FINRA Rules & Regulations: Record-keeping, Advertising, Disclosure and More

The Financial Industry Regulatory Authority (FINRA) is the largest regulator for all securities firms doing business in the United States, charged with protecting investors by maintaining the fairness of the U.S. capital markets. For your reference, here’s a roundup of recent commentary and analysis on FINRA rulemaking, from lawyers and law firms on JD Supra:

FINRA Requests Comments on Proposal to Require Carrying or Clearing Member Firms to Maintain and Keep Current Certain Records in a Central Location (Katten Muchin Rosenman LLP):

“FINRA proposed Rule [4516] because it is essential that regulators be able to take prompt action with respect to customer accounts of a carrying or clearing member firm that can no longer continue to operate due to financial or operational problems. To that end, FINRA believes it is critical that a carrying or clearing member firm maintain and keep current certain documents and information at a specially designated area in the firm’s principal office that would be immediately available to representatives of FINRA, the Securities and Exchange Commission, and Securities Investor Protection Corporation.” Read more»

Update on FINRA Financial Rules (Daniel LeGaye):

“Pursuant to FINRA Rule 4523, every firm must now designate an associated person and a supervisor to be responsible for each general ledger account. The associated person should be responsible for each general ledger account and any account of like function used by a firm, and must control and oversee entries into each such account and determine that the account is current and accurate as necessary to comply with all applicable FINRA rules and federal securities laws.” Read more»

FINRA Provides Guidance on Advertising Regulation Issues (Katten Muchin Rosenman LLP):

“The Financial Industry Regulatory Authority, Inc. has issued Regulatory Notice 11-49, which … reminds firms that: i) the [NASD] Rule 2210(c) filing requirement concerning sales literature and advertisements of registered investment companies includes research reports that fall within the definition of advertisement or sales literature, and ii) the Rule 2210(c) filing requirement concerning sales literature and advertisements of public direct participation programs includes the advertisements and sales literature of exchange-traded products organized as grantor trusts that meet the definition of a FINRA Rule 2310 direct participation program.” Read more»

New FINRA Customer Arbitration Disclosures and RR Responsibilities Take Effect December 5 (Warner Norcross & Judd):

“Broker-dealers using predispute arbitration agreements must give each client new disclosures under FINRA Rule 2268. The new disclosures reflect amendments to FINRA Rule 12904, requiring arbitrators to provide an explained decision to the parties in eligible cases if there is a unanimous request at least 20 days before the first hearing date. All predispute arbitration agreements entered into on or after December 5, 2011, must reflect this and other changes mandated by the new rule.” Read more»

The Evolution of a Rule: FINRA Proposes Rule 5123 in lieu of Proposed Rule 5122 (Morrison & Foerster LLP):

“FINRA stated that it is proposing to adopt new Rule 5123 to ensure that investors in private placements are provided with detailed information about the intended use of offering proceeds, the offering expenses and offering compensation. In addition, new Rule 5123 would provide FINRA, through a member ‘notice’ filing requirement, with more timely and detailed information about the private placement activities of member firms. As a result, FINRA believes that the rule will provide important investor protections in connection with private placements without unduly restricting capital formation.” Read more»

FINRA Reminds Firms of Trade Reporting Requirements in OTC Equity Securities and Restricted Equity Securities Transactions (Katten Muchin Rosenman LLP):

“The Financial Industry Regulatory Authority has issued a Trade Reporting Notice to remind firms that over-the-counter (OTC) trades in OTC Equity Securities and trades in Restricted Equity Securities under Securities Act Rule 144A must be reported to FINRA’s OTC Reporting Facility in accordance with FINRA trade reporting rules.” Read more»


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