SEC OKs controversial registration plan for back-office workers

The Securities and Exchange Commission yesterday approved a plan by the Financial Industry Regulatory Authority Inc. that will create a new operations professional license, with a qualification exam and continuing-education requirements. The new rule marks a substantial expansion of registration requirements to include back-office personnel. Registration has historically been limited to individuals working in sales or trading. Finra will be announcing an effective date for the rule within the next two to three weeks, said Finra spokeswoman Nancy Condon. From the effective date, broker-dealers will have 60 days to identify covered employees. Those covered by the rule who already hold a Series 6 or 7 license, or have a supervisory license, would be exempt from taking the new exam. But they would have to register separately as operations professionals. Employees who are not now registered would have 12 months to pass the qualifying exam. The proposal was roundly blasted by industry participants when Finra floated the idea for comment last summer. In response, Finra made some minor changes, but the proposal remains controversial. Industry observers complained that Finra's definitions of covered operations personnel were unclear, and that the new program risked forcing many lower-level employees to register unnecessarily — including employees of outside vendors such as IT workers. Prior to the SEC's approval, Finra this week amended the proposal to clarify that only senior management with direct responsibility over the covered operational functions would be subject to the new registration requirement. In a letter to the SEC on Wednesday, Finra said the rule was necessary, because operations activities have "such significance [as] to require registration, qualification examination and continuing education requirements." Ms. Condon had no further comment on the new regulation.