Finra is promising to modify rules governing member firms' public communications and gifts to clients after an assessment of member firms identified “pain points” around both areas.
The industry-funded broker-dealer regulator Tuesday released reports on its rules review initiative. The
communications and
gifts regulations were the first two put under the microscope.
“Over the next several months, Finra will explore a combination of guidance, proposed rule modifications and administrative measures to enhance the effectiveness and efficiency of the rules,” Robert Colby, Finra chief legal officer, said in a statement.
Finra surveyed firms, individuals and experts to get an idea of the “pain points” in complying with each regulation. The communications rule requires that Finra review messages, such as advertisements and social media posts, sent to retail investors.
The regulator will consider streamlining and simplifying filing requirements for the communications rule, which respondents said were “overbroad” and “impose significant direct and indirect costs.” The organization also will align requirements to the “relative risk of the communications.”
For social media, Finra will consider “adapting rules and guidance in light of emerging technologies and communications innovation.”
The gifts rule limits to $100 annually the amount of gifts that can be given to clients and prohibits non-cash compensation.
Modifications to the gift rule could include increasing the dollar limit and setting an amount below which firms would not have to track gifts.
“The survey results reflected strong agreement among the respondents that the current $100 gift limit is too low,” the report stated.
Both rules could “benefit from some updating and recalibration to better align the investor protection benefits and economic impacts,” Finra said.
The rule review, which was launched in April, is part of Finra's increased attention to cost-benefit analysis of its regulations. The reports released Tuesday “represent a major step forward” in that area, Jonathan Sokobin, Finra chief economist, said in a statement.
The survey on the communications rule was completed by 626 of Finra's approximately 4,200 member firms and 13 of 40 subject matter experts to whom it was sent.
Sixty-seven percent said Firna “should provide increased flexibility and clarity on the application of its rules to social media and mobile communications,” while 64% said Finra should be flexible on its disclosure requirements and 63% said the regulator should clarify firms' responsibility for links to third-party websites.
The gift-rule survey was completed by 598 firms and nine experts.
