Having survived a wind storm and a semi-annual procedures update process that nearly killed me (the update, not the wind storm), I am resurfacing to provide a few reminders:
1. R.I.P. Webcasts: After March 31 you will no longer be able to view Webcasts on FINRA's website. All of the prior content is included in other offerings, such as Video E-Learning or plain-old E-Learning courses. But, well, you have to pay for those. Webcasts were free. All's fair in love, war, and a crappy economy.
2. TRACE: Agency Debt Securities became TRACE eligible on March 1, as did certain primary market transactions (those that qualify as list or fixed price offering or takedown transactions). See Notice 09-57.
3. New Capital Compliance Rule: As of February 8, the new financial responsibility rules became effective (FINRA Rules 4110, etc.). Many of the restrictive rules apply to "carrying or clearing firms"--but look at the footnote in the rule and you'll see that they also apply to firms with "k2i" accounts--you know, the account you have set up so you can receive checks from customers for mutual fund and other purchases? This new rule requires, for instance, that your firm must obtain prior written approval before withdrawing any capital that exceeds10 percent of the firm’s excess net capital in any rolling 35-calendar-day period. This includes withdrawals of profits, routine dividends and similar distributions. Wow. For small business owners who take profits this way, this rule seems extremely onerous. See Notice 09-71.
As for the answers to these extremely logical questions: 1) "To whom do firms request approval?" and 2) "How long does FINRA have to grant approval?", well, the answers were not easy to find... in summary: 1) Eventually there will be an electronic request process on Gateway, but for now fax or email your District Office, and 2) In your communication to the District, inform them that you will be making the distribution in x days in the absence of a response from them. In the published Response to Comments on these rules, it states,"[...] requests for withdrawals can be handled in a routine manner and that decisions typically would be issued in approximately three business days": how's that for clarity?!
[Allow me for a moment to express frustration with FINRA for making a Rule effective without having a mechanism in place for allowing firms to comply with the Rule--and for not providing this basic, administrative information to all firms in an easily accessible, publicly-available place (like the Notice??), rather than burying (half of) it in filing documents not regularly visited by most compliance staff. And what-up with making pleasant, good-intentioned, helpful folks like moi feel wrong for asking presumably easy questions and expecting to get answers? What's wrong with regulators saying, "I don't know" or "We're still working on that" or "Three days, but sorry, we didn't put that in the Notice"? ... ugh. P.S. I'm thankful to Estee Dorfman Foster (CPA/outsourced FINOP) for her assistance in finding answers.]
4. Variable Annuity Rules: As of February 8, the formerly-delayed parts of FINRA Rule 2330 became effective. Principals now have 7 days to review recommended v/a purchases and exchanges. There are changes to customer funds rules, too--because if you held a customer's check during that 7 days, you would have otherwise broken SEC customer funds rules. Check out Notice 10-05 for fresh guidance on these changes.
5. AML Madness: FINRA released its updated AML Small Firms Template in January... it is full of wonderfully--wait, not wonderfully, but rather, dreadfully--legalistic text changes that would drive any technical writer crazy. I'm proud to say my template is still better than theirs. You should look at your AML program and FINRA's updated template to assess the time it will take to make corresponding changes; then you should drown your sorrows in a stiff drink (or call me!). See here for a link to the template in Word format. Oh and remember that as of January 1, you may no longer have someone in your small firm conduct annual independent testing if that person has a conflict of interest (you used to be able to rely on a loophole--it is gone). For this rule change, see Notice 09-60.
6. 3012/3130--Testing & Verification: For most of you, it's that time of year again--in fact, this is the 5th time you have to follow these rules since inception! This should be easy by now...You have to test and verify your supervisory system. And write a report. And write another report about the process of writing the report. And sign a certification. And put the whole shebang in a file drawer and hope no-one ever asks for it (...but they will). Remember, your reports and certifications are due w/in 12 months of last year's. It's not a calendar year requirement--it's every 12 months by the anniversary. Here is a link to regulatory information on supervisory controls.
7. Short Sales Rule Change: Mary over at SEC approved a change to Reg. SHO, affectionately called the "alternative uptick rule" that restricts short selling in stocks that have dropped 10% in price in one day. Effective Date: May 10, 2010; Compliance Date: November 10, 2010. See link to Reg SHO change for 334 pages of bedtime reading. I'm getting sleepy just thinking about it.
8. TARP Warrants: How do we describe these nouvelles choses? Warrants (that's what they're called)? Options (they're priced like options)? Corporate securities (they're issued by corp's)? Government securities (they were issued to Uncle Sam--is he backing them in the secondary market)? Ask 4 people and you'll get 4 different answers (ask me and you'll get a frustrated shrug of confusion and disgust). Stay tuned for the answer.
FINRA has released its March 1 examination priorities. Review it and weep. You have work to do.
Your Moment of Optimism: 17 days till Spring!
Showing posts with label FINRA financial responsibility rules. Show all posts
Showing posts with label FINRA financial responsibility rules. Show all posts
Wednesday, March 3, 2010
Wednesday, January 6, 2010
We Have a Winner! (clarification on subject of k2i a/c and fin. resp. rules)
And the Snuggie goes to: a kind gentleman at FINRA who called me back TODAY and pointed to what I should have reviewed in the first place: response to comments and amendment 2 as they relate to the original rule filing.
In summary, even if your firm is a subscription-based mutual fund retailer--not a clearing firm and not a carrying firm--you still fit into the category of ''carrying/clearing members' if you have an account for the exclusive benefit of customers as described in paragraph (k)(2)(i) of SEA 15c3-3. That is, if you receive and deposit customer checks in an account you control, you're in this category for the sake of rule compliance. It's a customer protection thing, so they say.
So review Notice 09-71 again, and remember that all of these rules might apply to you, even if you think they don't (or shouldn't).
Going home now to put on my own Snuggie. Brrrr.
In summary, even if your firm is a subscription-based mutual fund retailer--not a clearing firm and not a carrying firm--you still fit into the category of ''carrying/clearing members' if you have an account for the exclusive benefit of customers as described in paragraph (k)(2)(i) of SEA 15c3-3. That is, if you receive and deposit customer checks in an account you control, you're in this category for the sake of rule compliance. It's a customer protection thing, so they say.
So review Notice 09-71 again, and remember that all of these rules might apply to you, even if you think they don't (or shouldn't).
Going home now to put on my own Snuggie. Brrrr.
Happy Oh-10: Financial Responsibilty Rules and New CCO Exam Proposal
Was just reading some Notices and had a few comments:
1. Financial Responsibility Rules (see Notice 09-71): I'm a little confused about whether non-clearing/non-carrying firms with "k2i" accounts are or are not included in the category of clearing/carrying members for many of the new rules... footnotes in the Rules, the Notice and the Rule Filing all say: "Members Operating Pursuant to the Exemptive Provisions of SEA Rule 15c3-3(k)(2)(i). For purposes of this Rule, all requirements that apply to a member that clears or carries customer accounts shall also apply to any member that, operating pursuant to the exemptive provisions of SEA Rule 15c3-3(k)(2)(i), either clears customer transactions pursuant to such exemptive provisions or holds customer funds in a bank account established thereunder."
But the Rule Filing explains, in a Pg 36 footnote: “For clarification, introducing firms and firms with limited business models (for example, firms that engage exclusively in subscription-basis mutual fund transactions, direct participation programs, or mergers and acquisitions activities) are not deemed carrying or clearing members and therefore would not be subject to Proposed FINRA Rule 4110(a), or for that matter any of the other provisions of the proposed rules that would apply only to carrying or clearing members.”
But what if a mutual fund application-way firm has a k2i account established to receive customer funds? I sent an email to one of the Notice authors: I'll let you know what I hear. Or if you can shed light on this apparent contradiction, please write me and I'll enter your name into a drawing for a free Snuggie.
2. Proposed Changes in Registration/Qualification Requirements (see Notice 09-70): One of the changes creates a new category for Chief Compliance Officers--they'd have to pass a specific exam to hold that title. Those with a 24 and who are listed on Form BD prior to the rule taking effect would be grandfathered (no new exam nec.), but those assuming the role after that, even if they have their 24, would have to take the test. I was thinking that some of you principals might want to take advantage of the "multiple CCO" mechanism before they make this rule effective. That way, you will be on the Form BD as CCO in time, and won't have to take the exam. For instance, if you're a small shop with a just a few senior managers, and you originally flipped a coin to see who would serve as CCO, what happens if your existing CCO moves to Jamaica, leaving you with an obligation to pass a new test just to step into Mr. Sun-n-Surf's shoes? Or, perhaps you have a new employee who got his 24, but hasn't yet assumed the role of CCO that you're anxiously looking forward to handing over...you could appoint him co-CCO (dividing up responsibilities, of course, and outlining all this in your WSP) and therefore he won't have to pass the new test later.
Other reminders: Look at your final renewal statements and pay what you owe or request a refund (see excerpted FINRA help, below); do your FCS check by Jan. 27; and don't forget to do quarterly complaint filing by the 15th. And send thank-you notes to all those nice people who gave you xmas gifts!! Emails don't count!
Your compliance compadre,
Sharon
RENEWALS:
If your statement shows an ‘Amount Due’ (i.e., positive amount or debit balance), then your firm needs to pay the balance to FINRA by February 5, 2010.
Print the statement. A copy of the statement’s first page should be included if your firm is paying with a check.
See the "How to Submit Renewal Payment" section of this Bulletin or visit the Renewal Program Payment Options page on the FINRA Web site.
If your Final Renewal Statement displays ‘Paid In Full’:
If your Final Renewal Statement’s ‘Paid In Full’ amount is equal to the amount owed for your Preliminary Renewal Statement then the balance is $0 and no additional payment is required.
If your Final Renewal Statement’s ‘Paid In Full’ amount is less than the amount your firm paid for its Preliminary Renewal Statement then your overpayment has been systematically transferred to your firm’s Daily Account. Any refunds should be requested from that account. You may request a refund check from FINRA or leave the funds in your Daily Account for future registration-related fees.
To request a refund check, have an appropriate signatory sign the first page of the Final Renewal Statement and mail it to FINRA for receipt by February 5, 2010. Send your refund request to:
FINRA Registration Management-CRD Accounting
9509 Key West Avenue
Rockville, MD 20850
(301) 869-6699
1. Financial Responsibility Rules (see Notice 09-71): I'm a little confused about whether non-clearing/non-carrying firms with "k2i" accounts are or are not included in the category of clearing/carrying members for many of the new rules... footnotes in the Rules, the Notice and the Rule Filing all say: "Members Operating Pursuant to the Exemptive Provisions of SEA Rule 15c3-3(k)(2)(i). For purposes of this Rule, all requirements that apply to a member that clears or carries customer accounts shall also apply to any member that, operating pursuant to the exemptive provisions of SEA Rule 15c3-3(k)(2)(i), either clears customer transactions pursuant to such exemptive provisions or holds customer funds in a bank account established thereunder."
But the Rule Filing explains, in a Pg 36 footnote: “For clarification, introducing firms and firms with limited business models (for example, firms that engage exclusively in subscription-basis mutual fund transactions, direct participation programs, or mergers and acquisitions activities) are not deemed carrying or clearing members and therefore would not be subject to Proposed FINRA Rule 4110(a), or for that matter any of the other provisions of the proposed rules that would apply only to carrying or clearing members.”
But what if a mutual fund application-way firm has a k2i account established to receive customer funds? I sent an email to one of the Notice authors: I'll let you know what I hear. Or if you can shed light on this apparent contradiction, please write me and I'll enter your name into a drawing for a free Snuggie.
2. Proposed Changes in Registration/Qualification Requirements (see Notice 09-70): One of the changes creates a new category for Chief Compliance Officers--they'd have to pass a specific exam to hold that title. Those with a 24 and who are listed on Form BD prior to the rule taking effect would be grandfathered (no new exam nec.), but those assuming the role after that, even if they have their 24, would have to take the test. I was thinking that some of you principals might want to take advantage of the "multiple CCO" mechanism before they make this rule effective. That way, you will be on the Form BD as CCO in time, and won't have to take the exam. For instance, if you're a small shop with a just a few senior managers, and you originally flipped a coin to see who would serve as CCO, what happens if your existing CCO moves to Jamaica, leaving you with an obligation to pass a new test just to step into Mr. Sun-n-Surf's shoes? Or, perhaps you have a new employee who got his 24, but hasn't yet assumed the role of CCO that you're anxiously looking forward to handing over...you could appoint him co-CCO (dividing up responsibilities, of course, and outlining all this in your WSP) and therefore he won't have to pass the new test later.
Other reminders: Look at your final renewal statements and pay what you owe or request a refund (see excerpted FINRA help, below); do your FCS check by Jan. 27; and don't forget to do quarterly complaint filing by the 15th. And send thank-you notes to all those nice people who gave you xmas gifts!! Emails don't count!
Your compliance compadre,
Sharon
RENEWALS:
If your statement shows an ‘Amount Due’ (i.e., positive amount or debit balance), then your firm needs to pay the balance to FINRA by February 5, 2010.
Print the statement. A copy of the statement’s first page should be included if your firm is paying with a check.
See the "How to Submit Renewal Payment" section of this Bulletin or visit the Renewal Program Payment Options page on the FINRA Web site.
If your Final Renewal Statement displays ‘Paid In Full’:
If your Final Renewal Statement’s ‘Paid In Full’ amount is equal to the amount owed for your Preliminary Renewal Statement then the balance is $0 and no additional payment is required.
If your Final Renewal Statement’s ‘Paid In Full’ amount is less than the amount your firm paid for its Preliminary Renewal Statement then your overpayment has been systematically transferred to your firm’s Daily Account. Any refunds should be requested from that account. You may request a refund check from FINRA or leave the funds in your Daily Account for future registration-related fees.
To request a refund check, have an appropriate signatory sign the first page of the Final Renewal Statement and mail it to FINRA for receipt by February 5, 2010. Send your refund request to:
FINRA Registration Management-CRD Accounting
9509 Key West Avenue
Rockville, MD 20850
(301) 869-6699
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