Aside from changing the exam, major changes at FINRA include consolidating its enforcement functions into a single unit as well as getting savvier about blockchain and other financial technologies
FINRA has been making changes and even changing how it keeps those changes. It announced recently that it is establishing a consolidated rulebook. That new rulebook will, over time, replace the older NYSE Rules as new regulations come into force and older ones are eliminated. So, what kind of rules are in progress?
Aside from changing the exam, one of the more major changes at FINRA includes consolidating its enforcement functions into a single unit. It is also changing its advisory committee structure. Some of those changes also include as FINRA calls it, “leveraging its self regulatory model by utilizing the expertise and experience of our members.” That includes getting savvier about blockchain and other financial technologies.
FINRA has changed rules about its standards to protect senior investors. Financial firms must now take “reasonable efforts” to protect seniors’ accounts, including finding a trusted contact person for those accounts. The rule change also allows a FINRA member firm to place a hold on withdrawals from accounts where the member firm believes there may be fraud or misuse by another.
FINRA is also working to regulate its former regulators. It noticed a proposed rule change that would prohibit former FINRA officers or employees from appearing before FINRA or making specific communications. That proposed new rule also sets a gag on employees regarding “nonpublic information obtained” through their job unless authorized by law.
FINRA is also moving to amend its Capital Acquisition Broker (CAB) rule on money laundering. That rule, whose implementation date is in November of 2018, adopts additional customer due diligence requirements from the Department of the Treasury’s Financial Crimes Enforcement Network. Those requirements state, in extremely generic terms, “[a] covered financial institution with notice of or a reasonable suspicion that a customer is evading or attempting to evade beneficial ownership or other customer due diligence requirements should consider whether it should not open an account, close an account, or file a suspicious activity report, regardless of any interpretations below.” FINRA has described CABs as “firms that engage in advising companies and private equity funds on capital raising and corporate restructuring, and acting as placement agents for sales of unregistered securities to institutional investors under limited conditions.” Most financial advisors will not fall within this limited rule, but FINRA’s enhanced due diligence in this area could foreshadow additional rules similar in nature. It may also be of use to take note of how FINRA is working in alignment with federal agencies.
Along those lines, FINRA has a new rule, effective April 1, 2019, that will collect information on non-FINRA members in TRACE reports for U.S. Treasury securities. By way of reference, FINRA (in its previous iteration as the NASD) created theTrade Reporting and Compliance Engine (TRACE) to assist in the mandatory reporting of over-the-counter secondary market transactions in eligible fixed income securities. The new reporting requirement will assist FINRA in reporting on non-member firms.
Similarly, in August of 2018, the SEC required covered automated trading systems to identified non-FINRA members in TRACE reports. And FINRA requested an expanded definition of “Agency Debt Security” in reference to TRACE reports. That new expanded definition takes into account that credit risk transfer securities (CRTs) such as Fannie Mae and Freddie Mac (who issue CRTs) have changed their own structure issue direct debt securities, which FINRA articulates in a recent SEC filing, should be covered by the definition of Agency Debt Security.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.get xpress proposal