Changes to FINRA Advisory Committees: Phase 1

Background


In March 2017, FINRA issued a Special Notice on its engagement programs as part of FINRA360, its comprehensive review of its operations. In response to the Special Notice, FINRA received a number of comments and suggestions regarding the usefulness of some advisory committees, their membership and their effectiveness as a vehicle for dialogue between FINRA and member firms. After carefully reviewing and analyzing the comments, FINRA is taking a number of actions to address the comments and suggestions.

Addressing Technology-related Issues


Some comments suggested altering the focus of FINRA’s Technology Advisory Committee (FTAC), which has served primarily as a forum for FINRA to communicate its technology-related updates to members rather than a forum to provide guidance to FINRA on its technology-related decisions. Other commenters questioned whether the roles of FTAC and the Operations Advisory Committee (OAC) overlap.

In light of the limited role of FTAC and in consideration of overlap with OAC, FINRA is retiring the FTAC. To enhance the dialogue between FINRA and member firms on important technical topics, FINRA will introduce an annual “CIO Summit.” The CIO Summit will provide a venue to discuss and receive candid feedback from member firms’ CIOs or their equivalents on important technical topics within the broker-dealer community. In addition, as part of its Innovation Outreach Initiative, FINRA has established a FinTech Industry Committee to help facilitate an ongoing dialogue around FinTech issues.

Operational Impact of Rule Changes


Several comments addressed the need for an advisory committee to focus on operational and technical issues that arise with respect to rule implementation.

Rather than establishing a new committee for the specific purpose of providing insight on operational and technology implications of rule changes, FINRA is broadening the authority and membership of the existing Operations Advisory Committee (OAC) specifically to provide such feedback. Existing OAC members are senior operational and compliance staff from a broad spectrum of firms, and can provide substantive input on the impact of FINRA proposals on the middle and back office functions of firms.

Addressing Issues of Interest to Firms


There were numerous suggestions that FINRA establish new committees to address specific topics, including annuity products, private placements and municipal advisor issues. FINRA has updated the enabling resolutions and public descriptions of certain advisory committees on its website to clarify which committees are available as forums to discuss these issues. Additionally, in December, the FINRA Board of Governors will explore the creation of new committees, focusing on issues raised by commenters.

Committee Transparency


Numerous commenters supported publishing advisory committees’ rosters in various formats to help members and the public gain a better perspective of how individual firms are represented across multiple committees. Currently, FINRA posts committee rosters on its website for the SFAB, the National Arbitration and Mediation Committee (NAMC), the District Committees and the National Adjudicatory Council.

FINRA has published the name and firm affiliation of each advisory committee member on its website. Interested parties may contact committee members via the contact information for the individual FINRA staff committee liaisons.

FINRA also intends to provide additional transparency regarding committee views by directing staff to include additional detail in FINRA rule filings and Regulatory Notices about committees that reviewed the proposal and the nature of their review.

Committee Participation


FINRA received a number of comments requesting greater opportunities for interested industry members to join various committees and supporting greater transparency about the committee member nomination and selection process.

FINRA plans to enhance the information currently provided on the “Get Involved” and FINRA Committee pages on FINRA.org to include more information on the selection process for appointed seats on various committees. We also plan to issue an annual notice about the committees and the application process for interested individuals to be considered for vacancies. In addition, we will widen the distribution list for election-related Notices to include each firm’s Chief Executive Officer, Chief Compliance Officer and Chief Operating Officer.

Additional Initiatives


In early 2018, FINRA will introduce an online portal through which interested individuals can submit indications of interest for serving on FINRA committees. In addition, FINRA management is conducting a holistic review of FINRA advisory and district committees and will discuss further enhancements with the FINRA Board of Governors in coming months.

Actions (as of 11/13/17)


  • Retiring the FINRA Technology Advisory Committee and replacing it with annual “CIO Summits.”
  • Expanding the charter of the Operations Advisory Committee to provide a venue to obtain important insights regarding rule implementation from a people, process, and technology perspective.
  • Amending the enabling resolutions of several other advisory committees to clarify, among other things, the scope of the subject matter reviewed by the committees.
  • Updating the public descriptions of certain advisory committees on FINRA’s website to clarify which committees are available as forums for discussion of specific issues.
  • Publishing rosters of each advisory committee, listing the name and firm affiliation of each advisory committee member on the new Governance page on FINRA.org.
  • Publishing the descriptions and staff liaison contacts for ad hoc committees.
  • Providing additional detail in FINRA rule filings and Regulatory Notices regarding the committees that reviewed the proposal and the nature of their review.
  • Issuing an annual notice about the committees and the application process for interested individuals to be considered for vacancies.
  • Emailing Election Notices to a broader distribution group, including each firm’s Chief Executive Officer, Chief Compliance Officer and Chief Operating Officer.