks or other challenges created by changes in markets, products, services or technology where additional guidance or standards would better enable member firms to serve investors, consistent with investor protection and market integrity?
The rules and guidance should be more clearly organized between what are must do items and ones that are best practices, but not something that is required if it doesn’t make sense for your particular business. FINRA should also empower its staff to provide more concrete guidance.
Where does FINRA’s oversight of its member firms interact with other non-FINRA regulatory requirements in a manner that should be a focus for modernization, based on unnecessary or duplicative burdens, insufficiently tailored requirements, member firm or investor confusion, or otherwise? For example, what differences between FINRA’s requirements for broker-dealers and the requirements that apply for investment advisers engaging in similar activities should be a focus for modernization?
There should be one exam program instead of one for each SRO. The exchange SROs typically focus on very nuanced requirements of their specific rulebooks. This type of complexity should be reduced. Simply the registration categories and specify more clearly who needs to be registered and why. Same for Associated Persons.
There should be consideration given where a firm is subject to multiple regulators, e.g., SEC, NFA, and CFTC. It seems reasonable that there should be some overlap and some due should be given where the requirements are similar. There should be some way of resolving what is reasonable in terms of principles based rules vs. prescriptive rules. There should be a review process for inquiries to root out overreach and unreasonable requests; too often I have seen requests under the guise of “just gathering information” that are a lot of work to respond to without any apparent connection to anything.
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Thomas Marcone Comment On Regulatory Notice 25-04
What specific FINRA rules should be a focus for modernization based on their economic costs and benefits; changes in markets, products, services, or technology; or otherwise? What groups of FINRA requirements should be a focus? Please include FINRA rules that may be mandated or derived from a statutory or other non-FINRA regulatory requirement applicable to FINRA or its members.
Rules 3110, 3120, 3130, 3210, 3270, 3280, 1010, 4590, 1210, 1220, and 1230 should be in focus.
What changes to FINRA’s rules or other requirements applicable to FINRA members would facilitate innovation and the development and deployment of new technologies and services that enable them to better serve markets and investors?
Lessening of barriers of entry. Much innovation comes from technology but today people with coding skills would rather work in tech than sit for Series exams that may not have much to do with their actual jobs. The rules seemed to be based on regulating salespeople more than other types of persons, so it would be a good idea to reassess why we have so many categories of registration.
There should be separate rulesets or clearer guidance how FINRA rules apply to firms with limited businesses. Another commenter introduced the idea of NCASFs, which seems like an approach that could work. Similarly, now that most proprietary trading firms must be FINRA members, it doesn’t make sense to apply FINRA’s rules that have their roots in customer protection to firms that have no customers. Many FINRA rules stem from measures to address specific bad behavior, which may or may not still be necessary in light of how business models have changed over time. If the original intent behind a rule is no longer a high concern, we should consider eliminating it. Similarly, FINRA should revisit the U4 process, particularly where the guidance concerning the form doesn’t quite align with FINRA rules. The filing process is quite antiquated and FINPRO seems like it could be the way of the future, but it also seems hamstrung by dependence on the existing way things are done.
Are there gaps, risks or other challenges created by changes in markets, products, services or technology where additional guidance or standards would better enable member firms to serve investors, consistent with investor protection and market integrity?
The rules and guidance should be more clearly organized between what are must do items and ones that are best practices, but not something that is required if it doesn’t make sense for your particular business. FINRA should also empower its staff to provide more concrete guidance.
Where does FINRA’s oversight of its member firms interact with other non-FINRA regulatory requirements in a manner that should be a focus for modernization, based on unnecessary or duplicative burdens, insufficiently tailored requirements, member firm or investor confusion, or otherwise? For example, what differences between FINRA’s requirements for broker-dealers and the requirements that apply for investment advisers engaging in similar activities should be a focus for modernization?
There should be one exam program instead of one for each SRO. The exchange SROs typically focus on very nuanced requirements of their specific rulebooks. This type of complexity should be reduced. Simply the registration categories and specify more clearly who needs to be registered and why. Same for Associated Persons.
There should be consideration given where a firm is subject to multiple regulators, e.g., SEC, NFA, and CFTC. It seems reasonable that there should be some overlap and some due should be given where the requirements are similar. There should be some way of resolving what is reasonable in terms of principles based rules vs. prescriptive rules. There should be a review process for inquiries to root out overreach and unreasonable requests; too often I have seen requests under the guise of “just gathering information” that are a lot of work to respond to without any apparent connection to anything.