Finds Rules Have Been Effective, and Begins Process of Updating
WASHINGTON — The Financial Industry Regulatory Authority's rules governing its Membership Application Program (MAP) have been effective in meeting their investor-protection objectives, and there are opportunities to make the rules and related processes more efficient, according to a
issued today as part of a retrospective rule review.The MAP rules govern FINRA's evaluation of the proposed business activities of potential and current member firms, including the applicant's financial, operational, supervisory and compliance systems. Firms are required to demonstrate their ability to comply with rules and laws, including just and equitable principles of trade, and to have qualified individuals in positions of supervisory responsibility.
"Retrospective review helps ensure that our rules are working as designed and that we update them as needed to address changes in the real-world business and regulatory environment," said Jonathan Sokobin, Chief Economist at FINRA, which established the retrospective review program in 2014.
The review consists of two parts: the assessment phase, which involved gathering comments from a broad range of external and internal stakeholders and surveying FINRA firms and others experienced with the rules; and an action phase that starts now, in which FINRA engages in its rulemaking process to propose any amendments to the rules or other changes based on the results of the review. Among the areas to be considered in the action phase are better aligning the application review process with the relative risk of the applicant and its business; clarifying the scope and nature of information to be reviewed; and providing additional guidance on key areas.
"With this thorough assessment in hand, we will explore a combination of guidance, rule amendments and changes in process or technology that will help enhance the efficiency and effectiveness of the Membership Application Program, while still serving its goal of investor protection," said Robert Colby, FINRA's Chief Legal Officer.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.