FINRA Regulatory Matters at a Glance What Compliance Officers Need to Know

Transcription

1 s at a Glance What Compliance Officers Need to Know s, Rule Filings and Guidance for the Period May 2015 through April 2016 Prepared by Glen Barrentine, Partner, Winston & Strawn, gbarrentine@winston.com or Questions or suggestions? Please contact Glen or your usual Winston & Strawn contact. INTERNAL LINKS: s Rule Filings Exemptive & Interpretive Letters Targeted Examination Letters Reports and Studies Other s of Interest Calendar Chart Color Key Action May Be Required (does not include continuing education items) Administrative Arbitration Continuing Education Notifications / Request for s s New s TRACE Fixed Income Exemption ATS and Compliance Engine (TRACE): Exemption from Trade Reporting Obligation for Certain Transactions on Alternative Trading Systems Rule 6720 (Participation in TRACE) Rule 6730 (Transaction Reporting) Rule 6732 (Exemption from Obligation for Certain The notice describes new Rule 6732, which provides with authority to exempt certain transactions by an ATS from the transaction reporting obligations of Rule Effective : July 18, 2016 Attorney advertising materials

2 s Transactions on an Alternative Trading System) Rule 7730 ( and Compliance Engine (TRACE) Alternative Trading Systems (ATS) Equity Securities Volume and Trade Count Information Alternative Trading Systems (ATSs): Announces for Publication of ATS Block-Sixe Trade Data Rule 6110 (Trading Otherwise than on an Exchange) Beginning on October 3, 2016, will expand its alternative trading system (ATS) transparency initiative to publish monthly information on blocksize trades occurring on ATSs. : October 3, Financial Reporting Net Capital Foreign Equity Securities Ready Market Foreign Equity Securities: Revised SEC No-Action Guidance Expanding the Definition of Ready market for Certain Foreign Equity Securities SEA Rule 15c3-1 (Net Capital Requirements for Brokers and Dealers) Regulation T Rule 4210 (Margin Requiremetns) The notices announces the issuance by the SEC s Division of Trading and Markets of a new no-action letter that sets forth conditions under which brokerdealers may treat certain foreign equity securities as having a ready market for purposes of the net capital rule. The no-action letter replaces the previous SEC no-action letter on this topic. s may want to consider whether changes to their written policies and procedures are warranted Sales Practices Pension Income Stream Products Pension Income Stream Products: Provides Guidance on Firm Responsibilities for Sales of Pension Income Stream Products Rule 3110 (Supervision) Rule 3270 (Outside Business Activities of Registered Persons) Rule 3280 (Private Securities Transactions of Typically, Pension income stream products involve an upfront lump sum payment to a pensioner in exchange for the rights to the future pension income payments. The notice provides guidance regarding sales practice issues related to pension income stream products. The notice identifies certain s may want to consider whether changes to their written policies and procedures are warranted to cover pension income stream products. Page 2

3 s an Associated Person) issues and concerns involving the purchase and sale of pension income stream products, including whether such products are securities, and the related questions concerning application of s requirements relating to outside business activities and/or private securities transactions, and supervisory responsibilities Financial Reporting FOCUS Reports Supplemental Information Supplemental FOCUS Information: SEC Approves Expanded Application of Supplemental Schedule for Derivatives and Other Off- Balance Sheet s SEA Rule 15c3-1 (Net Capital Requirements for Brokers and Dealers) Rule 4524 (Supplemental FOCUS Information) The notice informs members of the approval by the SEC of s proposal to amend Rule 4524, which requires certain non-carrying/nonclearing firms that have significant amounts of offbalance sheet obligations to file the Derivatives and Other Off- Balance Sheet s Schedule ( OBS ) with their FOCUS report. : The Schedule for the period ended June 30, 2016 must be filed with on or before August 2, s may want to consider whether changes to their written policies and procedures are warranted Municipal Securities Direct Purchases Bank Loans Municipal Securities: Direct Purchases and Bank Loans as Alternatives to Public Finance in the municipal Securities Markets Various SEC, and MSRB Rules The notice provides guidance regarding the practice of privately placing municipal securities directly with a single purchaser and the use of bank loans as alternatives to traditional public financings. s that may engage in the placement of municipal securities directly with a single purchaser or the use of bank loans as alternatives to traditional public offerings in the municipal securities market may want to compare the guidance set forth in to their practices and written policies and procedures. Previously Reported s Page 3

4 s Settlement Cycle Regular Way Shortening the Settlement Cycle for Securities to T+2: Requests on Proposed Amendments to Rules to Support the Industry Initiative to Shorten the Settlement Cycle for Securities in the U.S. Secondary market from T+3 to T+2 SEA Rule 15c6-1 Various Rules In anticipation of the SEC s change to SEA Rule 15c6-1 to facilitate settlement no later than T+2, The proposed changes would amend the definition of regular way settlement as occurring on T+2. Period Expires April 4, This is informational only and for the purpose of soliciting comments on a proposed rule change Offerings Contingent Offerings Contingency Offerings: Private Placements and Public Offerings to a Contingency SEARule 10b-9 (Prohibited representations in connection with certain offerings) and SEA Rule 15c2-4 (Transmission or maintenance of payments received in connection with underwritings) The notice provides guidance on the contingency offering requirements of SEARule 10b-9 and SEA Rule 15c2-4. s that may engage in contingency offerings may want to compare the guidance set forth in to their practices and written policies and procedures Books and Records Notifications Private Placements Change of Control Jumpstart Our Business Startups (JOBS) Act: SEC Approval of Rule 4518 (Notification to in Connection with the JOBS Act) Rule 4518 (Notification to in Connection with the JOBS Act The notice informs members of the approval by the SEC of Rule 4518, which requires members to notify prior to engaging for the first time in a transaction involving the offer or sale of securities in reliance on Section 4(a)(6) of the Securities Act or within 30 days of controlling or being controlled or under the common control of a funding portal as defined pursuant to Rule 300(e)(2) of SEC Regulation Crowdfunding. Effective ; January 29, 2016 s may want to consider whether they need to update their policies and procedures to reflect Rule JOBS Act Jumpstart Our Business Startups (JOBS) Act: SEC Approval of Funding Funding Portal Rules The notice announces the SEC s approval of Funding Portal Rules, which implement the Effective ; January 29, The Funding Portal Rules apply to funding portals and not to broker-dealer Page 4

5 s Funding Portal Rules Portal Rules and related Forms requirement of Section 3(h)(1)(B) of the Exchange Act and Regulation Crowdfunding that funding portals are required to become members o f a national securities association members of Financial Flings Electronic Reporting Annual and Supplemental Reports Electronic Filing of Broker- Dealer Annual Reports: SEC No-Action Guidance on Electronic Filing of Broker- Dealer Annual Reports SEA Rule 17a-5 (Reports to be made by certain brokers and dealers) SEA Rule 17a-12 (Reports to be made by certain OTC derivatives dealers) The notice provides information regarding a recent SEC noaction letter that allows brokerdealers and OTC derivative dealers to file annual and supplemental reports under SEA Rule 17a-5 and SEA Rule 17a-12 electronically through the SEC s EDGAR system Internal Administration Merger of Dispute Resolution: SEC Approves Merge Dispute Resolution, Inc. into and with Regulation, Inc. The notices announces the approval of the merger of Dispute Resolution, Inc. into and with Regulation, Inc. : December 20, Exempted Securities Government Securities Mark Ups and Commissions MARK-UP RULE AND EXEMPTED SECURITIES: SEC Approves Amendment to Apply Rule Governing Mark-ups to Transactions in Exempted Securities that are Government Securities Rule 0150 (Application of Rules to Exempted Securities Except Municipal Securities) Rule 2121 (Fair Prices and Commissions) The informs members that the SEC has approved application of Rule 2121 pertaining to s mark up/commission policy to government securities. : The amendment became effective at the time of the SEC s approval. s should ensure their practices and policies and procedures are consistent with the rule change. Qualification Examinations General Securities QUALIFICATION EXAMINATIONS: Revises the Series 9/10 Examination Program NASD Rule 1021 (Registration Requirements) The informs members that has revised the content outline for the Geenral Securities Sales Supervisor : The content Page 5

6 s Sales Supervisor Series 9/10 Content Outline NASD Rule 1022 (Categories of Principal Registration) (Series 9/10) Examination Program. changes will be reflected in examinations administered on or after March 7, Registration Renewals BD AND IA RENEWALS FOR 2016: Final Renewal Statements for Broker-Dealers, Investment Adviser Firms, Agents and Investment Adviser Representatives, and Branches Not Applicable This is provided to help firms review, reconcile and respond to their FINAL Renewal Statements and reports currently available in Web CRD/IARD for the annual registration renewal process. Payment Deadline: January 15, This is informational only Customers Communications with Customers Stock Quotes PROVIDING STOCK QUOTATIONS TO CUSTOMERS: SEC Staff Provides Insight Into Firms Obligations When Providing Stock Quote Information to Customers Rule 603 of Regulation NMS (Distribution, consolidation, and display of information with respect to quotations for and transactions in NMS stocks) Rule 5310 (Best Execution and Interpositioning) The notice reminds members that, when they provide a quotation to a customer that can be used to assess the current market or the quality of trade execution, Rule 603(c) of Regulation NMS requires they provide the customer with a consolidated display of market data and not rely on nonconsolidated market information. s should ensure their practices and policies and procedures are consistent with the provided guidance Equity Trade Reporting Facilities Equity Over the Counter (OTC) EQUITY TRADE REPORTING: Submission of Clearing-Only, Non- Reports to the Equity Trade Reporting Facilities Rule 7130(g) (Trade Report Input) Rule 7230A(i)) (Trade Report Input) Rule 7230B(h) (Trade Report Input) Rule 7330b(h) (Trade The notice announces a rule change that allows a member to submit a clearing-only, nonregulatory report to a Facility for a previously executed trade from which a tape report has been submitted to the Facility, or for the offsetting portion of a riskless principal or agency transaction for which a non-tape, non-clearing report already has been submitted to the Facility satisfying Effective : February 1, 2016 Page 6

7 s Report Input) regulatory requirements Communication with the Public Website BrokerCheck BROKERCHECK: SEC Approves Rule Requiring s Websites to Include a Readily Apparent Reference and Hyperlink to BrokerCheck Rule 2210 (Communications with the Public) This notice announces a rule change that requires members websites to include a readily apparent reference and hyperlink to BrokerCheck on the home page and any other webpage that includes a professional profile of one or more registered persons that conduct business with retail investors. Effective : June 6, 2016 s should revise their websites and policies and procedures in accordance with the rule change Form U5 BrokerCheck BROKERCHECK: SEC Approves Changes to Reduce the Waiting Period for the Release of Information Reported on Form U5 Through BrokerCheck Rule 8312 (BrokerCheck Disclosure) The notice announces a rule change that reduces the waiting period for the disclosure on BrokerCheck of information reported on Form U5 from 15 to three days. : December 12, Alternative Display Facility ( ADF ) Facilities ( TRFs ) NMS Stocks OTC Equity Securities EQUITY TRADING INITIATIVES: SEC Approves Amendments to Publish OTC Equity Volume Executed Outside Alternative Trading Systems Rule 6110 (Trading Otherwise than on an Exchange) Rule 6610 (General) The notice announces an approved rule change that authorizes to publish non- ATS OTC volume information by member firm and security on a two week basis for NMS stocks in Tier 1 of the NMS Plan to Address Extraordinary Market Volatility and a four week delayed basis for all other NMS stocks and OTC Equity Securities. Effective : April 2, 2016 other than the publication of firm trade volume by TRACE Fixed Income TRADE REPORTING AND COMPLIANCE ENGINE (TRACE): SEC Approves Amendments to Require Firms to Report Transactions in TRACE- Eligible Securities As Soon As Rule 6730 (Transaction Reporting) The notice announces a rule change that requires the use of an indication when a TRACE report does not reflect a commission or mark-up or markdown. : May 23, 2016 s that report to TRACE will need to comply with the rule change. Page 7

8 s Practicable Customers Order Handling Best Execution BEST EXECUTION: Guidance on Best Execution Obligations in Equity, Options and Fixed Income Markets Rule 5310 (Best Execution and Interpositioning) The notice provides guidance regarding the best execution obligations of members that receive, handle, route or execute customer orders in equities, options and fixed income securities. The notice states that members that receive, handle, route or execute customer orders in equities, options or fixed income securities should review their systems and procedures to ensure that they are designed to incorporate and reflect the best execution principles and the guidance provided [t]herein Qualification Examinations Equity Trader Registration Series 55 Proprietary Trader Series 56 Securities Trader Series 57 SECURITIES TRADER REGISTRATION AND QUALIFICATION EXAMINATION: Announces Approval of and for Securities trader and Securities Trader Principal Registration Categories and Related Qualification Examination, Fees and Continuing Education Requirements NASD Rule 1022(a) (General Securities Principal) NASD Rule 1032(f) (Limited Representative Equity Trader) The notice announces a rule change that replaces the Equity Trader registration category and qualification examination (Series 55) with a new Securities Trader registration category and qualification examination (Series 57) and establish a Securities Trader Principal registration category. : January 4, An associated person registered as an equity trade on the effective date of the proposed rule change will be grandfathered as a securities trader without having to take any additional examinations. Securities Trader Principal Electronic Blue Sheet Submissions ELECTRONIC BLUE SHEET SUBMISSIONS: and ISG Extend Effective for Certain Electronic Blue Sheet Data Elements Rule 8211 (Automated Submission of Trading Data Requested by ) Rule 8213 (Automated Submission of The extension is being granted to be consistent with the exemptive relief recently granted by the SEC, which extended the compliance date for certain broker-dealer recordkeeping and reporting requirements of SEA Rule 13h-1 (Large Trader Rule). Extension : November 1, 2017 Page 8

9 s Trading Data for Non-Exchange- Listed Securities Requested by ) Business Continuity Disaster Recovery BC/DR TESTING UNDER REGULATION SCI: Files Rule with SEC for Authority to Designate Firms for Mandatory Participation in s Business Continuity/Disaster Recovery Testing, as Required by Regulation SCI Rule 4380 (Mandatory Participation in BC/DR Testing Under Regulation SCI) The notices announces the adoption of a new rule that authorizes to designate firms that must participate in s business continuity/disaster recovery testing under Regulation SCI. Effective : November 3, Net Capital Subordination Agreements Electronic Filings SUBORDINATION AGREEMENTS: to Require Electronic Submission of Subordination Approval Requests SEA Rule 15c3-1 Appendix D (Satisfactory Subordination Agreements) Rule 4110 (Capital Compliance) The notice informs members that all future subordinated loan agreements and secured demand note agreements including renewals of existing agreements must be submitted over a new electronic platform on the Firm Gateway rather than in hard copy as is currently the case. Effective : November 30, TRACE Fixed Income TRADE REPORTING AND COMPLIANCE ENGINE (TRACE): SEC Approves Amendments to Require Firms to Report Transactions in TRACE- Eligible Securities As Soon As Practicable Rule 6700 Series This announces that the SEC approved amendments to TRACE to require reporting of transactions in TRACE-eligible securities that are subject to dissemination as soon as practicable following the time of execution of the transaction. : November 30, 2015 s that report to TRACE may need to revise their systems and processes to comply with the newly approved reporting requirements Registration Renewals BD AND IA RENEWALS FOR 2016: Broker-Dealer, Investment Adviser Firm, Agent and Investment Adviser Representative, and Branch Not Applicable This announces that the 2016 Renewal Program begins on November 16, 2015 when makes the online Preliminary Statements available Payment Deadline: December 18, 2015 Firms should process renewals for 2016 in accordance with the dates set out in the.. Page 9

10 s Renewals for 2016 to all firms on Web CRD/IARD Qualification Examinations Financial and Operations Principal Series 27 Introducing Broker- Dealer Financial and Operations Principal QUALIFICATION EXAMINATIONS: Revises the Series 27 and 28 Examination Programs NASD Rule 1021 (Registration Requirements) NASD Rule 1022 (Categories of Principal Registration) The informs members that has revised the content outline for the Financial and Operations Principal (Series 27) Examination Program and has also revised the content outline for the Introducing Broker-Dealer Financial and Operations Principal (Series 28) Examination Program : Series 28 Content Outline Continuing Education Firm Element Advisory Update CONTINUING EDUCATION Securities Industry/ Council on Continuing Education Issues Firm Element Advisory Update Rule 1250 (Continuing Education Requirements). The Securities Industry/ Council on Continuing Education has released its Spring 2015 Firm Element Advisory, which is available at 95/2015-spring-firm-elementadvisory.pdf : The Securities industry/ Council on Continuing Education recommends that firms consider the topics reflected it the Council s Fall 2015 Firm Element Advisory in their Firm Element training plan Sales Practices Customer Account Information Disbursements Seniors Vulnerable Adults FINANCIAL EXPLOITATION OF SENIORS AND OTHER VULNERABLE ADULTS: Requests on a Rules Relating to Financial Exploitation of Seniors and Other Vulnerable Adults Rule 4512 (Customer Account Information) New Rule 2165 (Financial Exploitation of Specified Adults) is requesting comment on proposed rules that would (i) require firms to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer s account and (ii) permit qualified persons of firms to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of financial exploitation of these customers. November 30, This solicits comments on a proposed rule. Page 10

11 s Confirmations Fixed Income Corporate Debt Agency Debt PRICING DISCLOSURE IN THE FIXED INCOME MARKET: Requests on a Revised Proposal Requiring Confirmation Disclosure of Pricing Information in Corporate and Agency Debt Securities transactions Rule 2232 (Customer Confirmations) is proposing to require that members disclose additional information on customer confirmations for transactions in corporate and agency debt. This notice revises a previous proposal in The MSRB has also solicited comments on a proposal that is similar to but varies from s proposal. See MSRB and (extending comment period on ). December 11, This solicits comments on a proposed rule Enforcement Disciplinary Proceedings Code of Conduct Cease and Desist Orders CEASE AND DESIST ORDERS SEC Approves Amendments to Rules Regarding Temporary and Permanent Cease and Desist Orders Rule Series 9100 (Application and Purpose) Rule Series 9200 (Disciplinary Proceedings) The Order amends the relevant rules to make a number of changes that would affect the issuance of cease and desist orders by. Effective : November 2, 2015 Rule Series 9300 (Review of Disciplinary Proceeding by NAC and Board; Application for SEC Review) Rule Series 9550 (Expedited Proceedings) Rule Series 9800 (Temporary Cease and Desist Page 11

12 s Orders) Sales Practices Military Personnel SALES ON MILITARY INSTALLATIONS SEC Approves Rule Governing Sales of Securities on military Installations to s of the U.S. Armed Forces or Their Dependents New Rule 2272 (Sales and Offers of Sales of Securities on Military Installations) The provides an overview of recently approved Rule 2272, which imposes additional notice and other obligations on the sale by members of securities on the premises of any military installation to members of the U.S. Armed Forces or their dependents. Effective : March 30, 2016 s that engage in sales to customers should update their procedures accordingly Liquidity Risk Management LIQUIDITY RISK: Guidance on Liquidity Risk Management Practices The provides the results of s recent sweep of 43 introducing and carrying brokers relating to managing liquidity needs in a stressed environment. The announces s expectation that each member that hold proprietary positions or clear and carry customer transactions will regularly assess its funding and liquidity risk management practices.... While no rule specifically addresses liquidity risk management,, the appears to look to the SEC s financial responsibility rules as offering support for s expectation. While characterizes the as guidance the also states that members that hold inventory positions or clear and carry customer transactions should consider and implement the provided guidance. In particular, it would seem that this should include a regular assessment of a member s funding and liquidity risk management. Corporate Finance Offerings Regulation A+ REGULATION A OFFERINGS: Filing Requirements and Review of Regulation A Offerings Rule 2210 (Communications with the Public) Rule 2310 The reminds members of the applicability of the relevant rules to Regulation A offerings and, in particular, the need for members that participate in the s that participate in the distribution of securities in a Regulation A+ offering may want to confirm their existing Page 12

13 s DPP Advertising Filing Requirements (Direct Participation Programs) Rule 5110 (Corporate Financing Rule Underwriting Terms and Arrangements) Rule 5121 (Public Offerings of Securities with Conflicts of Interest) distribution of securities in a Regulation A+ offering to file documents and other information with s Corporate Financing Department. Regulation A+ solicitation materials related to direct participation programs may also need to be filed with s Advertising Regulation Department within ten business days of first use. procedures against the Research (Debt) Research Analysts Research Report EQUITY RESEARCH: SEC Approves Consolidated Rule to Address Conflicts of Interest relating to the Publication and Distribution of Debt Research Reports Rule 2242 (Debt Research Analysts and Debt Research Reports) The announces that the SEC has approved new Rule 2242, which regulates debt research analysts and debt research reports. Effective: February 22, 2016 s that publish debt research should update their procedures as necessary to comply with Rule Research (Equity) Research Analysts Research Report EQUITY RESEARCH: SEC Approves Consolidated Rule to Address Conflicts of Interest relating to the Publication and Distribution of Equity Research Reports Rule 2241 (Research Analysts and Research Reports) The announces that the SEC has approved new consolidated Rule This rule contains a number of additional requirements over and beyond existing NASD Rule Provisions of the rule becomes effective on September 25, 2015 and December 24, s that publish research should update their procedures as necessary to comply with Rule Qualification Examinations Registered Options QUALIFICATION EXAMINATIONS: Revises the Series 4 Examination Program NASD Rule 1031 (Registration Requirements) The informs members that has revised the content outline for the Registered Options Principal Page 13

14 s Principal Series 4 Content Outline NASD Rule 1032 (Categories of Representative Registration) (Series 4) Examination Program Continuing Education Element Web-Based Delivery Fees CONTINUING EDUCATION: SEC Approves Amendments Relating to Web-based Delivery of the Element Rule 1250 (Continuing Education) The announces that the SEC has approved amendments to rules to allow to implement a web-based delivery method for delivery of the regulatory element of the continuing education requirement, which will be administered through the CE Online System. This system will be rolled out in two phases. The first will be launched on October 1, 2015 and will include Elements S106 (Investment Company and Variable Contracts Representatives), S201 (Registered Principals and Supervisors) and S901 (Operations Professionals). The second phase will be rolled out on January 4, 2016 and will include Element S101 (all other registration categories). This web-based system will replace the current use of test centers, which will be phased out no later than six months after January 4, is also phasing out in-firm delivery of the Element through Pearson VUE in accordance with the two tier phase in schedule above. The first phase in date is October 1, The second phase in date is January 4, Test centers will be phased out no later than January 4, s should consider if their current continuing education/regulatory element procedures will need to be revised to accommodate this change. is reducing the fee for participants from $100 per session to $55. Page 14

15 s Supervisory Procedures (WSPs) Municipal Securities Fail to Receive Firm Short Positions MUNICIPAL SECURITIES TRADING: Guidance Related to Firm Short Positions and Fails-to- Receive in municipal Securities Various The remind firms engaged in municipal securities transactions that their written supervisory procedures should identify the process for detecting, resolving and preventing the consequences of firm short positions and fails-toreceive in municipal securities, as well as the controls for ensuring that communications with customers regarding municipal securities transactions, including the tax status of interest payments, are not false or misleading. examinations have found that, as a result of trading errors and inadequate firm controls, some customers who purchased taxexempt municipal securities have been paid substitute interest, which is not tax-exempt under the Internal Revenue Code. s that engage in municipal securities positions may want to review their existing procedures against the guidance provided in TRACE Fixed Income TRADE REPORTING AND COMPLIANCE ENGINE (TRACE): Requests on a New Academic TRACE Data Product Rule 7730 ( and Compliance Engine (TRACE)) is soliciting comments on a proposal to create a new Academic TRACE Data product that would be available to institutions of higher education. The contemplated data product would make available an enhanced version of Historic TRACE Data that would include masked dealer identification. September 14, This solicits comments on a proposed rule Financial Responsibility Rule 15c3-1 Rule 15c3-3 SEC FINANCIAL RESPONSIBILITY RULES: Announces Updates of the Interpretations of Financial Responsibility Rules SEA Rule 15c3-1 (Net Capital Requirements for Brokers and Dealers) The list of the interpretations that have been revised or added to s Interpretations of Financial and Operational Rules is available in the notice. though firms should be aware of these changes. Page 15

16 s SEARule15c3-3 (Customer Protection Reserves and Custody of Securities)) TRACE Fixed Income TRADE REPORTING AND COMPLIANCE ENGINE (TRACE): Requests on the Reduction of the Delay Period for Historic TRACE Data Rule 7730 ( and Compliance Engine (TRACE)) is soliciting comments on reducing the delay period applicable to the historical TRACE Data Sets from 18 to six months August 24, This solicits comments on a proposed rule Customer Accounts Suitability Sale of Securities on a Subscription-way Basis Financial Responsibility Rule 15c3-3 Promptly Transmit SUBSCRIPTION-WAY TRANSACTIONS: Provides Limited Relief Regarding Requirements to Promptly Transmit Funds in Connection With Sales of Securities on a Subscription-Way Basis for the Purpose of Completing Suitability Reviews Under Identified Conditions SEA Rule 15c3-3 (Customer Protection Reserve and Custody of Securities) Rule 2150(a) (Improper Use of Customers Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts Improper Use) NASD Rule 2830(m) (Investment Company Securities Prompt Payment for Investment Company Shares) In order to allow members to take advantage of a recent noaction letter by the SEC, is providing limited relief from Rule 2150(a) and NASD Rule 2830(m) regarding the requirement to promptly transmit customer funds received in connection with the sale of securities on a subscription-way basis for the purpose of completing suitability reviews. Firms may hold a customer check payable to an issuer or appropriate third-party payee for up to seven days, subject to the seven conditions set forth in the notice. Effective Firms that engage in subscription-way sales should revise their procedures regarding the prompt transmittal of customer funds in accordance with the requirements set forth in Customers DISCRETIONARY ACCOUNTS AND TRANSACTIONS: Various is soliciting comment on the adoption of a consolidated. Page 16

17 s Sales Practices Authorization Discretion Bulk Exchange of Money Market Mutual Funds Requests on a Revised proposal to Adopt a Consolidated Rule Regarding Discretionary Accounts and Transactions rule that would replace NASD Rule 2510 (Discretionary Accounts) and Incorporated NYSE Rule 408 (Discretionary Power in Customers Accounts) and NYSE Rule Interpretation 408 (Discretionary Power in Customers Accounts). August 17, 2015 This solicits comments on a proposed rule. Bulk Transfer of Customer Accounts Sweep Accounts and Free Credit Balances Money Market Mutual Fund Redemption Programs Arbitration Cancellation Fees LATE CANCELLATION FEES: SEC Approves Amendments to the Code of Arbitration Procedure to increase the Fees Assessed for Late Cancellation or Postponement of a Hearing Rule (Payment of Arbitrators) Rule (Postponement of a Hearing) Rule (Payment of Arbitrators) The rule change amends s code of arbitration for both customer and industry disputes with respect to the fee relative to a late cancelation, i.e., a cancelation made within ten days before the date of a scheduled hearing session. Effective : The revised fees apply to arbitration cases filed on or after July 6, 2015 Suggested Action.. Rule (Postponement of a Hearing) Qualification Examinations QUALIFICATION EXAMINATIONS RESTRUCTURING: Requests on a Concept Proposal to Restructure the Representative-Level Qualification Examination Program NASD Rule 1031 (Registration Requirements) NASD Rule 1032 (Categories of Representative Registration) NASD Rule 1070 is soliciting comment on a concept proposal to restructure the current representative-level qualification examination program into a format consisting of a general knowledge examination and an appropriate specialized knowledge July 27, This solicits comments on a proposed rule. Page 17

18 s (Qualification Examinations and Waiver of Requirements) examination Employment Registered Representatives Sales Practice Customer RECRUITMENT PRACTICES: Requests on a Proposed Rule to Require Delivery of an Educational Communication to Customers of a Transferring Representative. Rule 4512 (Customer Account Information) is soliciting comment on a proposed amended to Rule 4512 (Customer Account Information) that would require a firm that hires or associates with a registered representative to provide an educational notice to former retail customers of the representative that are solicited by the firm. July 13, This solicits comments on a proposed rule Arbitration Public and Non-Public Arbitrator DEFINITIONS OF NON-PUBLIC AND PUBLIC ARBITRATOR: SEC Approves Amendments to Arbitration codes to Revise the Definitions of Non-Public and Public Arbitrator Rule (Definitions) Rule (Definitions) The SEC has approved amendments to s arbitration code to revise the definitions of non-public and public arbitrator. Effective : June 26, Communications with the Public Advertising Regulation COMMUNICATIONS WITH THE PUBLIC: Guidance on Rules Governing Communications with the Public Rule 2210 (Communications with the Public) Rule 2310 (Direct Participation Programs) has published questions and answers, that supplement previous guidance, on the Advertising Regulation page of the website. Effective It is recommended that firms review the new guidance against their existing procedures and practices. Investment Company Act Rule 34b-1 (Sales Literature Deemed to be Misleading) Communications with the Public COMMUNICATIONS WITH THE PUBLIC: Requests s on Proposed Amendments to Rules Governing Communications Rule 2210 (Communications with the Public) Rule 2213 is soliciting comment on proposed amendments to rules governing communications with the public. The proposed amendments would revise the July 2, This solicits comments on a proposed Page 18

19 s Advertising Regulation with the Public (Requirements for the Use of Bond Mutual Fund Volatility Ratings) Rule 2214 (Requirements for the Use of Investment Analysis Tools) filing requirements in Rule 2210 and Rule 2214 and the content and disclosure requirements of Rule Sanction Guidelines Enforcement Fraud Misrepresentations Suitability SANCTION GUIDELINES: The National Adjudicatory Council (NAC) Revises the Sanction Guidelines Related to Misrepresentations and Suitability Various The revisions to the Sanction Guidelines are intended to reinforce that fraudulent conduct in unacceptable and warrants the imposition of strong sanctions and that adjudicators should strongly consider barring an individual engage in intentional or reckless fraud. Effective TRACE Fixed Income TRADE REPORTING AND COMPLIANCE ENGINE (TRACE): SEC Approves Amendments to Require Firms to Identify Transactions with Non= Affiliates in TRACE Trade Reports Rule 6700 Series The amendment approval a new contra party type for TRACE reporting consisting specifically of non-member affiliates, as defined in Rule 6710(ee). The amendments also requires firms to use a new indicator to identify certain trades that typically are not economically distinct and, as such would not provide useful pricing information. Specifically, the amendment requires firms to identify trades with non-member affiliates that occur within the same day and at the same price as a trade between the firm and another contra-party in the same security. : November 2, s that report to TRACE may need to revise their systems and processes to comply with the newly approved reporting requirements. Fees TRADING ACTIVITY FEE (TAF): Requests on Section 1 to Schedule A to The requests comment on a proposed exemption to. Page 19

20 s Trading Activity Fee (TAF) Proprietary Trading Firms Proposed Exemption to the Trading Activity Fee for Proprietary Trading Firms s By-Laws ( Fees) exclude from the TAF transactions by a proprietary trading firm on exchanges of which the firm is a member. June 19, 2015 This solicits comments on a proposed exemption to exclude from the TAF transactions by a proprietary trading firm on exchanges of which the firm is a member. Rule Filings New Rule Filings Rule Filing ( ) Research (Debt) Research Analysts Research Report of Filing and Delay of Rule 2242 (Debt Research Analysts and Debt Research Reports) Rule 2242 (Debt Research Analysts and Debt Research Reports) As approved, the proposal delays the implementation of new Rule 2242, which regulates the creation and publication of research related to debt. New : July 16, This merely delays the implementation date of a previously approved rule. Rule Filing ( ) Alternative Trading Systems (ATS) Equity Securities NMS Stocks OATS Reporting of Designation of Longer Period for Commission Action to Adopt Rule 4554 (Alternative Trading Systems Recoding and Reporting Requirements of Order and Execution Information for NMS Stocks) Proposed Rule 4554 (Alternative Trading Systems Recoding and Reporting Requirements of Order and Execution Information for NMS Stocks) The proposed rule change would require ATSs to report additional ATS-specific data elements in existing OATS reports for orders in NMS stocks. June 3, This is informational only and for the purpose of soliciting comments on the proposed rule change. Rule Filing ( ) Capital Acquisition Brokers of Filing of Partial Amendment No. 1 to Adopt Capital Acquisition Broker Rules The proposed rule would institute a new rule set referred to as the Capital Acquisition Rules. The proposed rule would create a separate rule set that would apply to members that meet the definition of capital acquisition broker and elect to be governed under the capital acquisition rule set. May 6, This is informational only and for the purpose of soliciting comments. Amendment No. 1 clarifies that Page 20

21 s the term capital acquisition broker does not include any broker or dealer that effects securities transactions that would require the broker or dealer to report the transactions under Rules 6300 Series, 6400 Series, 6500 Series, 6600 Series, 6700 Series, 7300 Series or 7400 Series. Rule Filing ( ) Margin Requirements TBA of Filing of Amendment No. 2 and Designation of a Longer Period to Determine Whether to Approve or Disapprove a Amend Rule 4210 (Margin Requirements) to Establish Margin Requirements for the TBA Market, as Modified by Amendment Nos. 1 and 2 Rule 4210 (Margin Requirements The proposed rule change would establish margin requirements for TBAs. May 2, This is informational only and for the purpose of soliciting comments on Amendment Nos. 1 and 2 to institute proceedings to determine whether to approve or disapprove the proposal. Rule Filing ( ) Computer Clocks NMS Securities OTC Securities Order Approving a Proposed Rule Change to Reduce the Synchronization Tolerance for Computer Clocks that are Used to Record Events in NMS Securities and OTC Securities OATS Technical Specifications The proposal would reduce the drift tolerance for computer clocks that record events in covered securities from one second to 50 milliseconds. Effective : will announce the effective date in a notice to be published no later than 90 days following approval. Firms should consider whether system changes are necessarily to comply with the announced standard. : Firms with systems that capture time in milliseconds must comply with the new Page 21

22 s standard within six months of the effective date; firms that do not have such systems must comply within 18 months of the effective date. Rule Filing ( ) Algorithmic Trading Strategies Qualification Examinations Securities Traders Order Approving a Proposed Rule Change to Require Registration as Securities Traders of Associated Persons Primarily Responsible for the Design, Development, Significant Modification of Algorithmic Trading Strategies or Responsible for the Day-to- Day Supervision of Such Activities NASD Rule 1032(f) (Limited Representative Equity Trader) The proposal would require associated persons responsible for the design, development, significant modification of algorithmic trading strategies or the day to day supervision thereof to be registered as Securities Ttraders. Effective : will announce the effective date in a to be published no later than 60 days following SEC approval, with such implementation date to be no sooner than 180 days following publication of such but no later than 300 days following Commission approval. s that use algorithms should consider whether changes are necessary to their policies and procedures. Rule Filing ( ) Supervision Associated Persons Transactions Order Approving Proposed Rule Change to Adopt Rule 3210 (Accounts at Other Broker-Dealers and Financial Institutions), as Modified by Partial Amendment No. 1 and Partial Amendment No. 2, in Proposed Rule 3210 (Accounts at Other Broker- Dealers and Financial Institutions), The proposed amendment would adopt a new, consolidated rule addressing accounts through which securities transactions can be effected in which an associated person of a member has a beneficial interest Effective : To be determined. In light of the differences between newly approved Rule 3210 and existing NASD Rule 3050, s should consider whether changes are necessary to their policies Page 22

23 s the Consolidated Rulebook. which would replace NASD Rule 3050 (Transactions for or by Associated Persons) that are opened or established at firms other than the firm at which the associated person is associated. Rule (a)(-(d) would establish a rebuttable presumption that an associated person has a beneficial interest in accounts held by a listed individual. This presumption could be overcome by demonstrating that the associated person derives no economic benefit from the account and exercises no control over the account. and procedures. Rule Filing ( ) Data Reporting OATs Reporting Order Approving a Proposed Rule Change to Amend Rule 7410 (Definitions) and 7440 (Recording of Order Information) Rule 7410 (Recording of Order Information) Rule 7440 (Recording of Order Information) The proposed amendments require members to identify on their OATS reports the identify of certain brokerdealers that are not members when the member has received an order from such a broker-dealer. Effective : will announce the effective date in a to be published no later than 60 days following SEC approval, with such implementation date to be no later than 120 days from Commission approval. s should consider whether changes are necessary to their policies and procedures. Rule Filing ( ) OTC Exchanged- Traded Managed Fund Shares (NextShares) /NASDAQ Trade Reporting Facility (TRF) of Filing and Amend Rule 6184 (Transactions in Exchange- Traded Managed Fund Shares ( NextShares )) Rule 6184 (Transactions in Exchange-Traded Managed Fund Shares( Next Shares )) The proposal amends Rule 6184 to provide that the /Nasdaq Facility will make available to market participants a daily file with the final trade price for each over-the-counter transaction in Effective : On or about April 4, Page 23

24 s NextShares. NextShares are exchangedtraded managed fund shares that are listed on Nasdaq. NextShares trade in the secondary market using a trading protocol called NAV- Based Trading, whereby bids, offers and execution prices are expressed as a premium or discount to the fund s nextdetermined net asset value per share. Previously Reported Rule Filings Rule Filing ( ) Government Entities Solicitation Distribution Pay to Play Order Instituting Proceedings to Determine Whether to Approve or Disapprove Adopt Rule 2030 and Rule 4580 to Establish Pay-To-Play and Related Rules The proposal would adopt Rule 2030 (Engaging in Distribution and Solicitation Activities with Government Entitles) and Rule 4580 (Books and Records Requirements for Government Distribution and Solicitation Activities). The proposal would establish pay to play provision for member firms that engage on behalf of investment advisers in distribution or solicitation activities for compensation with government entities. April 25, The proposal would adopt Rule 2030 (Engaging in Distribution and Solicitation Activities with Government Entitles) and Rule 4580 (Books and Records Requirements for Government Distribution and Solicitation Activities). Rule Filing ( ) Communication Former Customers Recruitment Practices Account Transfers Order Approving Proposed Rule Change to Adopt Rule 2273 (Educational Communication Related to Recruitment Practices and Account Transfers) The proposal would adopt Rule 2273 (Educational Communication Related to Recruitment Practices and Account The proposal would require a firm that attempts to contact former customers of a new representative to provide the former customer with an educational communication that highlights key considerations in transferring assets to the new firm and the direct and indirect Effective : To be determined. s should consider whether changes are necessary to their policies and procedures. Page 24

25 s Transfers) impact of such transfer. Rule Filing ( ) TRACE Fixed Income of Filing and Modify the Dissemination Protocols for TRACE-Eligible Securities The proposed rule would modify the dissemination protocols for TRACE-Eligible Securities to disseminate a new alternative trading system contra-party type and ATS indicator. Effective Rule Filing ( ) Capital Acquisition Brokers Order Instituting Proceedings to Determine Whether to Approve or Disapprove Adopt Capital Acquisition Broker Rules The proposed rule would institute a new rule set referred to as the Capital Acquisition Rules. The proposed rule would create a separate rule set that would apply to members that meet the definition of capital acquisition broker and elect to be governed under the capital acquisition rule set. April 13, The order merely announces a longer period for Commission consideration on the underlying rule proposal. The term capital acquisition broker would mean any broker that solely engages in any one or more of the following activities: advising an issuer, including a private fund, concerning its securities offerings or other capital raising activities; advising a company regarding its purchase or sale of a business or assets or regarding its corporate restructuring, including a goingprivate transaction, divestiture or merger; advising a company regarding its selection of an investment banker; assisting in the preparation of offering Page 25

26 s materials on behalf of an issuer; providing fairness opinions, valuation services, expert testimony, litigation support, and negotiation and structuring services; qualifying, identifying, soliciting, or acting as a placement agent or finder with respect to institutional investors in connection with purchases or sales of unregistered securities; and effecting securities transactions solely in connection with the transfer of ownership and control of a privately-held company through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, to a buyer that will actively operate the company or the business conducted with the assets of the company, in accordance with the terms and conditions of an SEC rule, release, interpretation or noaction letter that permits a person to engage in such Page 26

27 s activities without having to register as a broker or dealer pursuant to Section 15(b) of the Exchange Act.3 Rule Filing ( ) Alternative Trading Systems (ATS) Equity Securities NMS Stocks OATS Reporting of Filing of a Proposed Rule Change to Adopt Rule 4554 (Alternative Trading Systems Recoding and Reporting Requirements of Order and Execution Information for NMS Stocks) Proposed Rule 4554 (Alternative Trading Systems Recoding and Reporting Requirements of Order and Execution Information for NMS Stocks) The proposed rule change would require ATS to report additional ATS-specific data elements in existing OATS reports for orders in NMS stocks. March 28, This is informational only and for the purpose of soliciting comments on the proposed rule change. Rule Filing ( ) Fees /NASDAQ Trade Reporting Facility of Filing and Amend Rule 7620A Relating to /Nasdaq Trade Reporting Facility Fees Rule 7620A (/NASDAQ Facility Reporting Fees) The rule change amends certain fees applicable to members that use the /Nasdaq Trade Reporting Facility. Effective Rule Filing ( ) Trading Regulation NMS Tick Size of Filing of Partial Amendment No. 1 and Order Granting Accelerated Approval to a Proposed Rule Change to Adopt Rule 6191(a) to Implement the Quoting and Trading Requirements of the Regulation NMS Plan to Implement a Tick Size Pilot Program Proposed Rule 6191 As approved, the proposal adopt s Rule 6191(a) to Implement certain quoting and trading requirements of the Regulation NMS Plan to Implement a Tick Size Pilot.Program : To be announced. Firms that will be required to implement the approved quoting and trading requirements should consider whether changes are necessary to their policies and procedures and systems. Rule Filing ( ) Algorithmic Trading Strategies Qualification Examinations of Filing of a Proposed Rule Change to Require Registration as Securities Traders of Associated Persons Primarily Responsible for the Design, Development NASD Rule 1032(f) (Limited Representative Equity Trader) The proposal would require persons primarily responsible for the design, development or significant modification of algorithmic trading strategies (or responsible for the day-to-day March 16, This is informational only and for the purpose of soliciting comments on the Page 27