The Financial Industry Regulatory Authority (FINRA), on March 21, 2017, published a Special Notice soliciting comments on various existing FINRA engagement programs (Notice). This request for comment is one component of FINRA’s recently announced undertaking to review various aspects of its operations and programs with an eye towards greater efficiency. The Notice follows closely on the heels of the rule proposal, filed by FINRA on March 8, 2017 with the Securities and Exchange Commission, which seeks to simplify competence exams and facilitate the entry and re-entry of professionals to the securities industry.
The Notice identifies and discusses six categories of current and/or proposed engagement initiatives: committees; rulemaking; member outreach and compliance resources; investor education; FINRA transparency; and other communications. The Notice further asks specific questions regarding FINRA’s existing and proposed engagement programs, with a comment period expiring on May 5, 2017. The Notice provides an opportunity for FINRA members and others to comment on a wide range of FINRA activities and programs (albeit not its membership, enforcement or examinations programs). Although the Notice is not limited to small broker-dealers, FINRA directed many of its questions to the impact on smaller firms.
This OnPoint provides a brief summary of the Notice.
FINRA’s committees, involving industry and non-industry stakeholders, include participant advisory, subject matter advisory, geographic district and ad hoc committees. Questions as to the committee program address: overall effectiveness of the various committees in achieving their respective goals; potential areas of improvement; and proposals for increasing committee transparency and accessibility.
Of special relevance are items related to FINRA’s participant advisory committees: the Compliance Advisory Committee; Investor Issues Committee; Regulatory Advisory Committee; and Small Firm Advisory Board. Each of these committees serves as a representative body for a discrete broker-dealer market segment or stakeholder class, such as large firms, small firms, or subject matter experts. Advisory committees communicate the needs and views of their constituents through comments and consultation during the FINRA rulemaking process, as well as through regular contact with FINRA. Among the questions posed with respect to the FINRA committee program is one asking whether “the current committees enable sufficient engagement by FINRA with all of its different types of members, including members with different business models and challenges[.]” Questions such as this provide an opportunity for firms to express concerns with the representative quality or overall efficacy of the advisory committee program.
The Notice describes how FINRA solicits member and industry participant input during its rulemaking process. In requesting feedback as to the effectiveness of its rulemaking engagement initiatives, FINRA focused on the initial rulemaking process, retrospective rule reviews and regulatory guidance. The Notice asks how to “encourage meaningful input on proposed rules by advisory committee members,” which presents an avenue for member firms to express concerns as to the economic impact and regulatory burdens of new rules – this is an issue the rulemaking process intends to address through review by the FINRA Office of the Chief Economist.1
Member Outreach and Compliance Resources
The Notice seeks comments on FINRA’s member and public outreach programs and compliance resources. These programs include: Member Meetings and Small Firm Roundtables; conferences and educational presentations organized by FINRA; and compliance tools and resources aimed at reducing the regulatory burden of compliance areas (such as cybersecurity, anti-money laundering and advertising).2 The Notice invites industry participants to comment on possible improvements to these resources and to suggest other tools that may assist with difficult or burdensome compliance areas.
Investor Education, FINRA Transparency and Other Resources
The final three engagement topics on which the Notice seeks comment concern its investor outreach and education programs, transparency into FINRA operations and financial reporting, and other public points of contact such as hotline and website resources. Notably, the Notice contains requests for comments as to the substance and usefulness of FINRA’s Annual Priorities Letter and other key communications channels, which may serve as an avenue for member firms to address particularly pertinent touchpoints.