On May 30, the U.S. Government Accountability Office (GAO) released a report regarding the Securities and Exchange Commission’s (SEC) oversight of the Financial Industry Regulatory Authority (FINRA). GAO noted that FINRA does not have the means to retroactively review its rules, whereby unsuccessfully being able to determine whether or not certain rules are effective or unproductive.
By reviewing existing rules and their effects on the industry, FINRA will be able to proactively help the U.S.capital markets retain their pre-eminent position. AdvisorOne has recently proposed the following changes to FINRA regarding their current rules:
1. FINRA should update and streamline the registration forms and guidance for firms and associated persons relating to arbitrations.
2. FINRA should coordinate Form U4 amendments with Rule 4530 filings to reduce duplicative paperwork.
3. FINRA should clarify when firms need to self-report under FINRA Rule 4530.
Rule 4530, which became effective in July 2011, requires firms to report to FINRA conduct that:Â
- has widespread or potential widespread impact to the member, its customers or the markets, or
- arises from a material failure of the member’s systems, policies or practices involving numerous customers, multiple errors or significant dollar amounts.
4. FINRA should issue updated cooperation guidelines in light of the new self-reporting requirements.
5. If FINRA wants to receive non-securities information and documents from broker-dealers, it should undertake to amend FINRA Rule 8210.
6. FINRA should reconsider whether documents and information produced to it by firms and representatives should be protected from disclosure.
Currently, FINRA provides no confidentiality or privacy protections for documents and information produced pursuant to Rule 8210. FINRA’s existing policy, as set forth in production request letters, is that it will not:Â
- entertain requests for confidential treatment of any information or documents you produce in response to this request;
- give you notice of any subpoena or access request we receive that encompasses any such information or documents; or
- undertake to return documents when this investigation is completed.
7. FINRA should articulate a coherent standard of supervisory requirements for registered personnel.
8. FINRA should eliminate the annual compliance meeting requirement.
9. FINRA should clarify what internal communications may say.
10. FINRA should consider repealing rules that duplicate SEC rules.
