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Volume X, Number 225

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This Week's Financial Industry Regulatory Authority (FINRA) Update

SEC Seeking Comments on Adoption of FINRA Rule 3241

The Securities and Exchange Commission is seeking comment on a proposed rule change filed by the Financial Industry Regulatory Authority (FINRA) to adopt FINRA Rule 3241 (Registered Person Being Named a Customer’s Beneficiary or Holding a Position of Trust for a Customer). The proposed rule would create a uniform, national standard to govern registered persons holding positions of trust. The comments period expires July 30, 2020.


Upcoming Effective Date of Amendments to FINRA Rule 6730 (Transaction Reporting)

On June 21, 2019, the Securities and Exchange Commission approved amendments to FINRA Rule 6730 (Transaction Reporting), which requires members to report transactions in US Treasury Securities executed to hedge a primary market transaction with an appropriate identifier. The amendments, further discussed in the June 8, 2018 edition of Corporate & Financial Weekly Digest, provide that members will have additional time to report such transactions — until the next business day during Trade Reporting and Compliance Engine (TRACE) system hours. The effective date of such amendment is August 3, 2020.

FINRA Regulatory Notice 19-30, which discusses the amendments, is available here.


FINRA Publishes FAQ on Interactive Virtual Business Entertainment Events

The Financial Industry Regulatory Authority (FINRA) issued an FAQ on whether FINRA Rule 3220 (Influencing or Rewarding Employees of Others) and the non-cash compensation provisions of FINRA Rules 2310, 2320, 2341 and 5110 would prohibit an associated person from hosting a virtual business entertainment event and providing food and beverage to the employees of an institutional customer or third-party broker-dealer. The non-cash compensation rules provide that business entertainment provided by member firms to their clients is not subject to the $100 gift limit set forth in FINRA Rule 3220 as long as it does not raise any question of propriety. Accordingly, FINRA indicated that it would view the associated persons’ provision of reasonable amounts of food and beverage designed to be consumed by the recipient employees and their guests during that virtual business entertainment or meeting as not being subject to the $100 gift limit, provided that it does not raise questions of propriety.

The FAQ is available here.


FINRA Proposes Extension to Temporary Rule Change of Certain Timing, Method of Service and Other Procedural Requirements in FINRA Rules

On July 27, the Financial Industry Regulatory Authority (FINRA) filed with the Securities and Exchange Commission a proposed rule change to extend the expiration of the temporary amendments to some timing, method of service and other procedural requirements in SR-FINRA-2020-015, previously discussed in the May 15, 2020 edition of Corporate & Financial Weekly Digest. FINRA has proposed to extend the expiration date of such temporary amendments from July 31, 2020 to a date to be specified in a public notice issued by FINRA, which date shall be no later than December 31, 2020.

The proposed rule change is available here.


FINRA Requests Comment on Proposed Changes to TRACE Reporting Relating to Delayed Treasury Spot and Portfolio Trades

On May 22, the Financial Industry Regulatory Authority (FINRA) issued a regulatory notice seeking comment on two proposed changes to the Trade Reporting and Compliance Engine (TRACE) reporting rules recommended by the Securities and Exchange Commission’s Fixed Income Market Structure Advisory Committee. The changes would require firms to identify (1) delayed treasury spot trades; and (2) corporate bond trades that are a part of a larger portfolio trade.

Interested parties are encouraged to comment by September 14, 2020. Further details and comment instructions are available in FINRA Regulatory Notice 20-24, which is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 213

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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
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.

Previously, Sue was a senior vice president and chief counsel of Enforcement for FINRA, where she supervised all aspects of regulatory investigations, negotiations, settlements and disciplinary hearings concerning a wide variety of FINRA rules and federal securities laws. Prior to its merger with FINRA, she served in a similar role with NYSE Regulation, Inc. and helped lead the integration of the two enforcement departments. Earlier, Sue was a trial attorney in the Office of the District Attorney for Bronx County, New York.

Sue is a frequent speaker on regulatory and compliance topics for broker-dealer and securities conferences. She also advises several professional journals on securities industry topics.

212-940-8599
Jack West Financial Attorney Katten
Associate

Jack West is an associate in the Financial Markets and Funds practice.

312-902-5463