Finra sets date for kick-in of controversial registration plan

Finra's controversial new rule requiring registration of operations professionals will become effective Oct. 17, 2011. Firms must identify covered individuals by that date, the Financial Industry Regulatory Authority Inc. announced Friday. Covered individuals must then be registered as operations professionals before Dec. 16, 2011. The new rule covers certain senior managers or supervisors in operations, and those who have authority to materially commit capital in various back-office functions. Covered persons who already hold a Series 6, Series 7 or a supervisory license are exempt from taking the new Series 99 exam for the operations license. Nevertheless, they still have to register separately as operations professionals. Operations employees who are currently unregistered — and will be affected by the new rule —have until Oct. 17, 2012 to pass the qualifying exam. Finra's rule marks a significant expansion of registration requirements. Historically, registration has been limited to persons working in sales or trading. The operations licensing regime is widely seen as a response to the Bernard Madoff scandal. Indeed, Finra has argued that operations activities have a significant impact on compliance and that registering operations personnel might help prevent fraud. Industry observers have complained, however, that the definitions of covered operations personnel are unclear. Critics also claim the new program risks ensnaring too many lower-level employees. Finra posted a regulatory notice announcing the effective date on Friday.