On May 5, the Financial Industry Regulatory Authority released Regulatory Notice 16-17 (Notice), which pertains to large options positions reporting (LOPR) under FINRA Rule 2360(b)(5) and other options exchange rules. The Notice provides an overview of applicable LOPR requirements and consolidates previously issued guidance. Among other things, the Notice reminds member firms of the controls that firms should have in place to achieve compliance with their LOPR obligations. While not an exhaustive list, firms should:
- identify related accounts for in-concert reporting during the account opening process;
- periodically review the accuracy of the firm’s in-concert groups;
- periodically review the accuracy of the firm’s reported data;
- review any data rejected by The Options Clearing Corporation (OCC) during the reporting process; and
- review over-the-counter products to assess whether such products meet the definition of “option” under FINRA Rule 2360(a)(21) and to determine whether such positions should be reported.
FINRA urges firms to include legal, compliance and trading personnel in the development of these controls and to document and maintain the rationale behind and outcomes of such controls.
The Notice also reemphasizes the requirement to report all accounts under common control as acting in concert where the aggregate number of positions held by such accounts meets or exceeds the 200-contract threshold. Examples of where control is considered to exist include “accounts for which a registered representative has trading authority, accounts of wholly-owned subsidiaries, [and] multiple accounts held by related people or entities that have a common beneficial owner.”
As for the population of the “tax number” field, the Notice further clarifies that firms should report foreign tax numbers for foreign accounts where such numbers are known and can be reported. Otherwise, firms should populate the “tax number” field for foreign accounts with all nines.
The Notice can be found here.