New Reg. Category for Operations Professionals: Let's Be Clear About This

Notice 10-25 solicits comments on a new registration category for "Certain Operations Personnel." I only wish they'd have called them "Operations Supervisors" so as to limit the hysteria sure to result when folks hear about this. Okay, maybe I'm the only hysterical person in the room. Consider me a bellwether. (Mais, je prefere "belle-weather.")

Here are two excerpts from the Notice that should calm everyone down:

"Persons subject to the new registration category generally are those persons who are directly responsible for overseeing that tasks within the covered functions are performed correctly in accordance with industry rules, firm protocols, policies and procedures, and who are charged with protecting the functional and control integrity of the covered functions for the firm."

and

"The requirements would not apply to persons who perform a covered function, but whose responsibilities are below these three specified levels, or persons who perform a function ancillary to a covered function or whose function is to serve a role that can be viewed as supportive of, or advisory to, the performance of a covered function, such as internal audit, legal or compliance personnel. Also, the requirements would not apply to persons who are engaged solely in clerical or ministerial activities in any of the covered functions."

It seems to me it's all about supervisors and those with control.  I guess after the comments are received and addressed, we'll have convincing clarity on this, as we normally do when a rule is made effective.

[throat clearing sound]

Alright, maybe there is room for worry, in the end...another quote:

Importantly, those persons subject to the new Operations Professional registration category would be considered associated persons of a firm irrespective of their employing entity and would be subject to all FINRA rules applicable to associated persons and/or registered persons.

So, just like outsourced professionals who are doing work requiring registration and qualification, employees of parent companies, affiliates, etc. will be treated as if they work for the BD. Ah, the long arm of the law gives a bear hug to your whole enterprise...

I'm done for now. Three blog entries in one day? Gotta get back to work.

New CCO Reg. Category

Quick note on proposed Rule 1230(a)(4). Reference: Notice 09-70.

The rule makes a stand-alone registration category for Chief Compliance Officers, which will require a new qualification examination. Here are some reminders:

• If you are already on Form BD as CCO when the rule is made effective, you'll be 'grandfathered' and won't have to take the new test. You will be registered as CCO via a U4 amendment.
• This includes any person listed on Form BD, such as co-CCO's and limited principals filling that role.
• If you are added to Form BD after the effective date of the rule, but before the new examination is available, you will likewise be grandfathered, BUT only if you hold a 24. That is, if you are a limited principal and the firm adds you as CCO in this interim period, you will not qualify for the freebie CCO registration--you'll have to take the 24 or wait and take the new CCO exam.
• If you are added to Form BD after the effective date of the rule and after the new examination is available, you will have to pass the exam first before your CCO registration is approved. Even if you have a 24...it won't matter.

So think about this and plan accordingly. I'm not sure when the rule will be approved. See this link for links to Comments about the proposal.

The Difference Between June 1 and June 2: Red Flags Rule Delayed AGAIN

June 1:
>The effective/enforcement date of FTC's Red Flags Rule, whereby you, my broker-dealer friends, had to put in place an Identity Theft Prevention Program.
>The date by which I (against my better judgment/procrastination instincts) worked my buttocks off in an attempt to customize/deliver FTC's neat-o PDF customizable 'low-risk' form.
>The date before which, if a regulatory body were going to announce a delay in enforcement of the Rule, said regulatory body should have announced a delay of said Rule.

June 2:
>The date after which you, my broker-dealer friends, put into effect your IDTPP's, after having struggled to customize either FINRA's template or FTC's 'customizable low-risk form.
>The date after which we all collectively considered this topic done/handled/put to rest and happily forgotten about it.
>The date we got notice from FINRA that the enforcement date of the Rule had been delayed AGAIN...now to Dec. 31, 2010.
>The date, perhaps, you and I both swore under our breath something profane and un-American.


Here is the announcement, in case you missed it:

The FTC has again delayed enforcement of its Fair and Accurate Credit Transactions Act of 2003 (FACT Act) Red Flags Rule, from June 1, 2010, to December 31, 2010. The delay will allow Congress to consider legislation limiting the businesses covered by the rule. If legislation passes with an effective date earlier than December 31, 2010, the FTC will begin enforcement as of that effective date.

Firms subject to this rule—which include most broker-dealers—must have in place by the FTC enforcement date a written program to identify, detect and respond to patterns, practices or specific activities that could indicate identity theft.

As a reminder, FINRA has developed an optional template that firms may use as a guide when fulfilling their requirements under the FTC's Red Flags Rule. You can find more information about the FACT Act regulations in Regulatory Notice 08-69.

I won't start babbling about how I think this Rule is redundant and how the criteria for determining applicability is being interpreted in a bogus way. You can always search the subject on my blog to read more. But why bother? Let's just forget this all happened. And let's hope the Rule NEVER gets enforced for you BD's who are already, under AML rules, required to act as law enforcement and root out any nefarious attempts to usurp identities (even if they're not terrorists).

What a Difference a Day Makes: No, what a difference two weeks would have made! Now that kind of lead-time would have been appreciated! (Here I am again, Daydream Believer.)