Board Approves Rule Proposals, Welcomes New Governors and Honors Retiring Governors
WASHINGTON—FINRA’s Board of Governors held its third meeting of 2018 on July 18-19 in Washington, D.C., where it approved four rule proposals, welcomed two new Governors and honored two who are stepping down from the Board.
The FINRA Board also continued its engagement with key stakeholders, meeting with SEC Commissioners Hester Peirce and Robert Jackson and Counselor to the Secretary of the Treasury Craig Phillips. The FINRA Board, which meets five times annually, has hosted senior leaders from the SEC at each of its last four meetings.
New and Retiring Governors
The July meeting was the first for Governors Jack Ehnes and Jim Nagengast, who represent the public and large firms, respectively; and the last for Governors John Davidson and Joe Romano, who represent the public and small firms, respectively. As announced earlier this week, elections are underway, concluding in late August, to elect a new small-firm representative to fill the seat vacated by Joe Romano, and additional industry Governors to fill one mid-size and one large-firm seat each. The Nominating and Governance Committee is considering candidates to succeed Davidson.
“FINRA continues to attract Governors with invaluable perspectives to contribute to our mission of protecting investors and ensuring the integrity of our markets,” said FINRA Chairman Bill Heyman. “We thank John and Joe for their service to the Board and look forward to working with Jack and Jim.”
“This is an excellent opportunity to remind our public and industry stakeholders about the opportunities to serve on FINRA’s Board of Governors and advisory committees,” said President and CEO Robert W. Cook. “FINRA relies on diverse, expert input from our Board and advisory committees to inform our strategy, programs and operations. As part of our FINRA360 organizational improvement program, we are working to increase transparency around our governance and enhance stakeholder input to ensure we are operating as an effective, efficient self-regulatory organization.”
The Board approved four rule proposals to be published by FINRA for comment or filed with the SEC:
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.
More information regarding the Board's operations, including the membership and responsibilities of its committees, is available at www.finra.org/governance.
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs 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 a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.