Order Audit Trail System (OATS)

Established by FINRA, the Order Audit Trail System (OATS),  is an integrated audit trail of order, quote and trade information for all NMS (National Market System) stocks and OTC equity securities. As part of FINRA’s surveillance activities, Rules 7400 through 7470 (OATS Rules) and Rule 4554, OATS requires electronic auditing and reporting capabilities on all stock and equity orders, quotes, trades and cancellations. According to Rule 7430 (updated from NASD Rule 6953), all computer clocks and timestamping devices must be synchronized to be regarding a time source as designated by FINRA. This data can be collected during the day and transmitted to OATS in one or more files at a convenient time; however, reports for events that occur during particular OATS Business Days must be reported by 5am EST the following calendar day.  Read More…

FINRA Updates Private Placement Filer Form Pursuant to FINRA Rules 5122 and 5123

FINRA has updated the form that firms must use to file offering documents and information pursuant to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) (Filer Form). The updated Filer Form, which became available in the FINRA Firm Gateway in May of 2017, includes new and updated questions that will facilitate review of the filed material and eliminates other questions.  Read More…

Regulatory Notice 16-39: Trade Reporting and Compliance Engine (TRACE)

In 2001, the Securities and Exchange Commission approved the Trade Reporting and Compliance Engine (TRACE), a rule that requires all member firms to report secondary market transactions in eligible over-the-counter fixed income securities to FINRA. Unlike equities, over-the-counter securities trades are private transactions between counterparties and were not previously publicly reported. This lack of reporting provided very little to no price execution transparency to the marketplace.  Read More…

FINRA RULE 3130 (ANNUAL CERTIFICATION OF COMPLIANCE AND SUPERVISORY PROCESSES)

FINRA Rule 3130 (formerly known as NASD Rule 3013) requires the CEO to CERTIFY that the firm has a PROCESS to adopt adequate Supervisory Policies and Procedures. The goal of the Rule is to “promote regular and meaningful interaction between senior management and compliance personnel to ensure that compliance is given the highest priority by a member’s senior executive officers.”   Read More…

FINRA Rule 3210 (Accounts at Other Broker-Dealers and Financial Institutions)

FINRA Rule 3210 (Accounts at Other Broker-Dealers and Financial Institutions), which replaces the previously used NASD Rule 3050, Incorporated NYSE Rules 407 and 407A and Incorporated NYSE Rule Interpretations 407/01 and 407/02, was approved by the SEC in April of 2016, and became effective in April 2017. This is a consolidated rule governing accounts opened or established by associated persons at firms other than the firm at which they are employed, ensuring that member companies, brokers, and advisors maintain ethical standards.  Read More…

Rule 4530 Product and Problem Codes and Filing Application Form to reflect changes related to the DOL’s fiduciary rule

FINRA announced that it has revised the Rule 4530 (Reporting Requirements) Product and Problem Codes and Filing Application Form to reflect changes related to the Department of Labor’s fiduciary rule and the MSRB’s rules on customer complaints and recordkeeping. The changes related to the DOL’s fiduciary rule became effective on June 9, 2017, while the changes related to the MSRB’s customer complaints rules will take effect on October 1, 2017.  Read More…

SEC Approves Rules Relating to Financial Exploitation of Senior Investors (Rule 2165 and Rule 4512)

FINRA has recently announced the SEC approval of new Rule 2165 and amendments to FINRA Rule 4512 to address a longstanding problem within the securities industry: the financial exploitation of senior investors. “These rules will provide firms with tools to respond more quickly and effectively to protect seniors from financial exploitation. This project included input and support from both investor groups and industry representatives and it demonstrates a shared commitment to an important, common goal – protecting senior investors,” said Robert W. Cook, FINRA President and CEO.  Read More…

FINRA Provides Reminders Concerning the Use of Social Networking Websites and Business Communications

In today’s ever-changing technological environment, overseeing new forms of communication has become an increasingly challenging task. To assist broker-dealers with meeting regulatory demands, FINRA has released a series of Regulatory Notices focused on communications with the public through social media sites and the use of personal devices for business communications.  Most recently, FINRA published Regulatory Notice 17-18  which outlines guidance regarding use of social networking websites and business communications.  Read More…

Safe Harbor: Equity and Debt Research Rules for Desk Commentary

As summarized below, FINRA is currently seeking comment on proposed amendments to FINRA Rule 2241 and FINRA Rule 2242 to create a limited safe harbor for specified brief, written analysis distributed to eligible institutional investors that comes from sales and trading or principal trading personnel but that may rise to the level of a research report (desk commentary). The proposed safe harbor would be subject to conditions, including compliance with a number of the Rule 2241 or Rule 2242 provisions to mitigate research-related conflicts. Read More…

FINRA Requests Comment on Proposed Amendments to the FINRA Corporate Financing Rule

As summarized below, FINRA is currently seeking comment on proposed amendments to FINRA Rule 5110 (Corporate Financing Rule – Underwriting Terms and Arrangements) to make substantive, organizational and terminology changes to the rule. The proposal is intended to modernize Rule 5110 and to simplify and clarify its provisions.

The rule proposal would retain the primary principle of the rule that no member firm or person associated with a member firm may participate in a public offering for which the terms and conditions, including the aggregate amount Read More…