FINRA Regulatory Notice 21-17 FINRA Seeks Comment on Supporting Diversity and Inclusion in the Broker-Dealer Industry
FINRA is committed to supporting efforts by broker-dealer industry participants to foster diversity, inclusion and equal opportunity. FINRA seeks comment on any aspects of our rules, operations and administrative processes that may create unintended barriers to greater diversity and inclusion in the broker-dealer industry or that might have unintended disparate impacts on those within the industry.
FINRA reminds member firms about requirements when using predispute arbitration agreements for customer accounts. Where member firms use mandatory arbitration clauses in their customer agreements, FINRA rules establish minimum disclosure requirements regarding the use of such clauses and prohibit predispute arbitration agreements from including conditions that, among other things, limit or contradict FINRA rules. In addition, FINRA rules do not allow class action claims in FINRA arbitration. Accordingly, FINRA rules prohibit member firms from incorporating provisions that would prevent customers from bringing or participating in judicial class actions by adding waiver language into customer agreements (class action waivers) and prohibit member firms from enforcing arbitration agreements against members of a certified or putative class action. FINRA urges member firms to take prompt steps to ensure their customer agreements fully comply with FINRA rules. Member firms that fail to comply with FINRA rules related to customer agreements may be subject to disciplinary action.
With the recent increase in the number of customers seeking to open brokerage accounts and trade options, FINRA reminds members of the requirements for determining whether to approve a customer to trade options. Regardless of whether the account is self-directed or options are being recommended, members must perform due diligence on the customer and collect information about the customer to support a determination that options trading is appropriate for the customer. In addition, FINRA reminds members that options accounts are subject to specific supervisory reviews, including, among others, reviewing the compatibility of options transactions with investment objectives and with the types of transactions for which the account was approved, and are subject to other FINRA rules that apply when opening customer accounts, including among others, customer identification requirements under anti-money laundering rules. FINRA also reminds members of the margin requirements for options transactions.
FINRA warns member firms that, over the past two months, we have observed a sharp increase in new customers opening online brokerage accounts and engaging in Automated Clearing House (ACH) “instant funds” abuse to effect securities trading. (FINRA has previously warned firms about trends in losses from schemes involving electronic funds transfers, such as those involving outbound wire transfers and ATM withdrawals.
FINRA announces, effective immediately, clarifications of interpretations of FINRA margin requirements regarding day trading (Rule 4210(f)(8)(B)(ii)).
FINRA reminds member firms of their obligations regarding customer order handling, margin requirements and effective liquidity management practices during extreme market conditions.
MSRB Regulatory Notice 2021-07 Request for Comment on Fair Dealing Solicitor Municipal Advisor Obligations and New Draft Rule G-46
The Municipal Securities Rulemaking Board (MSRB) is requesting comment on new draft Rule G-46 that would codify interpretive guidance previously issued in 2017. That guidance relates to the obligations of “solicitor municipal advisors” under MSRB Rule G-17, on conduct of municipal securities and municipal advisory activities (the “G-17 Excerpt for Solicitor Municipal Advisors”) and was originally included in a larger notice regarding the application of MSRB rules to solicitor municipal advisors. In addition to codifying the general substance of the G-17 Excerpt for Solicitor Municipal Advisors, the draft rule also would add additional requirements that would better align some of the obligations imposed on solicitor municipal advisors with those applicable to non-solicitor municipal advisors under Rule G-42, on duties of non-solicitor municipal advisors, and to underwriters under Rule G-17, on conduct of municipal securities and municipal advisor activities. The proposed codification of this guidance is a next step in the MSRB’s ongoing review of the catalogue of interpretive guidance in its rule book, as announced in MSRB Notice 2021-02. The MSRB invites all interested parties to submit comments in response to this request for comment, along with any other information they believe would be useful.
FINRA Regulatory Notice 21-11 FINRA Requests Comment on Proposed Amendments to the Margin Rule Regarding When Issued and Other Extended Settlement Transactions
FINRA seeks comment on proposed amendments to Rule 4210 (Margin Requirements) that would clarify and incorporate into the rule current interpretations regarding when issued and other extended settlement transactions, and provide relief to facilitate the application of the rule to these transactions.
FINRA Regulatory Notice 21-10 FINRA Updates Private Placement Filer Form Pursuant to FINRA Rules 5122 and 5123
FINRA has updated the form that members must use to file offering documents and information pursuant to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) (Filer Form). The updated Filer Form will be accessible in the FINRA Gateway beginning May 22, 2021, and includes new and updated questions that will facilitate review of the filed material. Beginning on May 22, 2021, members will be required to complete the updated Filer Form for all new filings, as well as for new amendments to filings.
FINRA adopts rules to address brokers with a significant history of misconduct. Effective Dates: Amendments to the FINRA Rule 9200 Series, FINRA Rule 9300 Series, and FINRA Rule 9556: April 15, 2021; Amendments to FINRA Rule 8312: May 1, 2021; Amendments to the FINRA Rule 9520 Series and Funding Portal Rule 900: June 1, 2021; Amendments to the FINRA Rule 1000 Series and the Capital Acquisition Broker Rule 100 Series: September 1, 2021
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