June 16, 2021

Volume XI, Number 167

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June 14, 2021

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FINRA Seeks Comment on Proposed Amendments to Margin Rule Requirements and Diversity and Inclusion Initiatives

FINRA Seeks Comment on Proposed Amendments to Margin Rule Requirements

The Financial Industry Regulatory Authority (FINRA) is requesting comment on proposed amendments to Rule 4210 (Margin Requirements) that seek to clarify current interpretations related to extended settlement transactions. Rule 4210 generally requires firms to collect margin when they extend credit to their customers, and extensions of credit covered by the rule include transactions in which member firms permit customers to make partial or delayed payment on securities purchases (or partial or delayed delivery of securities sold). FINRA examinations have revealed some uncertainty in firms’ understanding about what constitutes delayed payment or delivery for purposes of the margin rules. Therefore, FINRA has proposed to refine the definition of “extended settlement transaction” to resolve any uncertainty related to these rules.

In addition, FINRA has proposed to add a new paragraph (f)(3)(C) to Rule 4210 requiring all extended settlement transactions (or net positions resulting from extended settlement transactions) to be margined as though they were in margin accounts, with a few limited exceptions, including, but not limited to, covered agency transactions and certain refunding transactions.

FINRA requests comment on all aspects of the proposal. Specifically, FINRA requests comment concerning (1) whether there are other ways in which FINRA applies Rule 4210 to extended settlement transactions, including impacts to the member firm operations and processes it uses, that should be modified, (2) whether Rule 4210 should also expressly address extended settlement transactions by broker-dealers for customers in non-securities, and (3) whether there are any material economic impacts, including costs and benefits to investors and firms, particularly smaller firms, that are associated specifically with the proposal.

The comment period expires on May 14.

FINRA’s notice.


FINRA Seeks Comment Regarding Diversity and Inclusion Initiatives

The Financial Industry Regulatory Authority (FINRA) is seeking comment on rules, operations and administrative processes that may create unintended disparate impacts on those within the industries that FINRA regulates.  FINRA recognizes that several broker-dealer industry participants have developed initiatives and programs to foster greater diversity, inclusion and equal opportunity in the industry, and FINRA has been engaging with its advisory committees, industry associations and other industry members to explore how it can further facilitate those goals within the broker-dealer industry.

Specifically, in support of these initiatives, FINRA has, among other initiatives, (1) established an internal Racial Justice Task Force, whose efforts include identifying opportunities to encourage greater diversity and inclusion within the broker-dealer industry, (2) created diversity-focused programming at the FINRA Annual Conference, (3) developed the Securities Industry Essentials Exam to expand who is eligible to take a qualification examination to allow for more flexibility within the broker-dealer industry, and (4) proposed to implement continuing education programs for broker-dealer industry professionals.

FINRA seeks comment on any aspects of its rules, operations and administrative processes that may create unintended barriers to greater diversity and inclusion in the broker-dealer industry. The comment period expires on June 28.

FINRA’s notice.

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume XI, Number 127
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About this Author

Susan Light, Katten Law Firm, Finance Law Attorney, New York
Partner

Susan Light focuses her practice on financial services regulatory matters. She counsels broker-dealers, hedge funds, investment banks and financial services clients on enforcement issues involving the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), other self-regulatory organizations (SROs) and state and federal regulatory authorities. She has particular experience related to sales practice issues, financial and operational issues, anti-money laundering, crowdfunding, cybersecurity, and cryptocurrencies.

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212-940-8599
Gregory Uffner, Financial Services Attorney, Katten Law Firm
Associate

Gregory Uffner is an associate in the Financial Services practice. 

While in law school, Gregory was an associate editor for the Moot Court Board, a member of the Fordham Urban Law Journal and served as managing editor for the Fordham Sports Law Forum.

212.940.6485
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