10-08 |
FIRMS THAT CARRY CUSTOMER MARGIN ACCOUNTS |
Customer Margin Accounts
FINRA rule 4521(d) requires that, unless otherwise permitted by FINRA in writing, firms that carry customer margin accounts must report to FINRA the total of all debit balances in securities margin accounts and the total of all free credit balances contained in cash or margin accounts.
Beginning March 1, 2010, reporting must be completed electronically using the new FINRA Customer Margin Balance Form at www.finra.org/firmgateway. Reports must be filed promptly after the last business day of the month. Reports that are not filed promptly will be subject to a $100 per day late fee up to a maximum of 10 business days. |
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10-09 |
GENERAL SECURITIES FIRMS |
Reverse Convertibles
FINRA provides guidance and reminds firms of their obligations concerning Reverse Convertibles. These reverse exchangeable securities are popular among retail investors because of the high yields they offer. However, because they are very complex investments that involve terms, features and risks that can be difficult to evaluate, member firms must have adequate written supervisory procedures in place to ensure that the sale of these products complies with federal securities laws, and FINRA rules and registered representatives must perform adequate suitability analysis before recommending them to customers. |
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10-10 |
ALL FIRMS |
SEC Approves New Consolidated FINRA Rules
FINRA has approved three rules as part of the Consolidated FINRA Rulebook effective April 19, 2010.
NASD Rule |
FINRA Rule |
Rule Title |
Summary |
3121 |
4570 |
Custodian of Books and Records |
At the time a firm files a Form BDW, the firm must designate a person associated with the member on the form BDW as the custodian of the firm’s books and records. |
2770 |
5160 |
Disclosure of Price and Concessions in Selling Agreements |
Requires that selling syndicate agreements or selling group agreements set forth the price at which securities are to be sold to the public or the formula by which such price can be ascertained and state clearly to whom and under what circumstances concessions may be allowed. |
3220 |
5330 |
Adjustment of Orders |
Sets forth the requirements for a member firm regarding orders held by the firm that involve a security that is subject to a dividend, payment or distribution. |
Rule conversion charts designed to help firms become familiar with the new rules and show firms how the new rules relate to those they will replace can be located on the FINRA website at www.finra.org/Industry/Regulation/FINRARules. FINRA updates these charts as the effective dates of rules for the consolidated rulebook are announced |
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10-11 |
ALL FIRMS |
Deficient Claims
FINRA amended the Codes of Arbitration Procedure for Customer and Industry Disputes effective March 22, 2010.
When an arbitration claim is initiated, both parties must file a signed and dated submission agreement and a statement of claim explaining the facts, outline the remedies requested, and pay all required filing fees. If each requirement is not met, the director of FINRA Dispute Resolution will issue a notice of deficiency and allow the party 30 days to take corrective action. If the deficiencies are not remedied, the director will close the case and issue a partial refund. Prior to this amendment, Rules 12307 and 13307 stated that if a deficient claim is corrected within 30 days from the time a party received a deficiency notice, the claim will be considered filed. However, the rules did not specify which date would be used as the date of filing. The amended procedure specifies that, if a deficient claim is corrected within 30 days from the time a party received a deficiency notice, the claim will be considered filed on the date the initial statement of claim was filed. |
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10-12 |
ALL FIRMS |
FOCUS Reporting
FINRA provides guidance from the SEC’s Division of Trading and Markets on the procedures for reporting adjustments on the FOCUS Report resulting from the Financial Accounting Standard Board’s Statement of Financial Accounting Standards No. 167 (FAS 167) and amendments to FASB Interpretation No. 46(R). FAS 167established new standards for reporting transfers of assets to special-purpose entities, known as variable interest entities, under GAAP, and for consolidating variable interest entities. Firms are required to consider the impact of the FAS 167 provisions on all future FOCUS Report filings, beginning with the January 2010 FOCUS Report. |
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10-13 |
ALL FIRMS |
Expedited Proceedings
The SEC has approved amendments to the Rule 9550 Series, which governs expedited proceedings. The amendments shorten the time in which a hearing must be held from 60 days after a hearing request to 30 days after the request in relation to Rules 9551 – 9555 and shorten the period before a suspension automatically turns into an expulsion or bar. Also, FINRA is now allowed to take expedited action against firms that fail to comply with orders of restitution or FINRA settlements providing for restitution. |
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10-14 |
GENERAL SECURITIES FIRMS |
Trade Reporting and Compliance Engine (TRACE)
On March 31, 2010, FINRA began providing the public with access to historical transaction-level data for transactions in all TRACE-Eligible Securities reported to TRACE since July 1, 2002 (excluding Rule 144A transactions). Fees were also implemented for professional users of Historic Trace Data. |
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10-15 |
ALL FIRMS |
Financial Responsibility
FINRA reminds firms that under Rule 4110(e)(1), subordinations (subordinated loans and notes collateralized by securities) must be approved by FINRA in order to receive a beneficial regulatory capital treatment. FINRA also provides guidance on:
- New standard subordination forms;
- Revised lender’s attestations;
- The submission and approval process of proposed subordinations;
- How to obtain approval of proposed amendments to subordinations; and
- How to obtain approval of renewals of previously approved subordinations.
Standard subordination forms and revised lender’s attestations are available at www.firna.org/subordinations. |
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