Monday, April 20, 2015

FINRA Announces Proposed Changes to Communications, Trading Rules

By Joanne Cursinella, J.D.

The FINRA board of governors has announced its approval of proposed changes to its Communications With the Public rules as well as amendments to the Trading Activity Fee for firms with no customers that are engaged solely in proprietary trading activity for their own accounts. The proposals were discussed at the April 2015 board meeting.

Communications rules. In general, FINRA member firms' communications with the public must comply with FINRA Rule 2210. The rule requires certain standards for the content, approval, recordkeeping, and filing of communications with FINRA, and firms must generally comply with its requirements when communicating with the public, including communications with retail and institutional investors.

FINRA will ask for comment on proposed amendments that would eliminate certain filing requirements that it says present a low level of risk to investors. These include the filing requirements for generic investment company material and investment company shareholder reports. FINRA said the proposed changes would also seek to better align the requirements to the relative risks presented by specific types of sales material. The proposed rule changes to the Communications With the Public Rule set are the first changes to FINRA rules under a retrospective rule review program started last April to assess the rules’ effectiveness and efficiency.

Specifically, FINRA has authorized publication of a Regulatory Notice seeking comment on proposed changes to Rules 2210, 2213 (Requirements for the Use of Bond Mutual Fund Volatility Ratings) and 2214 (Requirements for the Use of Investment Analysis Tools).

Trading activity fee. The FINRA board has also authorized publication of a Regulatory Notice requesting comment on proposed amendments to the trading activity fee rules for firms with no customers that are engaged solely in proprietary trading activity for their own accounts. Specifically, the amendments would exclude from the fee those transactions executed on an exchange where the firm is a member, including non-market-maker trades, as long as the firm has no customers and trades only for its own account. According to FINRA’s news release, these proposed changes follow the SEC's recent proposal to eliminate the registration exemption for proprietary trading firms that are members of exchanges but not FINRA.

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