Filing Requirements for Members that Carry Customer Margin Accounts
Customer Margin Accounts
Referenced Rules & Notices
FINRA Rule 4521(d)
FINRA Rule 4521(e)
FINRA Rule 4521(f)
Incorporated NYSE Rules 421(2)
Section 4(g) of Schedule A to the FINRA By-Laws
Regulatory Notice 09-71
Customer Margin Accounts
Beginning March 1, 2010, members subject to new FINRA Rule 4521(d)1 must file FINRA's new Customer Margin Balance Form (covering the February 2010 reporting period).2
FINRA Rule 4521(d) governs filing requirements for customer margin accounts and became effective on February 8, 2010. The rule, adopted as part of the new consolidated financial responsibility rules, replaces Incorporated NYSE Rules 421(2) and 421.40 and applies to all FINRA members that carry customer margin accounts.3
The text of FINRA Rule 4521(d) is in Attachment A.
Questions concerning this Notice should be directed to:
Background & Discussion
FINRA Rule 4521(d) Requirements
FINRA Rule 4521(d) provides that, unless otherwise permitted by FINRA in writing, each member carrying margin accounts for customers is required to submit, on a settlement date basis, as of the last business day of the month: (A) the total of all debit balances in securities margin accounts; and (B) the total of all free credit balances in all cash accounts and all securities margin accounts.
Please note: members must submit three separate data points, as the free credit balance total for cash accounts and the free credit balance total for securities margin accounts are two separate items.
If a member has no information to submit, it should note that on the report. Reports are due as promptly as possible after the last business day of the month, but in no event later than the sixth business day of the following month. In connection with this requirement, members should note:
Rule 4521(d) requires that a member must only include free credit balances in cash and securities margin accounts in the report. Balances in short accounts and in special memorandum accounts (see Regulation T of the Board of Governors of the Federal Reserve System) are not considered free credit balances. Members should note:
Lastly, Rule 4521(d) requires that reported debit or credit balance information not include the accounts of other FINRA members, or of the associated persons of the member submitting the report where such associated person's account is excluded from the definition of "customer" pursuant to Exchange Act Rule 15c3-3.
New FINRA Customer Margin Balance Form
Members that are required to file information pursuant to FINRA Rule 4521(d) must do so through the FINRA Firm Gateway (www.finra.org/firmgateway), where the new Customer Margin Balance Form will be available beginning March 1, 2010.4
Members should note that, unless FINRA grants a specific temporary extension of time, a late fee of $100 shall apply for each day (for a period not to exceed ten business days) that information required pursuant to Rule 4521(d) is not timely filed.5
Public Availability of Data
Data collected pursuant to NYSE Rules 421(2) and 421.40 has historically been made available to the public in aggregate form on the NYSE Web site.6 Beginning in March 2010, FINRA will post the data collected pursuant to FINRA Rule 4521(d), also in aggregate form, on FINRA's Web site.
1 Effective with the rule change, NYSE Form R-1, which Dual Members currently file pursuant to Incorporated NYSE Rule 421.40, has been discontinued.
2 The current FINRA rulebook consists of: (1) FINRA Rules; (2) NASD Rules; and (3) rules incorporated from NYSE (Incorporated NYSE Rules) (together, the NASD Rules and Incorporated NYSE Rules are referred to as the Transitional Rulebook). While the NASD Rules generally apply to all FINRA member firms, the Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (Dual Members). The FINRA Rules apply to all FINRA member firms, unless such rules have a more limited application by their terms. For more information about the rulebook consolidation process, see Information Notice 3/12/08 (Rulebook Consolidation Process).
3 FINRA Rule 4521(d) is substantively similar to Incorporated NYSE Rule 421.40. See Regulatory Notice 09-71 (SEC Approves Consolidated FINRA Rules Governing Financial Responsibility) (December 2009). See also Exchange Act Release No. 60933 (November 4, 2009), 74 FR 58334 (November 12, 2009) (Order Granting Approval to Proposed Rule Change; File No. SR-FINRA-2008-067); Exchange Act Release No. 61408 (January 22, 2010), 75 FR 4596 (January 28, 2010) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change; File No. SR-FINRA-010-004).
4 Members should note that their Regulation Filing Applications Account Administrator can provide access to the Customer Margin Balance Form in the Firm Gateway, and also provide a FINRA user ID, if needed. Members can also contact the FINRA Help Desk at (800) 321-6273 and refer to www.finra.org/regulationfiling for additional information on requesting entitlement.
6 Similar information, in modified form, has also been posted on FINRA's Web site at www.finra.org/statistics/margin.
Below is the text of new FINRA Rule 4521(d).
4521. Notifications, Questionnaires and Reports