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FINRA Forms Office of Financial Innovation

April 24, 2019
Volume 17

  • Regulatory Notices
  • UPC Advisories

Upcoming Deadlines and Effective Dates
  • FINRA Requests for Comment
  • SEC Request for Comment
  • Upcoming Effective Dates

Education and Compliance Programs

FINRA Forms Office of Financial Innovation. FINRA today announced the formation of an Office of Financial Innovation that will serve as a central point of coordination for issues related to significant financial innovations by FINRA member firms, particularly new uses of financial technology (fintech). The move will further enhance FINRA’s ability to identify, understand and foster financial innovation in the markets in a manner that strengthens investor protection and market integrity. Read the announcement.

SEC Staff Issues Guidance on Open Contractual Commitments. As a reminder, FINRA has made available an update to the Interpretations of Financial and Operational Rules that the staff of the SEC’s Division of Trading and Markets (SEC staff) has communicated to FINRA staff. The update, published in Regulatory Notice 19-11, relates to the conditions under which an underwriting backstop agreement in a firm commitment underwriting would not give rise to an open contractual commitment charge under Securities Exchange Act (SEA) Rule 15c3-1(c)(2)(viii) (Open Contractual Commitments).

Only three weeks left to register for the FINRA Annual Conference (May 15–17, 2019). This year’s event features more than 60 sessions, including special tracks related to trends in AML, cybersecurity, fixed income and much more.

Download the conference brochure. Space is limited, register today to attend in person or via live online broadcast.



SEC Approves Amendments to FINRA Rule 4570

The SEC approved a proposed rule change to amend FINRA Rule 4570 (Custodian of Books and Records) to: (1) provide a member firm that is filing a Form BDW (Uniform Request for Broker-Dealer Withdrawal) the option of designating another FINRA member firm as the custodian of its books and records on the form; (2) clarify the obligations of the designated custodian; and (3) require the designated custodian to consent to act in such a capacity. These changes, outlined in Regulatory Notice 19-16, become effective on August 19, 2019.

FINRA Publishes Consolidated Criteria to Designate Firms for Mandatory Participation in FINRA’s Business Continuity/Disaster Recovery Testing

As required by SEC Regulation Systems Compliance and Integrity (Regulation SCI), FINRA in 2015 adopted Rule 4380 requiring member firm participation in business continuity and disaster recovery (BC/DR) testing. The rule authorizes FINRA to designate firms that must participate in FINRA’s annual BC/DR test based on established standards, which FINRA first published in Regulatory Notice 15-43 and updated in Regulatory Notice 18-09. This Notice (Regulatory Notice 19-15) consolidates FINRA’s designation criteria, as previously announced in Notices 15-43 and 18-09, without change

UPC Advisories

The following UPC Advisories were posted in the past week:

  • UPC #13-19 Aegean Marine Petroleum Network Inc. (ANWWQ)
  • UPC #14-19 Activecare Inc. (ACARQ)

 Upcoming Deadlines and Effective Dates

FINRA Requests for Comment

FINRA is conducting a retrospective review of Rule 4370 (Business Continuity Plans and Emergency Contact Information), FINRA’s emergency preparedness rule, to assess its effectiveness and efficiency. Regulatory Notice 19-06 outlines the general retrospective rule review process and seeks responses to several questions related to firms’ experiences with this specific rule. Comments are due April 26, 2019.

FINRA has issued Regulatory Notice 19-12 to request comment on a proposed pilot program to study changes to corporate bond block trade dissemination based on recommendations of the SEC Fixed Income Market Structure Advisory Committee (FIMSAC). Specifically, the proposed pilot is designed to study two primary changes recommended by the FIMSAC: an increase to the current dissemination caps for corporate bond trades, and delayed dissemination of any information about trades above the proposed dissemination caps for 48 hours. The proposed pilot incorporates these primary elements of the FIMSAC Recommendation and other features, including a control group, designed to support a meaningful analysis of the pilot’s impact. Comments are due June 11, 2019.

SEC Request for Comment on FINRA Rules

The SEC requests comment on FINRA’s proposal to amend FINRA rules to establish a new issue reference data service for corporate bonds, consistent with a recommendation from the SEC’s Fixed Income Market Structure Advisory Committee (FIMSAC). The comment period expires April 29, 2019. See the Federal Register notice

Upcoming Effective Dates

On April 8, 2019, FINRA filed with the SEC a proposed rule change (SR-2019-009) to adopt all remaining NASD Rules (including, among others, the Membership Series rules) as FINRA Rules in the consolidated FINRA rulebook without any substantive changes. In addition, the proposed rule change adopted the remaining Incorporated NYSE Rules and Interpretations in the consolidated FINRA rulebook without any substantive changes as a separate Temporary Dual FINRA-NYSE Member Rule Series. This temporary rule series, as the name suggests, applies solely to dual FINRA and NYSE members. Finally, the proposed rule change updated cross-references and made other non-substantive changes within FINRA rules, due in part to the adoption of new consolidated FINRA rules. The proposed rule change will become effective on
May 8, 2019.

 Education and Compliance Programs

Register for the 2019 Compliance Outreach Program for Municipal Advisors, which takes place Tuesday, May 21, 2019, in San Francisco, CA. This free one-day program is designed to provide an open forum for municipal advisory industry professionals to discuss current compliance practices with regulators and promote a more effective compliance structure for regulatory obligations of municipal advisors. The program is sponsored by the SEC's Office of Compliance Inspections and Examinations (OCIE), in coordination with the SEC's Office of Municipal Securities, FINRA and the MSRB.

Register today to attend in person or via live audio webcast.

FINRA is hosting several upcoming Half-Day Compliance Boot Camps, AML Half-Day Seminars and Cybersecurity Half-Day Seminars across the country.

Half-Day Compliance Boot Camps

  • May 23, 2019 | Dallas, TX
  • June 4, 2019 | Chicago, IL
  • June 14, 2019 | Tempe, AZ

AML Half-Day Seminar – June 4, 2019 | Costa Mesa, CA

Cybersecurity Half-Day Seminar – July 16, 2019 | Chicago, IL

FINRA's Registration and Disclosure (RAD) training team offers several training solutions designed for those at broker-dealer or joint broker-dealer/investment adviser firms. Training programs include:

  • Foundations of CRD Training (next session offered June 6–7, 2019, in Chicago, IL)
  • Registration and Disclosure Boot Camp (upcoming sessions will be announced soon)
  • Custom Web CRD Training (contact the RAD training team to inquire about a training session that is tailored to the needs of your organization.)

Visit FINRA's Web CRD Training and Support page to learn more. Space is limited, so please register early.

District compliance events are designed for compliance and legal professionals at FINRA member firms, and offer an opportunity to hear about current regulatory issues while engaging with District Office staff. Upcoming events will be held in Boston on June 12, 2019 and Los Angeles on August 8, 2019.

Review the compliance calendar to see a complete list of events.

Registration is now open for the 2019 National Compliance Outreach Program for Broker-Dealers. The program, sponsored by FINRA and the SEC, is designed to provide an open forum for regulators and industry professionals to discuss current compliance practices and promote an effective compliance structure for the protection of investors. The event will be held on June 27, 2019, in Chicago, IL. Space is limited, so register early to secure your seat.

Also coming up:

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