Financial Industry Regulatory Authority

Firm Element Advisory Update

On October 10th, the Financial Industry Regulatory Authority announced that the Securities Industry/Regulatory Council on Continuing Education released its Fall 2014 Firm Element Advisory, which identifies regulatory and sales practice topics that firms should consider in their Firm Element training plans. FINRA Regulatory Notice 14- 41.

Confidentiality Provisions in Settlement Agreements and the Arbitration Discovery Process

On October 9th, the Financial Industry Regulatory Authority reminded firms that it is a violation of FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) to include confidentiality provisions in settlement agreements or any other documents, including confidentiality stipulations made during a FINRA arbitration proceeding, that prohibit or restrict a customer or any other person from communicating with the SEC, FINRA, or any federal or state regulatory authority regarding a possible securities law violation. FINRA Regulatory Notice 14- 40.

New Template Available for Compliance with Exchange Act Rule 17a-5(f)(2)

On October 8th, the Financial Industry Regulatory Authority announced the availability of a new template that will allow members to file electronically the statement required by Securities Exchange Act Rule 17a-5(f)(2), as revised, regarding the identification of a broker-dealer’s independent public accountant. FINRA is also providing a set of Frequently Asked Questions for members’ guidance. FINRA Regulatory Notice 14-39.

Proposal Permitting Arbitrators to Make Referrals During an Arbitration Proceeding Is Approved

On October 8th, the SEC approved the Financial Industry Regulatory Authority’s proposed amendment of Rule 12104 of the Customer Code and Rule 13104 of the Industry Code to broaden arbitrators’ authority to make referrals during an arbitration proceeding. The amendments will permit arbitrators to refer to FINRA any matter or conduct that an arbitrator has reason to believe poses a serious threat, whether ongoing or imminent, that is likely to harm investors unless immediate action is taken. SEC Release No. 34-73319.

Disapproval Proceedings Instituted for Proposed Quotation Requirements for Unlisted Securities

On October 7th, the SEC instituted proceedings to determine whether to approve or disapprove the Financial Industry Regulatory Authority’s proposed adoption of rules relating to quotation requirements for over-the-counter equity securities and to delete the rules relating to the OTC Bulletin Board Service and thus cease its operation. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of October 13. Rebuttal comments should be submitted within 35 days. SEC Release No. 34-73313.

Extension of Current Rate for Fees Paid under Section 31 of the Exchange Act

On October 7th, the Financial Industry Regulatory Authority advised members that the SEC is operating under a continuing resolution that will extend until December 11, 2014. As such, the Section 31 rate applicable to specified securities transactions on the exchanges and in the over-the-counter market will remain at the current rate of $22.10 per million dollars until 60 days after the enactment of a new fiscal year appropriation for the SEC. FINRA Information Memo.

Financial and Operational Rule Interpretations Updated

On October 6th, the Financial Industry Regulatory Authority updated the imbedded text of Securities Exchange Act financial responsibility rules for broker-dealers in the Interpretations of Financial and Operational Rules. The updates reflect the effectiveness of SEC amendments to Rules 15c3-1, 15c3-1a, 15c3-1e, 15c3-1f, 15c3-1g, 15c3-3a and 17a-4. FINRA is also making available related updates of the Interpretations of Financial and Operational Rules that have been communicated to FINRA by the staff of the SEC’s Division of Trading and Markets. The updated interpretations relate to Rule 15c3-1. FINRA Regulatory Notice 14-38.


NYSE Regulation to Assume Regulatory Functions

On October 6th, NYSE Group announced NYSE Regulation will directly perform the market surveillance, investigation and enforcement functions for NYSE Group’s three equities exchanges and two options exchanges upon the expiration of the contract with the Financial Industry Regulation Authority on December 31, 2015. FINRA will retain the cross-market surveillance and investigation functions and will continue to conduct the registration, testing, and examinations of broker-dealer members of NYSE Group’s exchanges. NYSE Group Press Release.