As previously discussed in this publication, the SEC has approved FINRA’s amendments to Rule 2232. The rule will require broker-dealers to disclose on retail customer confirmations the “mark-up” or “mark-down” for most sales in corporate and agency debt securities.
FINRA has announced that the amended rule will become effective on May 18, 2018. Accordingly, broker-dealers are working to update their systems to ensure that their confirmations can include the required disclosures. FINRA’s regulatory notice as to the effective date may be found here.
Under the new rule, if a broker-dealer buys or sells a corporate fixed-income security (including a structured note) to or from a retail customer, and on the same day buys or sells the same security as principal from another party in an equal or greater amount, the firm will be required to disclose on the customer confirmation the firm’s mark-up or mark-down from the market price. The confirmation would also have to provide the execution time and access to trade-price data in the TRACE system.
The new rules do not apply to securities purchased in fixed-price offerings, such as most initial offerings of structured notes.
FINRA has indicated that broker-dealers may have specific implementation questions about the requirements of the rule and that it is committed to working closely with the industry during the implementation period, including to provide any needed further guidance.
For additional discussion of these rules, please see the September 14, 2016, edition of this publication, which can be found here.