Finra wants to ease membership application process, while still protecting investors

New report details proposed changes in rules and material it requires from broker-dealers

Mar 11, 2016 @ 12:35 pm

By Liz Skinner

+ Zoom

Finra is taking a fresh look at its membership rules and requirements to make the process easier for applicants, while still trying to ensure the financial firms they oversee are protecting investors.

The Financial Industry Regulatory Authority Inc. said in a report issued Friday that its process of reviewing new membership applications and the material it requires when businesses make operational changes could be improved by considering the relative risk of the applicant and its operations to investors.

(More: Finra asks 8 questions to asses a firm's culture)

It also will propose new rules or otherwise issue new guidance on the extent of information requested by applicants and the nature of that material, the self-regulatory organization said in a statement that accompanied the 21-page report that examined current processes.

"With this thorough assessment in hand, we will explore a combination of guidance, rule amendments and changes in process or technology that will help enhance the efficiency and effectiveness of the membership application program, while still serving its goal of investor protection," said Robert Colby, chief legal officer for Finra.

The Finra report concludes that the group's existing rules have largely been effective at protecting investors.

The report comes as Sen. Elizabeth Warren, D-Mass., has criticized Finra for failing to protect investors from the firms it's supposed to be overseeing.

She cited an academic study that concluded one in 13 Finra-regulated brokers has committed misconduct that is part of their records. It also showed that 50% of advisers with ethical lapses are fired, but 44% of them are rehired within a year.

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