Changes to FINRA Rulemaking Process

Background

In response to the March 2017 Special Notice on Engagement issued as part of FINRA360, FINRA received a number of comments and suggestions regarding engagement in connection with FINRA's rulemaking process. After carefully reviewing and analyzing the comments, FINRA is taking a number of actions to address the comments and suggestions that it received.

Rulemaking Process

Comments regarding the rulemaking process included suggestions to make the process more transparent, encourage engagement with the public and member firms, and improve accessibility to FINRA's responses to comments.

Increased Transparency

FINRA is committed to increasing transparency around its rulemaking process. For example, FINRA staff is previewing with its advisory committees upcoming proposed rulemakings, including anticipated timeframes for when the staff envisions discussing the proposed rulemakings with the committees and the FINRA Board.

FINRA also has broadened the responsibilities and membership of its Operations Advisory Committee (OAC) to increase the focus on operational and technical issues that arise with respect to rule implementation. Since OAC members are senior operational and compliance staff from a broad spectrum of firms, they will provide FINRA with substantive input on the impact of rule proposals on the middle and back office functions of firms.

FINRA is reviewing its Rule Filing Status Report page to provide comprehensive information regarding the status of proposed rule changes filed with the SEC. In addition, in the next few weeks FINRA will begin providing rule implementation dates on its Compliance Calendar.

Encouraging Engagement

FINRA actively seeks out and welcomes a dialogue with interested stakeholders on its rule proposals. Whether through informal processes or the more formal comment letter process, FINRA encourages those with views on its rule proposals to submit comments or discuss their feedback with the relevant FINRA staff. In order to elicit meaningful comment from interested stakeholders on its rule proposals, FINRA asks questions in its Regulatory Notices, and encourages interested stakeholders to respond to those questions, some of which result from discussions with FINRA's committees. These questions seek feedback on a wide range of issues related to the proposed rule, typically including its scope and substance, seeking feedback on regulatory options and potential impacts.

In addition, to provide interested stakeholders with sufficient time to comment on its rule proposals, FINRA has extended the default comment period from 45 to 60 days, while at the same time retaining flexibility to provide shorter or longer comment periods, if warranted.

Some commenters requested that FINRA provide a second round of comments on its rule proposals prior to filing a proposal with the SEC. Today, if there are significant changes to a rule proposal, FINRA often will seek comment on those amendments in a subsequent Regulatory Notice. In addition, if FINRA has made changes to a rule proposal in response to input from interested stakeholders, FINRA discusses those changes in the rule proposal, and any subsequent amendments, in filings with the SEC.

Improving Accessibility to FINRA's Responses to Comments

To make it easier to locate FINRA's responses to comments received on its Regulatory Notices, FINRA has begun cross-linking between the Regulatory Notice requesting comment and the FINRA rule filing containing FINRA's response to comments. In addition, FINRA has begun including in the Regulatory Notice announcing SEC approval of a rule change, a link to FINRA's response to comments received by the SEC after publication of the proposed rule change in the Federal Register. This change will make it easier for individuals to locate FINRA's response to comments and to see why comments were or were not incorporated into the final rule.

Regulatory Guidance

In recognition of the value that Frequently Asked Questions (FAQs), interpretations and other forms of guidance have in helping member firms comply with FINRA rules, FINRA is committed to publishing such guidance where appropriate. When developing new FAQs or interpretive guidance, FINRA staff may vet the FAQs and interpretive guidance with FINRA's committees, as well as other regulators as applicable, prior to publication. In addition, FINRA communicates the publication of new and updated FAQs and interpretive guidance in its weekly update email to member firms.

FINRA is also considering ways to improve the accessibility on FINRA's website to its rules and related FAQs and interpretive guidance, and plans to make improvements in this regard in 2018. In addition, as described in more detail in the "Retrospective Rule Review" section above, we continue to review whether FINRA rules or rule sets meet their intended investor-protection objectives.

Summary of Actions

  • Extending the default comment period for Regulatory Notices requesting comment on a proposed rule change from 45 to 60 days, while retaining flexibility to provid a longer or shorter comment period if warranted.
  • Previewing for the appropriate advisory committees upcoming proposed rulemakings.
  • Reviewing the Rule Filing Status Report page to provide comprehensive information regarding the status of proposed rule changes filed with the SEC.
  • Adding a new "Rule Filings" category to the Compliance Calendar.
  • Committed to publishing FAQs and interpretive guidance that have general applicability.
  • Including in the Regulatory Notice announcing SEC approval of a proposed rule change, a link to FINRA's response to comments received by the SEC after publication of the proposed rule change in the Federal Register.