Executive Summary: FINRA has recently announced its proposal to enforce a licensing requirement on certain operations personnel. A new qualification examination for Operations Professionals would provide reasonable assurance that such individuals understand their professional responsibilities and the importance of identifying and escalating red flags. This proposed rule would require those individuals who are directly responsible for overseeing that tasks within the covered functions are performed correctly in accordance with applicable rules, protocols, policies, and procedures be appropriately registered.
The following persons (covered persons) would be required to register with FINRA as an Operations Professional:
- Senior management, with responsibility over the covered functions;
- Supervisors, managers or other persons responsible for approving or authorizing work in direct furtherance of the covered functions, including work of other persons in the covered functions;
- Persons with the authority or discretion to commit the firm's capital in direct furtherance of the covered functions or to commit the firm to any contract or agreement (written or oral) in direct furtherance of the covered functions.
The three categories of covered persons identified above that conduct activities or functions for the firm in one or more of the following covered functions would be required to register as an Operations Professional:
- Development and approval of pricing models used for valuations;
- Trade confirmation, account statements, settlement, margin;
- Stock loan/securities lending;
- Prime brokerage (services to other broker-dealers and financial institutions);
- Client on-boarding (customer account data and document maintenance);
- Capturing of business requirements for sales and trading systems and any other system related to the covered functions, and validation that these systems meet such business requirements;
- With respect to the covered functions, defining and approving business security requirements and policies for information technology (including, but not limited to, systems and data);
- Defining information entitlement policy in connection with the covered functions;
- Financial controller (including general ledger);
- Collection, maintenance, re-investment (i.e., sweeps) and disbursement of funds;
- Bank, custody, depository and firm account management and reconciliation;
- Segregation, possession and control, fail control, buy-ins;
- Receipt and delivery of securities and funds, account transfers;
- Financial regulatory reporting; and
- Posting entries to the books and records of a firm in connection with the covered functions.
The proposed examination would test for a broad understanding of a broker-dealer's business at a basic level, a basic understanding of the operations functions that support a broker-dealer's business, and the regulations designed to achieve investor protection and market integrity.
Individuals who currently hold certain registrations (Series 6, Series 7, Series 17, or Series 37/38), or who have held one during the two years immediately prior to registering as an Operations Professional, may qualify for an exception from having to take the Operations Professional examination. This exception also applies to individuals who do not currently hold an eligible registration, but would like an alternative to the Operations Professional examination. Such individuals would be permitted to sit for an eligible exam, and use such registration to qualify for the Operations Professional registration through filing an amendment to the Form U4. Likewise, individuals who currently hold (or within the past two years have held) certain principal-level registrations would be qualified to register as an Operations Professional without passing the Operations Professional examination. These principal-level registrations include the Series 4, 9/10, 14, 16, 23, 24, 26, 27, 28, 51, and 53.
The proposed transition period would last approximately six to nine months from the date of inception. During this time, covered persons would be required to register with FINRA as an Operations Professional by filing an amendment to their Form U4.
Regulatory Compliance is monitoring this and other proposed regulatory changes and will keep you informed on changes that may impact you and your reps. For more information on this and other FINRA proposals, please contact your Regulatory Compliance account manager at 603-434-3594.
Back to top
Back to Newsletter
|
