The Financial Industry Regulatory Authority (FINRA) is seeking comment with respect to proposed amendments (the “Proposed Amendments”) to FINRA Rule 2210 (Communications with the Public). The Proposed Amendments would create an exception to FINRA’s general prohibition on projected performance and would be applicable to all FINRA-member firms. The Proposed Amendments would allow firms to present to prospective and current customers illustrations that show the projected performance of an asset allocation or investment strategy (although it remains impermissible to present the projected performance of individual securities).
Continue Reading FINRA Proposes Amendments to Rule Pertaining to Communications with the Public

The Securities and Exchange Commission has approved amendments to Financial Industry Regulatory Authority (FINRA) Rule 2232 (Customer Confirmations) that require FINRA-member firms to disclose additional information to retail customers with respect to transactions in certain fixed income securities (the “Final Rules”). The Final Rules require the disclosure in customer confirmations of (1) the mark-up or mark-down applicable to certain transactions in corporate or agency debt securities; (2) a reference and hyperlink (if the confirmation is electronic) to the website established by FINRA, which contains publicly available trade data; and (3) the execution time of the transaction such that a customer may locate its individual transactions when accessing FINRA’s website.
Continue Reading SEC Approves Pricing Disclosures for Fixed Income Securities

The Financial Industry Regulatory Authority (FINRA) has filed proposed rules with the Securities and Exchange Commission to adopt FINRA Rule 6800 Series, which is designed to implement the compliance rule regarding the National Market System (NMS) Plan Governing the Consolidated Audit Trail.

Pursuant to Regulation NMS, various exchanges have filed with the SEC a plan to create, implement and maintain a consolidated audit trail (CAT) to capture information related to customers and order events for transactions in NMS securities and over-the-counter (OTC) equity securities. The CAT will capture order information across all markets and throughout the life of an order (from inception to execution). Each exchange must enforce compliance with the plan with respect to its members or trading permit holders.
Continue Reading FINRA Files Proposed Rules With The SEC To Implement Consolidated Audit Trail Plan

The Securities and Exchange Commission has approved the Municipal Securities Rulemaking Board’s (MSRB’s) revisions to its customer complaint and related recordkeeping rules. The MSRB has modernized the rules and extended their application to municipal advisors as follows:

  • The MSRB extended its customer complaint recordkeeping requirements to all municipal advisors, including non-solicitor and solicitor municipal advisors.

On January 18, the Financial Industry Regulatory Authority, responding to increased industry interest in distributed ledger technology (DLT) known as “Blockchain,” issued a report on the uses and potential implications of this technology in the securities industry.

The report provides an overview of DLT and its applications in various markets as well as discussing governance, operational structure and security concerns. The report also discusses regulatory challenges for broker-dealers, noting that a DLT network may create new ways to hold customer funds, impact a member firm’s net capital requirements, afford market participants the ability to develop and maintain certain records on the network itself, and alter clearance and settlement processes.
Continue Reading FINRA Issues Report on Implications of Blockchain

On January 12, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) released its 2017 examination priorities, which seek to address: (1) the protection of retail investors; (2) risks related to elderly and retiring investors; and (3) market-wide risks.
Continue Reading 2017 Examination Priorities Announced by the SEC

On January 4, the Financial Industry Regulatory Authority published its Annual Regulatory and Examinations Letter (Priorities Letter), which outlines the key areas on which FINRA intends to focus during its 2017 exam period. The areas of emphasis set forth in the Priorities Letter are based on observations from FINRA’s regulatory programs and additional input from investor advocates, member firms and other regulators.
Continue Reading FINRA Publishes 2017 Regulatory and Examination Priorities Letter

The Financial Industry Regulatory Authority has issued a notice clarifying the “as soon as practicable” requirement under FINRA reporting rules for transactions effected over-the-counter (OTC). As background, FINRA rules provide that OTC trades in national market system (NMS) securities that are executed during the hours that a FINRA trade reporting facility is open must be reported for dissemination purposes as soon as practicable, but no later than 10 seconds, following trade execution.
Continue Reading FINRA Interprets “As Soon As Practicable” Requirement Under Trade Reporting Rules

On November 22, the Chicago Board Options Exchange, Inc. (the “Exchange” or CBOE) filed a proposal to amend CBOE Rules 6.45A, 6.45B and 6.73, specifying that, for transactions between floor brokers and market makers, the “initiator” of an order is the party responsible for ensuring that transactions are executed in accordance with open outcry priority and allocation requirements and trade-through prohibitions. The Exchange’s current rules and interpretations regarding responsibility for trade-throughs were considered ambiguous, and the Exchange has taken the position in enforcement actions that all parties to a trade are liable for any trade-through violation. The filing specifically states that in a typical open outcry transaction, it is the floor broker representing an order and requesting quotes from market makers in the trading crowd. In that circumstance, the floor broker will be deemed to have initiated the transaction.
Continue Reading CBOE Files Proposal To Amend Priority Rules

On November 15, the Securities and Exchange Commission approved the consolidated audit trail (CAT) plan proposed by the self-regulatory organizations (SROs).  As specified by the CAT plan, the CAT will be designed to create a central repository to track all trading activity in national market system (NMS) securities, including options and equity securities.
Continue Reading SEC Approves Plan To Create Consolidated Audit Trail