Summary of Regulatory Notice 21-17 Feedback

In April 2021, FINRA published Regulatory Notice 21-17 seeking feedback on any aspects of our rules, operations and administrative processes that may create unintended barriers to greater diversity and inclusion in the broker-dealer industry or that might have unintended disparate impacts on those within the industry. In response, FINRA received 33 comment letters spanning a broad range of issues. Commenters generally appreciated and supported FINRA’s efforts to review for FINRA regulatory barriers to diversity and inclusion. FINRA staff are evaluating and discussing some of the suggested changes with our regulatory partners at the SEC and the states.  

The most common themes raised in the comments include:

• Qualification Exams: Some commenters supported the amendments to FINRA Rules 1210 (Registration Requirements) and 1240 (Continuing Education (CE) Requirements), particularly the rule change that allows individuals to elect to maintain their qualifications through CE for up to five years after leaving the industry. Some commenters suggested expanding the availability of qualification exams to non-associated persons beyond the Securities Industry Essentials (SIE) Exam to expand the pool of potential hires.
• Registered Representative Background Data: Several commenters stated that the current collection and publication of registered representative background data may create an unintended barrier to greater diversity in the broker-dealer industry and suggested eliminating the requirement to report some criminal and financial distress events (e.g., events that occurred long ago, non-violent crimes, and charges that did not lead to a conviction). Similarly, some commenters also recommended that FINRA support amending the “statutory disqualification” definition in Section 3(a)(39) of the Securities Exchange Act or modify the conditions for approval via a FINRA eligibility proceeding to make it less burdensome for firms to employ an individual subject to a non-investment-related disqualification.
• Remote Work, Inspections and Testing: Several commenters suggested that facilitating greater use of remote work, inspections and testing would lower barriers to entry and promote diversity and inclusion.
• Financial and Business Barriers: One commenter suggested that certain FINRA and SEC rules, such as FINRA Uniform Practice Rule 11880 (Settlement of Syndicate Accounts) providing a 90-day syndicate settlement deadline combined with the treatment of syndicate receivables under the SEC’s Net Capital Rule, disproportionately affect smaller firms, which include minority-, women-, and veteran-owned broker-dealers (MWVBDs), constraining their ability to participate in opportunities that would grow their business. 
• Data Collection: Some commenters supported expanding the types of data collected to evaluate progress in diversity and inclusion efforts. 
• Supporting Accessibility: Several commenters suggested supporting accessibility for limited English proficiency individuals, including providing required disclosures and other materials and administering qualification exams in other languages to promote broader access to the industry and providing a regulatory roadmap for firms on the use of languages other than English.