The Financial Industry Regulatory Authority (FINRA) is in the process of a developing a unified NYSE/NASD rulebook, but in the interim has proposed amending and deleting certain NYSE rules in an effort to reduce regulatory duplication and relieve firms that are members of both FINRA and the NYSE. The term “allied member,” which designates a person with control over a member organization, would be deleted and replaced with the NASD Rule term “principal executive,” which denotes someone with principal responsibility over the various areas of a member organization. NYSE buy-in rules, Rules 283 and 285-290, would be repositioned into NYSE Rule 282, which would serve as a complete, central repository for all requirements and procedures related to transactions subject to the buy-in rules.
Permitted supervisory personnel under NYSE Rule 342.13(a) would be amended to require supervisory candidates to have one year of “direct experience” or two years of “related experience” in the subject area to be supervised rather than the current “creditable three-year record as a registered representative or three years of equivalent experience before functioning as a supervisor”. The four-month training period prescribed by NYSE Rule 345 before certain exam-qualified registered persons could receive NYSE approval to perform certain functions would be eliminated, and member organizations would determine, consistent with their overall supervisory obligations, the extent and duration of training for each registered person before being permitted to conduct registration-sensitive functions. The registration category of “securities trader” would be deleted.
NYSE notice requirements for member organization employees engaged in outside business activities would be deleted. The proposal would reposition the requirements pertaining to member organization employee “private securities transactions” from Rule 407 to Rule 346, which addresses issues related to outside business activities. Rather than retain Rule 346(e), which required NYSE approval for supervisory persons to devote less than their entire time to the business of the member organization, the proposal would require the prior written approval of the member organization, pursuant to the exercise of due diligence, for such arrangements.
The proposal would amend NYSE Rule 351.13 to limit the definition of the term “customer complaint” to any written statement of a customer or any person acting on behalf of a customer rather than the current application to both written and oral complaints. NYSE Rule 352(c) would be amended to exempt from the proportional contribution requirement joint accounts with immediate family members held by principal executives or registered representatives of member organizations, subject to the provision that no member organization will guarantee or in any way represent that it will guarantee a customer against loss. A person acting as an investment adviser, whether registered or not, would be permitted to receive compensation based on a share of profits or gains if all of the conditions of the Investment Advisers Act of 1940 Rule 205-3 are satisfied. Amendments to Rule 408(a) would require member organizations to obtain the signature of any person or persons authorized to exercise discretion in such accounts, of any substitute so authorized, and the date such discretionary authority was granted.
Rule 311 (prescribing the number of partners to be named in a member organization in order for it to conduct business), Rule 412 (transfer of customer accounts from one member to another), Rule 436 (interest on credit balances) and Rule 446 (business continuity and contingency plans) would be rescinded as they are covered in other FINRA rules.