The Financial Industry Regulatory Authority, Inc. (FINRA) (f/k/a/ National Association of Securities Dealers, Inc. (NASD)) filed with the Securities and Exchange Commission a proposed rule change with respect to NASD IM-1013-1. The proposal is aimed at addressing the applicability of the consolidated FINRA Rules to member firms of the New York Stock Exchange LLC that became members of FINRA pursuant to the waive-in process set forth in IM-1013-1.
Subsequent to NYSE amending its rules to require FINRA membership as a condition of being an NYSE member organization, FINRA incorporated into its existing rulebook NYSE Rules pertaining to member firm conduct. To simplify the mandatory dual-membership process, FINRA adopted NASD IM-1013-1 to enable eligible NYSE member organizations to become FINRA members through an expedited waive-in process. Accordingly, certain NYSE firms were eligible to automatically become FINRA members.
The proposed rule change will reflect FINRA’s position that NYSE firms which obtain FINRA membership pursuant to the waive-in process should be subject to all consolidated FINRA Rules. The proposal is particularly important because all existing NYSE Rules applicable to those NYSE firms which waive into FINRA membership are scheduled to be eliminated from the FINRA/NYSE consolidated rulebook, which would ultimately result in a gap in regulation for such NYSE firms. Thus, the proposal would amend IM-1013-1 to specify that the waive-in firms would be subject to FINRA’s By-Laws and Schedules to its By-Laws.