May 21, 2019

May 21, 2019

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May 20, 2019

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SEC Approves FINRA Rule Change to Permit the Use of Electronic Signatures for Discretionary Accounts

The Securities and Exchange Commission has approved a proposed rule change to amend Financial Industry Regulatory Authority (FINRA) Rule 4512 (Customer Account Information) (the “Amended Rule”). For discretionary accounts, member firms are currently required to maintain a record of the dated, manual signature of each named, natural person authorized to exercise discretion in such accounts. The Amended Rule will allow for the use of electronic signatures in connection with discretionary accounts. A valid electronic signature would be any electronic mark that clearly identifies the signatory and is otherwise in compliance with the E-Sign Act, the guidance issued by the SEC relating to the E-Sign Act, and the guidance provided by FINRA staff through interpretive letters. The Amended Rule is consistent with the requirements of Securities Exchange Act of 1934 Rule 17a-3(a)(17)(ii) relating to discretionary accounts, which does not prescribe the type of signature that must be obtained from an authorized individual.

In addition, the Amended Rule clarifies that it applies only to discretionary accounts maintained by member firms for which associated persons of such firms are authorized to exercise discretion.

The Amended Rule goes into effect on May 6. FINRA’s Regulatory Notice is available here.

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About this Author

Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange...

312-902-5452
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