Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed…
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Self-Regulatory Organizations;
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act"), /1/ and Rule 19b-4 thereunder, /2/ notice is hereby given that on
FOOTNOTE 1 15 U.S.C. 78s(b)(1). END FOOTNOTE
FOOTNOTE 2 17 CFR 240.19b-4. END FOOTNOTE
I.
FINRA proposes to amend FINRA Rule 4512 (Customer Account Information) to except institutional accounts from the requirements of FINRA Rule 4512(a)(1)(C).
The text of the proposed rule change is available on FINRA's Web site at http://www.finra.org, at the principal office of FINRA, and at the
II.
In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, as set forth in sections A, B and C below, of the most significant parts of such statements.
A.
1. Purpose
On
FOOTNOTE 3 See Securities Exchange Act Release No. 63784 (
FOOTNOTE 4 The current FINRA rulebook consists of (1) FINRA Rules; (2) NASD Rules; and (3) rules incorporated from
Servicing Institutional Accounts
FINRA Rule 4512 requires firms to maintain certain information relating to customer accounts, and it is based on existing requirements in NASD Rule 3110(c) (Customer Account Information) with several changes, as described in Regulatory Notice 11-19. Among other changes, FINRA Rule 4512(a)(1)(C) requires firms to maintain the name of the associated person, if any, responsible for the account, rather than requiring firms to maintain the signature of the registered representative introducing the account. /5/ Where a member designates multiple individuals as being responsible for an account, the firm is required to maintain each of their names and a record indicating the scope of their responsibilities with respect to the account. /6/ For purposes of the rule, it is the member's obligation to determine whether a particular individual is responsible for the account based on the scope of the individual's activities with respect to that account.
FOOTNOTE 5 See also SEA Rule 17a-3(a)(17). END FOOTNOTE
FOOTNOTE 6 This provision was added in response to a comment from the
Following discussions with industry representatives, FINRA has determined that the application of FINRA Rule 4512(a)(1)(C) to institutional accounts /7/ raises significant operational issues in light of the manner in which institutional business is conducted. FINRA understands that numerous sales and trading associated persons often interact with institutional accounts, depending on such factors as the scope of the relationship with the institutional account and the products involved, and that, for purposes of institutional accounts, compliance with the recordkeeping requirements of FINRA Rule 4512(a)(1)(C) would cause significant operational challenges. Accordingly, FINRA proposes to amend the rule to except institutional accounts from the recordkeeping requirements of FINRA Rule 4512(a)(1)(C). Additionally, FINRA proposes to add Supplementary Material .05 (Supervision of Accounts) to FINRA Rule 4512 to clarify that nothing in paragraph (a)(1)(C) of the rule obviates a member's obligation to supervise an account that it services, including determining the associated persons responsible for the account and ensuring that such persons are appropriately qualified and registered, and to comply with the requirements of Rule 2090 ("Know Your Customer") (which becomes effective on
FOOTNOTE 7 As defined in FINRA Rule 4512(c), the term "institutional account" means the account of: (1) A bank, savings and loan association, insurance company or registered investment company; (2) an investment adviser registered either with the
FINRA has requested the Commission to find good cause pursuant to Section 19(b)(2) of the Act /8/ for approving the proposed rule change prior to the 30th day after its publication in the
FOOTNOTE 8 15 U.S.C. 78s(b)(2). END FOOTNOTE
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, /9/ which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that the proposed rule change will further these purposes by providing greater clarity to members regarding the application of FINRA Rule 4512(a)(1)(C), which, in turn, will assist them in their compliance efforts. The clarification regarding FINRA Rule 4512(a)(1)(C) would except institutional accounts from the recordkeeping requirements of the provision, while new Supplementary Material .05 (Supervision of Accounts) emphasizes a member's obligation to supervise all accounts that it services, including determining the associated persons responsible for the account and ensuring that such persons are appropriately qualified and registered, and to comply with the requirements of Rule 2090 (which becomes effective on
FOOTNOTE 9 15 U.S.C. 78 o -3(b)(6). END FOOTNOTE
B.
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
C.
Written comments were neither solicited nor received.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic Comments
* Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
--This is a summary of a
Citation: "76 FR 77034"
Document Number: "Release No. 34-65890; File No. SR-FINRA-2011-070"
Federal Register Page Number: "77034"
"Notices"
Copyright: | (c) 2011 Federal Information & News Dispatch, Inc. |
Wordcount: | 1536 |
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