2016 Small Firm Compliance, November Regulatory Updates & Action Items
SMALL FIRM COMPLIANCE CORNER
REGULATORY UPDATES & ACTION ITEM
***ACTION ITEM: B/D, IA, AGENT and INVESTMENT ADVISOR REPS, AND BRANCH RENEWALS FOR 2017 (Reg Notice 16-42)
It's that time of year again, the 2017 Renewal Program begins on November 14, 2016, when FINRA makes the online Preliminary Statements available to all firms in E-Bill. Payment Deadline: 12/16/16
For complete information: http://www.finra.org/industry/notices/16-42
***SEC APPROVES MSRB MARKUP RULE CHANGE PROPOSAL (SR-MSRB-2016-12)
The SEC approved the proposed MSRB rule change, as modified by Amendment No 1, to MSRB Rules G-15 and G-30 to require disclosure of mark-ups and mark-downs to retail customers on certain principal transactions (in municipal securities) and to provide guidance on prevailing market price (PMP). Implementation Period: 18 months.
The specifics of the MSRB's rule focus on when a dealer in a principal capacity (for the dealer's own account) purchases from or sells to a retail customer and on the same day has an offsetting sale or purchase of the same security to or from a third party. The rule requires that a dealer disclose on the customer's confirmation the dealer's compensation, in the form of a "mark-up" or "mark-down" from the "prevailing market price" of the security. In addition to providing the dollar amount and percentage of the dealer's compensation on a trade, the confirmation would include the investor's time of the trade and a link to trade price data about the security on the MSRB's Electronic Municipal Market Access (EMMAÂ®) website.
For complete information: http://www.msrb.org/~/media/Files/SEC-Filings/2016/MSRB-2016-12-Federal-Register-Approval.ashx?la=en
***SEC APPROVES FINRA MARK-UP DISCLOSURE RULE CHANGE PROPOSAL (SR-FINRA-2016-032)
As announced yesterday, the SEC has approved the proposed FINRA rule change, as modified by Amendment No 1, on an accelerated basis to coincide with its approval of the MSRB proposed rule regarding mark-up disclosure on confirmations. Implementation Period: 18 months.
The FINRA rule change relates to FINRA Rule 2232 (Customer Confirmations) and the requirement for members to disclose additional pricing information (mark-ups/mark-downs) on retail customer confirmations relating to transactions in certain fixed income securities. A little more detail: FINRA will now require members effecting same day transactions as principal with non-institutional customers in corporate or agency debt securities to disclose the member's mark-up/mark-down from the prevailing market price (PMP) for the security on the customer confirmation. In addition, FINRA proposes that all confirms contain a reference, and hyperlink is electronic, to a webpage hosted by FINRA that contains TRACE trading data, and the time of trade expressed to the second.
For complete information:
***RELIEF PROVIDED TO BROKER-DEALERS ON ACCOUNTING FOR OPERATING LEASES
The Division of Trading and Markets of the Securities Exchange Commission (SEC) issued a no-action letter on November 8, 2016, to provide limited relief from the negative impact on net capital, which would have resulted from a recently adopted Financial Accounting Standards Board's (FASB) standard. The standard, and the relief provided, are discussed in the referenced No Action Letter.
For complete information: https://www.sec.gov/divisions/marketreg/mr-noaction/2016/sifma-111016-15c3.pdf
***CYBER SECURITY FOR SMALL FIRMS
Please take a look at this page http://www.finra.org/industry/cybersecurity , it is very important for small firms to address this area of regulatory focus.
***MSRB RECEIVED SEC APPROVAL TO SHORTEN THE TIME FRAME ON CLOSE-OUTS
The MSRB received approval to shorten the time frame during which municipal securities dealers must resolve open inter-dealer transactions to 10 days (with on 10 day extension permissible), thereby reducing the cost and market risk associated with open transactions. Effective Date for Amended MSRB Rule G-12: November 16, 2016
G-12(h) now states, "Transactions which have been compared or otherwise agreed upon by both parties but which have not been completed shall be closed out in accordance with this section, or cancelled by the parties, no later than 10 calendar days after settlement date." Under G-12 (h)(E): "If the securities described in the notice of close-out are not delivered to the originating purchaser by the date specified in the original notice, or the extended date resulting from a retransmittal, such purchaser may, at its discretion, grant the seller one 10 calendar day extension." For complete information:
I hope this update helps! Wishing everyone a wonderful holiday next week.
All the best,
PAIGE W. PIERCE