FINRA Proposes Simplified Rule Governing Personal Securities Transactions
FINRA has proposed a new rule governing personal securities transactions that streamlines the current process by placing most of the supervisory obligations on the employing firm. The proposed rule consolidates FINRA Rule 3050 and NYSE Rule 407. The proposed rule requires associated persons to obtain the employing firm’s consent before opening any account at another member firm, which consent shall not be given unless the associated person is instructed to have the executing firm provide duplicate account statements and confirmations. The proposed rule also requires the associated person to notify the executing firm of his/her association with another member. The executing member would be prohibited from executing transactions without the consent of the associated person’s firm. The proposed rule eliminates most of the due diligence and supervisory responsibilities previously (currently) imposed on executing firms.
OUR TAKE: Putting most of the supervisory obligations on the employing firm makes sense. The proposed rule should make compliance by all parties involved – associated person, employing firm, executing firm – simpler and clearer.