SEC approves sweeping changes to FINRA's regulatory reporting rules

Abstract

Purpose

This paper seeks to explain Financial Industry Regulatory Authority (“FINRA”) Rule 4530, which requires members to report to FINRA certain internal and external findings of violative conduct and quarterly statistical and summary customer complaint information.

Design/methodology/approach

The paper explains the background and provides an overview of FINRA Rule 4530; analyzes key provisions of the Rule, including the way it differs from legacy NASD and New York Stock Exchange Reporting Rules; and discusses next steps for FINRA members.

Findings

FINRA Rule 4530 requires members to promptly report findings of internal and external violations and provides interpretive guidance regarding these requirements. The new Rule imposes obligations beyond those set forth in current NASD Rule 3070, requires reporting of internal findings, and alters the now familiar materiality standard applied to NYSE Rule 351(a).

Practical implications

The new Rule will require members to enhance their policies and procedures to address the reporting of internal findings to define potentially reportable violations, identify decision‐makers to assess potential violations, create or modify reporting escalation procedures, and institute appropriate controls over reporting. Members may want to review their internal audit processes to reflect the new guidance regarding reporting based on internal findings of violations.

Originality/value

The paper provides practical guidance from expert securities lawyers.

Citation

Weiss, H.J., Lee, Y., Newman, B.H., Eckert, P.R. and Hanselmann, C.R. (2011), "SEC approves sweeping changes to FINRA's regulatory reporting rules", Journal of Investment Compliance, Vol. 12 No. 1, pp. 65-69. https://doi.org/10.1108/15285811111122100