July 2018 Board Update
FINRA President and CEO Robert Cook, Chairman Bill Heyman, Board members and FINRA staff provide updates on the July 2018 FINRA Board of Governors meeting.
July 25, 2018
FINRA’s Board of Governors met last week for the third time in 2018, this time in Washington, DC. I am writing to share with you some updates from our discussions.
By meeting in Washington, members of the Board had the opportunity to visit FINRA’s offices in Rockville, MD, to see some of our operations first-hand. In addition, the Board met with several policymakers, including Counselor to the Secretary of the Treasury Craig Phillips, and SEC Commissioners Hester Peirce and Robert Jackson. We appreciate their taking the time to visit with us.
During the meeting, the Board approved four new rule proposals—listed below—and reviewed some possible changes to our examination program structure. The Board also reviewed and approved several Special Notice Task Force recommendations to build on the progress FINRA has made with respect to transparency and governance, and heard a report regarding the work of the Consolidated Audit Trail (CAT) consortium, of which FINRA is a member.
The July meeting was the first for Governors Jack Ehnes and Jim Nagengast, and the last for Governors John Davidson and Joe Romano. We look forward to continuing to work with Jack and Jim—and we have enjoyed working alongside Joe and John and appreciate their dedication to FINRA’s mission. As announced earlier this week, elections are underway, concluding in late August, to elect a new small-firm Governor to fill the seat vacated by Joe, and additional industry Governors to fill one mid-size and one large-firm seat. The Nominating and Governance Committee is considering candidates to succeed John.
For more information about the discussions that took place during the July 2018 FINRA Board of Governors meeting, please watch the July 2018 Board Report video. Our next meeting is at the end of September, and I will preview with you highlights of that meeting’s agenda once details are available.
Robert W. Cook
President and CEO
Rulemaking Items Approved at the July 2018 Board Meeting
Expansion of Custodians of Books and Records
The Board approved filing with the SEC proposed rule amendments that would expand the categories of persons that can act as custodians of the books and records of firms leaving the business, while preserving FINRA’s ability to obtain such records. The proposal is designed to reduce the search costs that such firms incur in identifying a willing custodian.
Use of Electronic Signatures
The Board approved filing with the SEC proposed rule amendments to permit the use of electronic signatures in authorizing the use of discretion in a customer’s account. Allowing the use of electronic signatures is intended to increase flexibility and reduce costs and administrative inefficiency in compliance without diminishing investor protection.
Expansion of OTC Equity Volume Data Published on FINRA.org
The Board approved publication of a Regulatory Notice seeking comment on a proposal to expand the summary firm data that FINRA publishes on its website relating to over-the-counter (OTC) trading volume. The proposed expansion would include three elements: (1) monthly aggregate block-size trading data for OTC trades in National Market System stocks executed away from an alternative trading system (ATS), consistent with the present dissemination of block-size trades executed on ATSs; (2) aggregate non-ATS volume for all firms (by eliminating the existing de minimis exception); and (3) aggregate trading data executed by firms in their single dealer platforms (SDPs), along with the requirement that firms designate trades executed on their SDPs in their trade reports. These proposals will provide more fulsome transparency of trading activity in the OTC market.
Identifying and Reporting Hedge Transactions in U.S. Treasury Securities
The Board approved filing with the SEC a proposal to provide firms additional time to report to FINRA’s Trade Reporting and Compliance engine (TRACE) their transactions in U.S. Treasury securities to hedge primary-market transactions and also adopt a new modifier to identify such transactions. Members have raised operational difficulties in trade-day reporting of U.S. Treasury security transactions that are executed to hedge a primary-market transaction in a new-issue, TRACE-eligible security, particularly when that issuance occurs late in the day. The proposal is designed to improve compliance and ease operational concerns while not diminishing transparency.