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Interpretations of Financial and Operational Rules

To assist firms in complying with SEC Rules regarding financial and operational matters, FINRA has published and will periodically update certain interpretations provided by the staff of the SEC's Division of Trading and Markets.

Net Capital

Net Capital Requirements for Brokers or Dealers PDF 887 KB
Options PDF 47 KB
Adjustments to Net Worth and Aggregate Indebtedness for Certain Commodities Transactions PDF 42 KB
Consolidated Computations of NET Capital and Aggregate Indebtedness for Certain Subsidiaries and Affiliates PDF 63 KB
Satisfactory Subordination Agreements PDF 81 KB
Deductions for Market Credit Risk for Certain Brokers or Dealers PDF 107 KB
Optional Market and Credit Risk Requirements for OTC Derivatives Dealers PDF 69 KB
Conditions for Ultimate Holding Companies of Certain Brokers or Dealers PDF 89 KB

Customer Protection

SEA Rule 15c3-2 (Reserved) PDF 9 KB
Customer Protection – Reserves and Custody of Securities PDF 949 KB

OTC Derivatives Dealers

Internal Risk Management Control Systems for OTC Derivatives Dealers PDF 42 KB

Records to be Made and Preserved

Records to be Made by Certain Exchange Members, Brokers and Dealers PDF 108 KB
Records to be Preserved by Certain Exchange Members, Brokers and Dealers PDF 86 KB

Reports to be Made

Reports to be made by Certain Brokers and Dealers PDF 86 KB

Notification Provisions

Notification Provisions for Brokers and Dealers PDF 15 KB

Quarterly Security Counts

Quarterly Security Counts to be made by Certain Exchange Members, Brokers and Dealers PDF 49 KB
  • FINRA Announces Updates of the Interpretations of Financial and Operational Rules
  • FINRA Requests Comment on Proposed Amendments to FINRA Rule 4521 and New Supplemental Liquidity Schedule
  • FINRA Makes Available Frequently Asked Questions and Guidance and Extends Effective Date of Margin Requirements for Covered Agency Transactions: New Effective Date: June 25, 2018
  • Guidance to Members Affected by Hurricane Harvey
  • SEC Approves Amendments to FINRA Rules to Conform to the Shortened Standard Settlement Cycle for Most Broker-Dealer Transactions From Three Business Days (T+3) to Two Business Days After the Trade Date (T+2)
  • Regulation T and SEA Rule 15c3-3 Extension of Time Requests Under a T+2 Settlement Cycle
  • Updated SEC No-Action Guidance and Instructions on Electronic Filing of Broker-Dealer Annual Reports
  • (Margin Requirements) to Establish Margin Requirements for Covered Agency Transactions
  • Revised SEC No-Action Guidance Expanding the Definition of "Ready Market" for Certain Foreign Equity Securities
  • Application of Supplemental Schedule for Derivatives and Other Off-Balance Sheet Items
  • FINRA Requests Comment on Proposed Amendments to FINRA Rules to Support the Industry Initiative to Shorten the Settlement Cycle for Securities in the U.S. Secondary Market From T+3 to T+2
  • SEC No-Action Guidance on Electronic Filing of Broker-Dealer Annual Reports
  • Guidance on Liquidity Risk Management Practices
  • Guidance Relating to Firm Short Positions and Fails-to-Receive in Municipal Securities
  • FINRA Announces Updates of the Interpretations of Financial and Operational Rules
  • FINRA Provides Limited Relief Regarding Requirement to Promptly Transmit Funds in Connection With Sales of Securities on a Subscription-Way Basis for the Purpose of Completing Suitability Reviews Under Identified Conditions
  • SEC Approves Supplemental Inventory Schedule
  • New Template Available on FINRA Firm Gateway for Compliance With SEA Rule 17a-5(f)(2) (Statement Regarding Independent Public Accountant)
  • FINRA Announces Updates of the Interpretations of Financial and Operational Rules
  • FINRA Announces Updates of the Interpretations of Financial and Operational Rules
  • Extension of Time Requests Relating to New SEA Rule 15c3-3(d)(4)
  • FINRA Announces Updates of the Interpretations of Financial and Operational Rules
  • FINRA Announces Updates of the Interpretations of Financial and Operational Rules
  • SEC Approves Consolidated FINRA Rules 4314 (Securities Loans and Borrowings), 4330 (Customer Protection — Permissible Use of Customers' Securities) and 4340 (Callable Securities)
  • FINRA Requests Comment on Proposed Amendments to FINRA Rule 4210 for Transactions in the TBA Market
  • FINRA Announces Updates of the Interpretations of Financial and Operational Rules
  • eFOCUS System Updates Applicable to Joint Broker-Dealers/Futures Commission Merchants
  • SEC Approves Supplemental Schedule for Derivatives and Other Off-Balance Sheet Items*
  • FINRA Requests Comment on a Proposed Supplemental Schedule for Inventory Positions
  • SEC No-Action Guidance Expanding the Definition of "Ready Market" for Certain Foreign Equity Securities
  • Reporting Relief Relating to Customer and PAIB Reserve Formula Computations and Required Deposits Around the December 2012 Month-End Holidays
  • FINRA Requests Comment on Proposed Supplementary Schedule for Derivatives and Other Off-Balance Sheet Items
  • SEC Approves New FINRA Rule 4524 Requiring the Filing of Supplemental FOCUS Information and a Supplementary Schedule to the Statement of Income (Loss) Page of the FOCUS Report
  • FINRA Requests Comment on a Proposed New Rule Requiring Carrying/Clearing Member Firms to Maintain and Keep Current Certain Records in a Central Location
  • FINRA to Require Electronic Submission of Annual Audit Reports
  • Application of the SEC's Financial Responsibility Rules in Response to the Downgrade of U. S. Long Term Credit Rating by Standard & Poor's
  • SEC Approves Operations Professional Registration Category and Consolidated FINRA Continuing Education Rule
  • SEC Approves Consolidated Financial Responsibility and Related Operational Rules
  • SEC Approves Consolidated FINRA Rule Governing Fidelity Bonds
  • FINRA Requests Comment on Proposed New FINRA Rule 3190 to Clarify the Scope of a Firm's Obligations and Supervisory Responsibilities for Functions or Activities Outsourced to a Third-Party Service Provider
  • SEC Approves New FINRA Rule 4160 Relating to the Verification of Assets at a Non-Member Financial Institution
  • Funding and Liquidity Risk Management Practices
  • Supplemental FOCUS Filing Requirement Applicable to Certain Joint Broker-Dealers/Futures Commission Merchants
  • New Alert-Reporting Criterion for Leverage in FOCUS Reports
  • FINRA Requests Comment on Proposed Rule Requiring the Filing of Supplemental FOCUS Information and Proposed Supplementary Schedule to the Statement of Income (Loss) Page of FOCUS Report Parts II and IIA
  • SEC Approval and Effective Date for New Consolidated FINRA Rules and the Repeal of Certain NASD and Incorporated NYSE Rules
  • FINRA Reminds Firms of Responsibilities When Providing Customers with Consolidated Financial Account Reports
  • FINRA Issues Guidance on Master and Sub-Account Arrangements
  • FINRA Requirements for Subordinations
  • Guidance on FAS 167 for FOCUS Reporting
  • FINRA Requests Comments on Proposed Consolidated FINRA Rules Governing Securities Loans and Borrowings, Permissible Use of Customers' Securities and Callable Securities
  • SEC Approves Consolidated FINRA Rules Governing Financial Responsibility
  • FINRA Requests Comment on Proposed Consolidated FINRA Rule Governing Fidelity Bonds
  • Guidance on the Net Capital and Reserve Formula Treatment of Senior Unsecured Debt Securities Issued Under the Debt Guarantee Program Component of the FDIC's Temporary Liquidity Guarantee Program
  • FINRA Requests Comment on Proposed Consolidated FINRA Rules Governing Financial Responsibility and Operational Requirements
  • FINRA Addresses Firms’ Retail Foreign Currency Exchange Activities
  • FINRA Grants Additional,Temporary Relief from the Net Capital, Reserve Formula, Non-purpose Loan, & Maintenance Margin Requirements Applicable to Credit Extended on Auction Rate Securities to Broker-Dealers That Agree to Buy Back Auction Rate Securities
  • FINRA Announces Temporary Margin Maintenance, Net Capital and Reserve Formula Requirements Related to Money Market Mutual Funds Effective Date: October 21, 2008
  • FINRA Announces the Publication of Consolidated Interpretations of SEC Rules Governing Financial Responsibility, Customer Protection and Books and Records
  • Interpretive Guidance on Capital Treatment of Introducing Broker-Dealers' Clearing Deposits
  • FINRA Provides Clarification on SEC Guidance Regarding Emergency Orders Concerning Short Selling
  • Proposed Consolidated FINRA Rules Governing Financial Responsibility
  • FINRA Temporarily Increases Margin Maintenance Requirements on Auction Rate Securities Backed by Fixed Income Products
  • FINRA Announces Relief Relating to Customer and PAIB Reserve Formula Computations and Required Deposits around the December 2007 Month-End Holidays
  • FINRA Solicits Comments on Proposed Guidance Regarding International Prime Brokerage Practices

November 9, 2011

SEA Rule 15c3-1 Net Capital Treatment of Proprietary Assets Held with MF Global Inc.

On October 31, 2011, MF Global Inc. (MFGI) became subject to a liquidation proceeding under the Securities Investor Protection Act of 1970. As a result of the liquidation proceeding and reports of missing customer assets at MFGI, cash and securities assets held by MFGI on behalf of member firms may not be available for withdrawal for an extended period of time, rendering the assets illiquid and unavailable for normal broker-dealer business operations.

FINRA staff has discussed the net capital treatment of the assets with the staff of the SEC's Division of Trading and Markets and has been advised that effective immediately, member firms that have proprietary cash and/or securities held with MFGI pursuant to a proprietary account of an introducing broker-dealer (PAIB) agreement are required to apply a charge to their tentative net capital equal to 50 percent of the cash and securities. Dually registered broker-dealer/Futures Commission Merchant (FCM) members (BD/FCMs) must follow the regulatory guidance issued by the Joint Audit Committee via Regulatory Update #11-02 issued on November 4, 2011, for FCMs. As such, effective immediately, BD/FCMs must reflect customer segregated, secured 30.7 and commodities related proprietary trading balances held at MFGI at 60 percent of account balances (net liquidating value plus securities on deposit) for net capital purposes.

In addition, effective immediately, any other receivables from MFGI that are not included in the PAIB computation but that would ordinarily be an allowable asset for 30 days (e.g., commissions receivable) and any receivable from an affiliate of MFGI must be treated as a non-allowable asset.

Please note that the net capital treatment of proprietary assets held by MFGI, as discussed above, is subject to further change. Any questions regarding the foregoing should be directed to your firm's Regulatory Coordinator.


September 18, 2008

Additional, Temporary Relief from the Net Capital, Reserve Formula, Non-purpose Loan, and Maintenance Margin Requirements Applicable to Credit Extended on Auction Rate Securities to Broker-Dealers That Agree to Buy Back Auction Rate Securities

FINRA granted additional, temporary relief from the net capital, reserve formula, non-purpose loan, and maintenance margin requirements applicable to credit extended on auction rate securities to broker-dealers who have agreed to implement buyback programs for auction rate securities. See interpretive letter and Regulatory Notice 08-65.


April 11, 2008

Temporary Relief from the Requirements of FINRA and SEC Rules Regarding the Net Capital Charges Applicable to Credit Extended on Non-Marginable ARPS

FINRA released an interpretive letter on temporary relief from the requirements of FINRA and SEC Rules regarding the net capital charges applicable to credit extended on non-marginable Auction Rate Preferred Securities. The letter is in response to recent developments in the market for such securities.


April 24, 2008

Temporary Relief from the Requirements of FINRA and SEC Rules Regarding the Net Capital Charges Applicable to Credit Extended on Non-Marginable ARPS

Update to the April 11, 2008, Interpretive Letter: Auction Rate Preferred Securities

Update to the temporary relief from the requirements of FINRA and SEC Rules regarding the net capital charges applicable to credit extended on non-marginable ARPS. This update modifies the requirement to obtain secured bank loans for credit extended to customers collateralized by ARPS.