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On June 19, the Financial Industry Regulatory Authority (FINRA) issued a regulatory notice that it had amended its Capital Acquisition Broker (CAB) suitability rule and rules governing non-cash compensation to align with the Securities and Exchange Commission’s Regulation Best Interest (Reg BI) with respect to the requisite standards of conduct.
Continue Reading SEC Approves Changes to FINRA’s Suitability and Non-Cash Compensation Rules

The Financial Industry Regulatory Authority (FINRA) is filing with the Securities and Exchange Commission a proposed rule change to amend the Capital Acquisition Broker (CAB) Rules governing the qualification, registration and continuing education of associated persons of CABs (CAB Rules 119-125). The proposed rule change reflects new consolidated FINRA qualification and registration rules and changes to its continuing education requirements, which took effect in October 2018.
Continue Reading FINRA Files Proposed Rule Change to CAB Rules Governing Qualification, Registration and Continuing Education of Associated Persons of CABs

On August 17, the Financial Industry Regulatory Authority (FINRA) proposed rule amendments to apply its established “pay-to-play” rules to capital acquisition brokers (CABs) that engage in distribution to, or solicitation of, government entities on behalf of investment advisers for compensation.

CABs are FINRA members that are engaged in a limited range of broker-dealer activities, such as advising firms on capital raising and corporate restructuring or acting as a private placement agent to institutional investors (subject to certain conditions). CABs elect to be treated as such and are subject to a separate set of streamlined FINRA rules. A Katten advisory discussing CABs and the rules applicable to CABs is available here.
Continue Reading FINRA Proposes Rule Change to Subject Capital Acquisition Brokers to Pay-to-Play Rules

The Securities and Exchange Commission is seeking comments on a Financial Industry Regulatory Authority proposal to create a set of rules for FINRA member firms that meet the definition of “capital acquisition broker” (CAB) and elect to be governed by the rules. Under the proposed rules, qualifying firms would be eligible to receive transaction-based compensation and would be subject to reduced regulatory burdens. The reduced regulatory burdens under the proposed rule change include that CABs would not be subject to the provisions of FINRA’s supervision rule that require (1) annual compliance meetings, (2) review and investigation of transactions, and (3) supervisory procedures for supervisory personnel. In addition, the chief executive officer of a member firm that qualifies and elects to be treated as a CAB would not be required to certify the firm’s compliance program annually, and the proposed rules eliminate the requirement to maintain a business continuity plan. However, CABs still would need to comply with some FINRA rules that may be burdensome, including net capital requirements and obtaining audited financial statements.
Continue Reading Notice of Filing of a Proposed Rule Change To Adopt the Capital Acquisition Broker Rules