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Regulatory Notice 21-27

FINRA Announces Update of the Interpretations of Financial and Operational Rules

Executive Summary

FINRA is making available updates to interpretations in the Interpretations of Financial and Operational Rules that have been communicated to FINRA by the staff of the SEC’s Division of Trading and Markets (SEC staff). The updated interpretations are with respect to Securities Exchange Act (SEA) Rules 15c3-1 and 15c3-3. 

Questions concerning this Notice should be directed to:

  • Yui Chan, Senior Director, Office of Financial & Operational Risk Policy (OFORP), at (646) 315-8426 or by email;
  • Ann Duguid, Senior Director, OFORP, at (646) 315-7260 or by email; or
  • Kathryn Mahoney, Senior Director, OFORP, at (646) 315-8428 or by email.

Background & Discussion

FINRA is updating interpretations in the Interpretations of Financial and Operational Rules related to  SEA Rules 15c3-1 and 15c3-3, as set forth below. Page references are to the hardcopy version. These interpretations are being updated with specific additions, revisions and rescissions.

The following interpretations have been added:

  • SEA Rule 15c3-1(c)(1)(i)/02 (Indebtedness in the Proprietary Trading Account of a Broker-Dealer) on page 182
  • SEA Rule 15c3-1(c)(2)(i)(G)/01 (Services Arrangement with a Parent or an Affiliate) on page 226
  • SEA Rule 15c3-1(c)(2)(iv)(B)/16 (Deficits or Unsecured Balances in Securities Transactions with a Federal Reserve Bank) on page 283
  • SEA Rule 15c3-1(c)(2)(iv)(C)/095 (Unsecured Receivables and Related Payables) on page 298
  • SEA Rule 15c3-1(c)(2)(viii)(C)/033 (Offsetting Sale Commitments in an Unregistered Offering) on page 653
  • SEA Rule 15c3-1(e)/01 (Services Arrangement with a Parent or an Affiliate) on page 855
  • SEA Rule 15c3-3(j)(2)(ii)(B)(3)(i)(C)/01 (Changing, Adding or Deleting Products Available Through a Sweep Program) on page 2467
  • SEA Rule 15c3-3(Exhibit A - Note E(5))/02 (Exclusion of Omnibus Accounts from the Requirements of Note E(5)) on page 2606
  • SEA Rule 15c3-3(Exhibit A - General)/012 (Netting a Customer’s Account Balances when Preparing the Reserve Formula Computation under the Alternative Standard) on page 2622
  • SEA Rule 15c3-3 (Exhibit A - Item 10)/10 (Term Debits in Customers’ Accounts Collateralized by Securities Subject to Restrictions on Use) on page 2729

The following interpretations have been revised:

  • SEA Rule 15c3-1(a)/01 (Additional Net Capital Requirement) on page 1
  • SEA Rule 15c3-1(c)(1)/11 (Accrued Liability for Concessions or Commissions Payable) on page 153
  • SEA Rule 15c3-1(c)(2)(iv)(C)/091 (Concessions Receivable from Individual Variable Annuities are Allowable for 30 Days; from Group Variable Annuities an Offset is Permitted) on page 296
  • SEA Rule 15c3-1(c)(2)(viii)(C)/032 (Offsetting Sale Commitments in a Registered Offering) on page 653
  • SEA Rule 15c3-3(a)(1)/01 (Customer/Non-Customer Classification) on page 2003
  • SEA Rule 15c3-3 (Exhibit A - Item 10)/07 (Debit Balances in Customers’ Accounts Collateralized by Control or Restricted Securities) on page 2728

The following interpretations have been rescinded:

  • SEA Rule 15c3-1(c)(2)(iv)(C)/09 (Commissions or Concessions Receivable versus Commissions or Concessions Payable) on page 296
  • SEA Rule 15c3-3(Exhibit A - Item 11)/041 (Federal Reserve Bank as a Non-Customer) on page 2744

The rule text update is available in portable digital format (pdf) on FINRA’s Interpretations of Financial and Operational Rules page. 

FINRA member firms and others that maintain the hardcopy version of the Interpretations of Financial and Operational Rules may refer to the accompanying updated page, containing the update, which is being made available to enable the replacement of existing pages in the hardcopy version of the Interpretations of Financial and Operational Rules. The filing instructions for the new page(s) are as follows:

 

SEA Rule Remove Old Pages Add New Pages

15c3-1

 1

 1

15c3-1

 153

 153

15c3-1

 158

 158

15c3-1

 181-182

 180-182

15c3-1

 225

 225-226

15c3-1

 283

 283

15c3-1

 296-298

 296-298

15c3-1

 653-654

653-654 

15c3-1

 854

854-855 

15c3-3

 2003

2003

15c3-3

 2467

2467

15c3-3

 2606

2606   

15c3-3

 2622-2623

2622-2623  

15c3-3

 2727-2729

2727-2729

15c3-3

 2744

2744   

Further, the SEC staff continues to communicate and issue written and oral interpretations of the financial responsibility and reporting rules. FINRA will update the Interpretations of Financial and Operational Rules on its website as these written and oral interpretations are issued.