Update: FINRA Board of Governors Meeting
April 24, 2014
Dear Executive Representative:
This week, the FINRA Board of Governors met to discuss a number of items, including several rule proposals. A summary of the 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 the proposals we think will be of most interest to you, as well as the Board's discussion of high-frequency trading and FINRA's role in curbing manipulative activity.
As usual, your comments are welcome.
Richard G. Ketchum
Chairman and CEO
Rulemaking Items Discussed at the April 2014 Board Meeting
The Board authorized FINRA to file with the SEC a proposed amendment to FINRA Rule 3110 (Supervision) regarding background investigations of applicants for registration. Specifically, the amendment would adopt Rule 3110(e) (Responsibility of Member to Investigate Applicants for Registration) in the consolidated FINRA rulebook and delete the corresponding NASD and Incorporated NYSE rules relating to background investigations. The amendment would also require firms to adopt written procedures that are reasonably designed to verify the accuracy and completeness of the information contained in an applicant's Form U4 no later than 30 days after the form is filed with FINRA, including, at a minimum, procedures to conduct a search of reasonably available public records to verify the accuracy and completeness of the information.
Customer Account Statements
The Board authorized FINRA to publish a Regulatory Notice soliciting comment on proposed new FINRA Rule 2231 (Customer Account Statements). The proposal would largely transfer unchanged current NASD Rule 2340 (Customer Account Statements) and Incorporated NYSE Rule 409 (Statements of Accounts of Customers) into the consolidated FINRA rulebook as FINRA Rule 2231. The proposal (1) maintains the quarterly account statement delivery requirement in the current rule; (2) adopts supplementary material from NYSE Rule 409 and new supplementary material to clarify application of the proposed rule; and (3) allows customers to direct the transmission of customer account statements and other documents to third parties, provided the member firm sends duplicates of the account statements and other documents directly to the customer.
Panelist Pool Expansion for Disciplinary Hearings
The Board authorized FINRA to file with the SEC proposed amendments to FINRA Rules 9231 (Appointment by the Chief Hearing Officer of Hearing Panel or Extended Hearing Panel or Replacement Hearing Officer) and 9232 (Criteria for Selection of Panelists and Replacement Panelists) of the Code of Procedure. The amendments would allow any person associated with a member firm, or who has retired from a member firm, who currently serves or previously served on a FINRA Advisory Committee—and who is not a current member of the National Adjudicatory Council or a director or a governor—to be eligible to serve as a panelist on a Hearing Panel or Extended Hearing Panel.
Public Repository of FINRA Form 211 Information
The Board authorized FINRA to publish a Regulatory Notice to solicit comment regarding the establishment of a public repository of cleared Form 211 information and to submit a proposed rule change to the SEC to establish the repository.