The Financial Industry Regulatory Authority (FINRA) has issued a Regulatory Notice on a proposed rule to improve oversight of broker/dealers’ back-office operations. Specifically, the new rule would expand registration requirements to individuals who engage or supervise activities related to sales, trading support and/or handling of customer assets.
Previously, FINRA’s registration requirements only applied to brokers, investment bankers, traders or other financial professionals who gave advice to customers and handled securities transactions. Individuals who could be required to register under the new proposed rule include those who develop and approve valuation models; manage trade confirmations, account statements, trade settlement and margin; or oversee stock loan/securities lending, prime brokerage, receipt and delivery of securities, and/or financial regulatory reporting.
According to a statement from FINRA, the proposal is designed to provide “reasonable assurance” that these individuals understand their professional responsibilities, including key regulatory and control themes, as well as the importance of identifying and escalating red flags that may harm a firm, its customers, or the integrity of the marketplace or the public.
The Securities and Exchange Commission (SEC) must approve the rule change before it becomes effective.