Rule News

FINRA: Safeguarding Customer Assets

FINRA wants to know how effectively member firm safeguard customer assets, particularly when it comes to processing LOA's and transmittal requests.  Among other things, pols and procedures should be reasonably designed to review and monitor all instructions to transmit or withdraw assets from customer accounts, including instructions from an IA or other 3rd party purporting to act on behalf of the customer.  FINRA firms are required to test and verify their procedures for adequacy and to update them when necessary.

FINRA: Revise Discretionary Account Rules

FINRA plans to transfer NASD Rule 2510 into the Consolidated FINRA Rulebook as FINRA Rule 3260 with certain changes that take into account requirements under Incorporated NYSE Rule 408.  Comments on FINRA's proposal should be submitted by 12/28/09.

Transactions by Members and Their Associated Persons.   To provide additional clarity, proposed FINRA Rule 3260(a) groups together the requirements (such as trade-by-trade approval and frequent review of accounts)
applicable to members and their associated persons that have discretionary power over a customer’s account.

FINRA's New Quotation Facility: A Financial Burden on Market Makers

Last week, FINRA proposed replacing the Over-The-Counter Bulletin Board ("OTCBB") with a new Quotation Consolidation Facility ("QCF").  FINRA also proposed a concurrent reduction in the monthly quote fee (aka, listing fee or position charge), from $6 to $4 per security.  At first blush, the proposal appeared to be a "win-win" for FINRA and market making firms.  However, market makers now are beginning to realize that their monthly fees could sky-rocket under the proposal.

FOCUS Reports: 2010 Schedule

Periodic financial filings, such FOCUS Reports, Net Capital Computations and Equity Computations are due no later than the 17th business day of the month following the end of the reporting period.  The 17th day of each month in 2010 will fall on the dates below.   [NYSE Regulation, IM 9-52, 11/9]:

RULE Briefs

1. FINRA: To Be Stripped of IA Oversight in House Bill
2. Nasdaq:  2010 Testing Schedule
3. NYSE:  Updating Parameters for Gap Quote Policy
4. NFA:  FDM Alternative Net Cap Requirement, Security Deposit Exemption
5. DTC:  Change to Muni Bond Redemption Process

This Finra Is No FINRA

Senator Christopher Dodd, chairman of the Senate Banking Committee, envisions an all-power bank regulator, a new independent agency to monitor systemic risk - one that would take power away from the Federal Reserve and the FDIC, and eliminate the need for the Office of the Comptroller of the Currency and the Office of Thrift Supervision.  And that regulator would be called ... Finra, or the Financial Institutions Regulatory Administration.

The new regulatory agency, Finra - not to be confused with FINRA, or Financial Industry Regulatory Authority - would "eliminate the alphabet soup of multiple bank regulators that has led to weak, confusing regulation where it's easy for problems to fall through the cracks and difficult to know who is responsible," according to a summary of the draft bill. 

C-I Note:  Yes, the proposal would eliminate the alphabet soup to just 5 simple letters, and may even start the trend of naming financial regulators as "Finra," and assigning each a different Roman numeral - i.e., Finra-I, Finra-II, and so forth.

FINRA: Replace OTCBB with Quotation Consolidation Facility

FINRA plans to cease operation of the OTC Bulletin Board Service ("OTCBB") concurrent with the implementation of the Quotation Consolidation Facility ("QCF").  Ample transition time will be provided, with the change going into effect no sooner than 60 days, and no later than 365 days, from the date SEC approval is granted.  Here's what's proposed:

• Create a QCF for OTC Equity Securities for regulatory and transparency purposes that would serve as a data consolidator for all quote data in the OTC equity market;
• delete the FINRA Rule 6500 Series, which governs the OTCBB;
• modify the position charge from $6/security/month to $4/security/month.

WSP Alert: NYSE, Amex MOC + LOC Orders

NYSE proposes to amend Rule 123C to modify the procedures for its closing process;  similar changes are proposed for Amex.  This would be another step in the effort to enhance the Exchange market model - the first step was to replace the specialist function with a new category of market participant - the Designated Market Maker, or DMM.

So as to streamline and enhance transparency on the close and allow for greater customer participation when there is an imbalance in a security prior to the closing transactions, NYSE proposes to: 

Regulatory Element Exams Get a Make-Over

Those taking the S101 or the S106 Reg. Element Programs on or after 1/4/2010, will be looking at a new, redesigned version.  S101 - is the general program for all registration categories other than Series 6 or supervisory/principal types.  S106 - is required for Series 6 registered persons.

Changes to the programs include new story-based cases and an updated user interface.  They also will be streamlined to included only 4 modules, integrate topics such as ethics and business conduct, as well as compliance, registration/licensing and reporting requirements.  For more information on the new format and program content, click to access ...   [FINRA Info Notice on CEP, 11/9]

RULE Briefs

1. CBOE Proposes to Change Priority Rules
2. NYSE:  Sub-Penny Orders for Penny Stocks
3. NYSE, Amex: Audited Financials, SEA Rule 17a-5
4. FINRA:  Expedited Proceedings

MSRB Raises Examination Fees

MSRB's new Rule A-16 was filed for immediate effectiveness and will become active on 1/4/2010.  That means that any persons taking certain qualification examinations as of 1/4/2010 will be assessed $60 in additional fees.

Series 51 - Municipal Funds Securities Limited Principal.   It will now cost $145 ($85 to FINRA) to take this 1 1/2-hour, 60 question multiple-choice qualification exam. 

Series 52 - Municipal Funds Representative.   It will now cost $155 ($95 to FINRA) to take this 3-hour, 100 question multiple-choice qualification exam.

Series 53 - Municipal Funds Principal.   It will now cost $155 ($95 to FINRA) to take this 3-hour, 100 question multiple-choice qualification exam. 

The proposed costs are intended to partially cover costs incurred to develop, implement and update these exams.   [MSRB Notice 9-58, 11/5]

Newest SEC Divion: Adds Diversification, Staff Experts

Three officials - one senior advisor, two senior counsels - were added to the SEC's newly-established Division of Risk, Strategy and Financial Innovation - in risk management, structured finance and corporate transactions.

Risk Management.   Richard Bookstaber was appointed Senior Policy Advisor to the Director.  He has served as head of risk management at Salomon Brothers, Moore Capital Mgmt, and Morgan Stanley.

Structured Finance.   Adam Glass is a new Counsel to the Director.  He comes from Linklaters LLP, where he founded its Structured Finance and Derivatives Practice.  He previously was with Sidley Austin.

Corporated Transactions.   Bruce Kraus is a new Counsel to the Director.  He had been with Willkie Far & Gallagher for some 20 years, where his practices included M&A transactions and other corporate finance work.   [SEC PR 9-238, 11/5]

Speeches, Testimony by Top Regulators [11.13.09]

C-I's Linked Directory for SEC, FINRA, CFTC.  [Click Date to Access Speech, Testimony] 

• Mary Schapiro, SEC Chairman
  
• Richard Ketchum, FINRA CEO
• Gary Gensler, CFTC Chairman

• Elisse Walter, SEC Commissioner
  
• Louis Aguilar, SEC Commissioner
• Troy Paredes, SEC Commissioner
• H. David Kotz, SEC Inspector General
• Robert Khuzami, SEC Director, Div - Enforcement
  
• Andrew Donohue, SEC Director, Div - Investment Management
  
• Michael Dunn, CFTC Commissioner
  
• Bart Chilton, CFTC Commissioner

RULE Briefs

1. Nasdaq Options:  The Market Open Process
2. ISE:  Narrow-Based Indexes
3. ISE: Market Maker Guidelines
4. SEC:  Report on Administrative Proceedings
5. SEC:  Fee Rate Advisory #3

Proposed Rule Changes re: Disciplinary Proceedings, Arbitration Hearings

1. FINRA Rule 9251, Inspection and Copying of Documents in Possession of Staff.
2. FINRA Rules 12601/13601, 12902/13902, Dispute Resolution: Customer, Industry Codes.

1. FINRA Rule 9251, Inspection and Copying of Documents in Possession of Staff.
2. FINRA Rules 12601/13601, 12902/13902, Dispute Resolution: Customer, Industry Codes.

RULE Briefs [CBOE]

1. CBSX:  New Opening Time
2. CBOE: New Linkage Plan and ISO's
3. CBOE: Member Supervision of Clients with System Access
4. CBOE:  Temporary Membership and Interim Trading Permits
5. CBOE: Futures-Linked Securities