09-48 ALL FIRMS
SEC Approves Rule Establishing Expedited Procedures for Arbitrating Promissory Note Cases
Effective September 14, 2009, FINRA will begin expediting the administration of cases that solely involve a brokerage firm's claim that an associated person failed to pay money owed on a promissory note. Under the new procedures, a single public arbitrator from the roster of arbitrators approved to hear statutory discrimination claims will decide such promissory note cases. FINRA amended Rules 13214 and 13600 of the Code of Arbitration Procedure for Industry Disputes to make conforming changes.
09-49 UNDERWRITING/INVESTMENT BANKING FIRMS
SEC Approves Amendments to Modernize and Simplify NASD Rule 2720 Relating to Public Offerings of a Member Firm With a Conflict of Interest Participates
Effective September 14, 2009, firms must comply with the requirements of new NASD Rule 2720 (Public Offerings of Securities with Conflicts of Interest), which governs public offerings of securities in which a member firm with a conflict of interest participates. The new rule amends and replaces the previous NASD Rule 2720 in its entirety.
The rule prohibits a member firm with a conflict of interest from participating in a public offering, unless the nature of the conflict is prominently disclosed and:
a qualified independent underwriter (QIU) participates in the offering; or
- the member firm(s) primarily responsible for managing the offering does not itself have a conflict (and is not an affiliate of a firm with a conflict); or
- the offered securities are exchange-listed and satisfy the requirements for a bona fide public market or are investment grade rated by a nationally recognized statistical rating organization.
Additionally, member firms with a conflict of interest must comply with certain net capital, discretionary accounts and filing requirements, as applicable.
09-50 ALL FIRMS
SEC Approval and Effective Date for New Consolidated FINRA Rule 2320
In June 2009, the SEC approved new consolidated FINRA Rule 2320 (Variable Contracts of an Insurance Company), which will take effect on October 19, 2009. FINRA Rule 2320 regulates member firms in connection with the sale and distribution of variable life insurance and variable annuity contracts (together, variable contracts). It prohibits member firms from participating in the offer or sale of a variable contract unless certain conditions are met. It also regulates member compensation in connection with the sale and distribution of variable contracts, including both cash and non-cash compensation arrangements. The rule change requires members to determine and keep records of the value of non-cash compensation received from offerors in all cases (as opposed to NASD Rule 2820, which requires members to provide and keep records for the value of non-cash compensation only “if known”).Member firms are permitted to estimate the actual value of non-cash compensation for which a receipt (or similar documentation) assigning a value is not available. The rule change also makes certain non-substantive, technical changes to the rule to reflect FINRA’s corporate name and the new format of the Consolidated FINRA Rulebook.
09-51 GENERAL SECURITIES FIRMS
SEC Approves Amendments Relating to Recordkeeping and the Unsolicited Customer Order Exception of SEA Rule 15c2-11. (Effective September 21, 2009)
Firms are required to create a contemporaneous record of certain customer and order information demonstrating eligibility for the unsolicited customer order exception of SEA Rule 15c2-11 when the firm is relying on such exception.
09-52 GENERAL SECURITIES FIRMS
SEC Approves Amendments to FINRA Trade Reporting Rules on OTC Equity Transactions Executed Outside Normal Market Hours
Effective, January 11, 2010, firms that execute OTC trades in equity securities during the hours that a FINRA trade reporting facility is closed must report the trade within 15 minutes of the opening of the facility (i.e., by 8:15 a.m. Eastern Time).
Additionally, the FINRA/NASDAQ Trade Reporting Facility and the OTC Reporting Facility will allow firms to submit during normal market hours trade reports with a modifier designating the trade as executed outside normal market hours.
09-53 GENERAL SECURITIES FIRMS
Increased Margin Requirements for Leveraged Exchange-Traded Funds and Associated Uncovered Options
Effective December 1, 2009, FINRA is implementing increased customer margin requirements for leveraged ETFs and uncovered options overlying leveraged ETFs, in accordance with NASD Rule 2520 and Incorporated NYSE Rule 431.
09-54 GENERAL SECURITIES FIRMS
SEC Approves Amendments Requiring Related Market Center Indicator in Non-Tape Reports Submitted to FINRA
Effective March 1, 2010, firms submitting a non-tape report (either a non-tape, non-clearing report or clearing-only report) to the Alternative Display Facility (ADF), a Trade Reporting Facility (TRF) or the OTC Reporting Facility (ORF) (referred to as the “FINRA Facilities”) associated with a previously executed trade that was not reported to that same FINRA Facility must identify the facility or market where the associated trade was reported for dissemination purposes (the “Related Market Center”).
09-55 ALL FIRMS
FINRA Requests Comments on Proposed New Rules Governing Communications with the Public
FINRA requests comments on proposed new FINRA rules governing communications with the public. These new rules would replace current NASD Rules 2210 and 2211, Interpretive Materials that follow NASD Rule 2210, and portions of Incorporated NYSE Rule 472. While the proposed rules are based upon current rule provisions, the new FINRA rules would employ new communications categories and require the filing of certain types of communications that currently are not required to be filed. The proposal also would make a number of other changes to the communications rules. The Comment Period ends November 20, 2009.
09-56 ALL FIRMS
Proposed Changes to the Personnel Assessment and Gross Income Assessment Fees
On August 20, 2009, FINRA filed with the SEC a proposal to change FINRA's regulatory pricing structure by restructuring the Personnel Assessment and Gross Income Assessment fees in order to stabilize revenues used to fund FINRA's regulatory activities. If approved, the pricing changes would take effect on January 1, 2010. The SEC has published the proposal for comment. FINRA encourages firms to send comments to the SEC by the October 2, 2009, deadline.
09-57 GENERAL SECURITIES FIRMS
SEC Approves Amendments Expanding TRACE to Include Agency Debt Securities and Primary Market Transactions
Effective March 1, 2010, debt securities that are issued or guaranteed by an agency or by a government-sponsored enterprise (collectively, Agency Debt Securities) will become TRACE-Eligible Securities, and transactions in such securities will be reported and disseminated. Primary market transactions in TRACE Eligible Securities will be Reportable TRACE Transactions. For certain primary market transactions—List or Fixed Offering Price Transactions or Takedown Transactions—several significant exceptions to the current TRACE requirements will apply:
- the reporting period for List or Fixed Offering Price Transactions and Takedown Transactions will be extended to the close of business of the day following the day of execution (i.e., to 6:30 p.m. Eastern Time on T+1);
- member firms reporting such transactions will not be required to pay a standard transaction reporting fee; and
- transaction information will not be disseminated.
The SEC also approved new FINRA Rule 6770, granting FINRA emergency authority to suspend the reporting and/or dissemination of certain transactions in TRACE-Eligible Securities, or certain reporting or dissemination requirements as market conditions warrant and in consultation with the SEC.
Information Notice 09/29/09 GENERAL SECURITIES FIRMS
Publication of Daily and Monthly Short Sale Reports on the FINRA Web Site
Beginning September 20, FINRA is publishing on its Web site a Monthly Short Sale Transaction File to provide public access to certain transaction data, including transaction times, price, and number of shares for every short sale transaction in an NMS stock. FINRA also will begin publishing a Daily Short Sale Volume File in the fourth quarter of 2009, which will provide aggregate daily short sale volume data by security for NMS stocks and OTC Equity Securities.
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