FINRA Seeks Public Comment On Four New Proposals

by Glen Shapiro, LawAndTax-News.com, New York

15 May 2008

The US Financial Industry Regulatory Authority (FINRA) on Wednesday posted Regulatory Notices seeking public comment on four proposals consolidating NASD and New York Stock Exchange (NYSE) rules for the new FINRA Rulebook.

The four areas covered by the proposals are Financial Responsibility, Supervision and Supervisory Controls, Books and Records and Investor Education and Protection.

In addition, FINRA revealed that it will shortly will be submitting a filing to the Securities and Exchange Commission (SEC) proposing to move NASD marketplace and procedural rules into the new FINRA rulebook.

This filing - series 4000 through 10000 and series 12000 through 14000 - would transfer these rules without material change in terms of substance, though many rules would be renumbered and reorganized into a more logical and more user-friendly framework.

Series 4000 through 7000 generally involve regulatory requirements and fees for quoting, trading, reporting, clearing and comparing over-the-counter transactions in NMS stocks, OTC equity securities and certain eligible debt securities.

Series 8000 involves investigations and sanctions. Series 9000 involves disciplinary procedures. Series 10000, 12000, 13000 and 14000 involve Dispute Resolution (arbitration and mediation) procedures.

After the filing is made, the SEC will seek public comment on the proposal.

Following are the rule proposals FINRA posted for public comment on Wednesday. The deadline for submitting comments is 13th June, 2008:

• Financial Responsibility: As part of the process to develop a new consolidated rulebook FINRA is requesting comment on a proposed set of financial responsibility rules based in part on existing NASD and Incorporated NYSE Rules and would govern members' financial responsibility requirements. They would also afford registered firms served with a notice under the financial responsibility rules an expedited review proceeding.
• Supervision and Supervisory Controls: FINRA is requesting comment on proposals that would provide firms with greater flexibility as to the manner (but not the substance) in which they can meet their supervisory and supervisory control procedures obligations .
• Books and Records: FINRA is requesting comment on proposals that would rewrite existing books and records provisions with three goals in view: to streamline the books and records rules to make them as clear as possible; to group books and records requirements along similar subject matter lines to make finding them a more intuitive process and to provide firms with a better understanding of the regulatory scheme; and, to eliminate those books and records requirements contained in the current NASD and NYSE Rules that have become obsolete or otherwise duplicative.
• Investor Education and Protection: FINRA is proposing to adopt a new FINRA rule based on NASD Rule 2280 that would require member firms, with certain exceptions, to provide customers with FINRA's Web site address and information regarding FINRA's BrokerCheck program at least once every calendar year. The proposal slightly narrows the exceptions currently in the rule.

FINRA was created last July through the consolidation of the National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration operations of the New York Stock Exchange (NYSE).

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