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September 2018 Board Update

FINRA President and CEO Robert Cook, Chairman Bill Heyman, Board members and FINRA staff provide updates on the September 2018 FINRA Board of Governors meeting.

October 5, 2018

FINRA’s Board of Governors met last week in New York, and I am writing to share with you some updates from our discussions.

The Board met with SEC Chairman Jay Clayton and heard his perspectives on the leading issues facing the industry. We have hosted senior leaders from the SEC at each of our last five meetings—including Chairman Clayton at our December 2017 meeting—and I am pleased we have had the opportunity to build on our close relationship with the SEC.

At the September meeting, the Nominating and Governance Committee of the Board made several appointments to FINRA’s standing committees—which assist the Board in the execution of its responsibilities—to fill vacancies caused by recent Governor retirements and also to assign roles to our newest Governors. These standing committees play a vital role in carrying out FINRA’s oversight of the industry, and we rely on and appreciate the Governors’ commitment to serving on them.

Finally, the Board received an update on the consolidation of our Examination and Risk Monitoring Programs, as announced earlier this week. As I wrote in my email to you earlier this week, we believe moving to a single, unified program—built around and tailored to the different business models we oversee—will help us become more effective at examining for compliance, create a more integrated experience for firms, and allow us to better direct and align examination resources to the risk profile and complexity of member firms.

For more information about the discussions that took place during the September 2018 FINRA Board of Governors meeting, please watch the September 2018 Board Report video. Our next meeting is in December, 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 September 2018 Board Meeting

Proposed Amendments to Expand Time for Non-Parties to Respond in Arbitration
The Board approved filing with the SEC proposed amendments to: (1) extend the response time for non-parties to object to an order or subpoena from 10 calendar days of service to 15 calendar days of receipt of the order or subpoena; and (2) exclude first-class mail as an option to serve documents on the non-party and as an option for the non-party to file the objection to the scope or propriety of the order or subpoena. The proposed rule change would address arbitration forum users’ concern that non-parties wanting to object to an order or subpoena have insufficient time to do so.

Expansion of TRACE to Include Foreign Sovereign Debt Securities
The Board approved publication of a Regulatory Notice seeking comment on proposed amendments to expand the Trade Reporting and Compliance Engine (TRACE) rules to include transactions in U.S. dollar-denominated foreign sovereign debt securities. Issuance in these securities has accelerated in recent years and FINRA believes the proposal would provide important regulatory information on an increasingly active segment of the market. Under the proposal, trades in foreign sovereign debt securities would be subject to same-day reporting and would not be disseminated publicly.

Potential Amendments to Margin Requirements for Covered Agency Transactions
The Board approved revisions to the Covered Agency Transaction margin requirements that would: (1) eliminate the 2-percent maintenance margin requirement; (2) allow firms to take a capital charge in lieu of collecting margin for mark to market losses, subject to specified limitations and conditions; and (3) streamline the rule language. The revisions respond to competitive impact concerns raised by small firms in connection with recent changes in these requirements.

Proposed Amendments to FINRA’s Margin Rule to Clarify the Treatment of “When Issued” and Other Extended Settlement Transactions
The Board approved publication of a Regulatory Notice seeking comment on amendments to margin requirements that would clarify and incorporate into the rule current interpretations regarding “when issued” and other extended settlement transactions, and would provide relief to facilitate the practical application of the rule to extended settlement transactions.