Finra reviews effectiveness of broker-dealer rules

Tackles broker communications with the public as well as gifts, gratuities and non-cash payments; will look at other regulations

Apr 8, 2014 @ 12:54 pm

By Mark Schoeff Jr.

Finra on Tuesday began reviewing existing broker-dealer rules to see if they are keeping pace with the markets.

The first two areas that the Financial Industry Regulatory Authority Inc. will assess are rules dealing with broker communications with the public and those that govern gifts, gratuities and non-cash payments to brokers.

“Finra believes it is important to look back at its significant rulemakings to determine whether those rules and rule sets are meeting their intended investor protection objectives by reasonably efficient means,” Robert Colby, Finra's chief legal officer, said in a statement. “By thoroughly assessing the impact of existing rules, Finra will be able to ensure that its rules remain pertinent to current industry and market conditions and carefully tailored to protect the interests of the investing public.”

Finra, the industry-funded broker-dealer regulator, will conduct the rules review in two phases.

First, Finra staff will analyze whether the rules are duplicative or ineffective, out of step with current market conditions or leave regulatory gaps.

Part of the first phase includes a request for public input. The comment period for each of the first two reviews is May 8.

The Finra staff will recommend to the organization's board whether the rules should be kept intact, modified or ended. If the board decides to change a rule, amendments will be proposed and comments solicited through the normal rule-making process.

Last year, Finra hired its first chief economist, Jonathan Sokobin. His office is responsible for analyzing the costs and benefits of proposed rules as well as those that are already on the books.

The regulatory notice for the first two reviews indicates that more are coming.

“Finra intends to select relevant rules and to conduct retrospective rule reviews on an ongoing basis to ensure that its rules remain relevant and appropriately designed to achieve their objectives, particularly in light of environmental, industry and market changes,” according to the notice.

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