Update: FINRA Board of Governors Meeting
February 13, 2014
Dear Executive Representative:
The FINRA Board of Governors met this week to discuss a number of issues, including several rulemaking items. A summary of the rule proposals, as approved by the Board, is included below.
Please take a moment to watch my video report with Lead Governor Jack Brennan, in which we talk about these items and give an overview of other issues addressed by the Board.
As usual, your comments are welcome.
Richard G. Ketchum
Chairman and CEO
Rulemaking Items Discussed at the February 2014 Board Meeting
BrokerCheck Link in Online Retail Communications With the Public
The Board authorized FINRA to seek comment in a Regulatory Notice on a revised proposal to amend FINRA Rule 2210 (Communications With the Public) to require firms to include a readily apparent reference and link to BrokerCheck on any member firm's website that is available to retail investors. In addition, the proposal would require a firm to include a readily apparent reference and link to BrokerCheck in any online retail communication that includes a professional profile of, or contact information for, an associated person, subject to specified conditions. The proposal would not apply to (1) electronic mail or text messages; (2) a retail communication that is posted on an online interactive electronic forum (such as a message board, Twitter feed or chat room); (3) a member firm that does not provide products or services to retail investors; or (4) a directory or list of associated persons limited to names and contact information.
Definitions of Public and Non-Public Arbitrators
The Board authorized FINRA to file with the SEC proposed amendments to the Customer and Industry Codes of Arbitration Procedure to refine and reorganize the definitions of "non-public" and "public" arbitrator. The amendments would, among other matters, provide that individuals who worked in the financial industry for any duration during their careers would always be classified as non-public arbitrators, and professionals who represent investors or the financial industry as a significant part of their business would also be classified as non-public, but could become public arbitrators after a cooling off period. The amendments would reorganize the definitions to make it easier for arbitrator applicants and parties, among others, to determine the correct arbitrator classification.
Expungement of Customer Dispute Information
The Board authorized FINRA to file with the SEC proposed FINRA Rule 2081 (Prohibited Conditions Relating to Expungement of Customer Dispute Information). The proposal would prohibit firms and associated persons from conditioning or seeking to condition settlement of a dispute with a customer on, or otherwise compensating the customer for, the customer's agreement to consent to, or not to oppose, the firm's or associated person's request to expunge the customer dispute information from FINRA's Central Registration Depository (CRD®) system. The proposed rule will help ensure that the CRD system continues to contain information that is critical to investor protection.
Temporary Cease and Desist Orders, Expedited Proceedings
The Board authorized FINRA to file with the SEC proposed amendments to FINRA Rule Series 9800 (Temporary Cease and Desist Orders), Rule Series 9550 (Expedited Proceedings) and related rules in the Code of Procedure. The proposed amendments would (1) amend the evidentiary standard for issuing a temporary cease and desist order (TCDO); (2) reduce administrative burdens in TCDO proceedings; (3) adopt an expedited proceeding to address failures to comply with a TCDO or permanent cease and desist order; and (4) harmonize the rules governing service of documents in TCDO proceedings and expedited proceedings.