Update: FINRA Board of Governors Meeting
May 11, 2017
Dear Executive Representative:
The FINRA Board of Governors met this week, and I am writing to update you regarding the rulemaking actions taken, which are outlined below and addressed in the Board video report.
I would also like to call your attention to recently published Notices that are part of a new initiative called FINRA360, in which FINRA is conducting a comprehensive review of our operations and programs.
First, we issued a Special Notice in March seeking comment on how FINRA can enhance our engagement activities, particularly through our advisory committees and rulemaking processes. The comment period is now open until June 19, and we very much hope to hear from you and as many firms as possible.
Second, we have posted Regulatory Notice 17-14, requesting your feedback on FINRA’s existing rules, operations and administrative processes that address capital-raising activities, including recent additions to our rules regarding capital acquisition brokers and funding portals. Along with 17-14, FINRA issued two related Regulatory Notices—17-15, seeking comment on our corporate financing rule, and 17-16, requesting comment on a proposed safe harbor for equity and debt analyst rules. We hope firms engaged in the capital formation process will take the time to comment.
As you may know, next week is FINRA’s Annual Conference in Washington, D.C. I am excited to hear from many of you and talk to members from across the country about all the many developments FINRA is undertaking in the coming year. I look forward to seeing you there.
Robert W. Cook
President and CEO
Rulemaking Items Discussed at the May 2017 Board Meeting
The Board authorized steps designed to heighten the oversight of high-risk brokers and the firms that employ them, including (1) proposed amendments to FINRA’s Sanction Guidelines; (2) proposed amendments to the Rule 9200 Series (Disciplinary Proceedings); (3) publication of a Regulatory Notice proposing amendments to the Rule 9520 Series (Eligibility Proceedings); (4) publication of a Regulatory Notice rearticulating heightened supervision obligations under FINRA Rule 3110 (Supervision); (5) amendments to Schedule A of the FINRA By-Laws relating to fees for statutory disqualification eligibility applications; (6) publication of a Regulatory Notice proposing amendments to FINRA Rule 8312 (FINRA BrokerCheck Disclosure) to disclose a member’s status as a “taping firm” under FINRA Rule 3170; and (7) clarifications to FINRA’s examination waiver guidelines. The Board also discussed additional steps to address high-risk brokers that will be considered at a subsequent Board meeting.
Liquidity Reporting and Notification
The Board authorized FINRA to publish a Regulatory Notice seeking comment on: (1) proposed amendments to FINRA Rule 4521 (Notifications, Questionnaires and Reports) that would require larger member firms to notify FINRA no more than 48 hours after certain events that signal an adverse change in liquidity risk; and (2) a new supplemental liquidity schedule (SLS) that larger member firms would file as a supplement to the FOCUS Report. On the proposed new SLS, these firms would report information related to specified financing transactions and other sources or uses of liquidity. The information would include among other things maturity, collateral types and large counterparties.
Unpaid Arbitration Awards
The Board authorized FINRA to publish a Regulatory Notice soliciting comment on proposed amendments to FINRA’s Code of Arbitration Procedure for Customer Disputes to expand a customer’s option to withdraw an arbitration claim and file in court, even if a mandatory arbitration agreement applies to the claim, to situations where a member firm becomes inactive during a pending arbitration, or where an associated person becomes inactive either before a claim is filed or during a pending arbitration, and related changes to allow customers to amend pleadings, postpone hearings, request default proceedings and receive a refund of filing fees under such situations. In addition, the Board approved proposed amendments to the Uniform Application for Securities Industry Registration or Transfer (Form U4) to expand the Form U4 to elicit information from registered representatives that do not pay arbitration awards, settlements and judgments in full in accordance with their terms. The Board also discussed additional steps to address unpaid arbitration awards that will be considered at a subsequent Board meeting.