Take two for Finra on advance-notice rule

Plans to reissue a package of controversial membership rules regarding alerts on business changes

Feb 24, 2013 @ 12:01 am

By Dan Jamieson

Finra is planning to reissue a package of controversial membership rules regarding alerts on business changes.

In an e-mail sent to member firms Feb. 14, Financial Industry Regulatory Authority Inc. chief executive Richard G. Ketchum said the board had approved issuing a revised proposal in response to comments on the previous one, which was floated in 2010.

The original proposal drew a sharp response from the brokerage industry, which said Finra's plan to require 30 days' notice for changes in a number of routine business activities was too far-reaching.

Among other things, Finra wanted advance notice of new products or services; expansion of personnel beyond certain limits; transactions that involved 10% or more of a firm's ownership, assets or revenue; and changes in a member's service providers.

If the changes had been ap-proved, the advance notice would have allowed Finra to require a formal approval process — known as a continuing-member application — and object to any changes.

The proposal was designed to avoid fraud at both broker-dealers and their affiliates.

In his e-mail, Mr. Ketchum said the revised proposal would include provisions to address regulatory issues identified by Finra and to codify existing interpretations and practices.

Andrew DeSouza, a SIFMA spokesman, and Finra spokeswoman Michelle Ong declined to comment about Finra's plan to reissue the rule.

In a statement, FSI general counsel David Bellaire noted that Mr. Ketchum's e-mail did not specify what will be included in the new proposal.

“We are hopeful that Finra has addressed the issues we raised in our original comment letter,” he said.

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