Outsourcing
Latest Update
Over the past two years, SIFMA has had multiple discussions with the SEC and the NYSE regarding the proposed NYSE Rule 340 governing NYSE member firms' outsourcing activities. SIFMA does not endorse this rule proposal because the rule is overly prescriptive, differs substantially from the NASD's 2005 guidance, and is overly burdensome for NYSE member firms. Despite SIFMA's objections to the proposal, we will continue to work with the SEC and NYSE on this issue. SIFMA will also comment on the rule proposal upon publication which is expected in the Summer of 2007.
Background
For decades, financial services firms have retained service providers to lower costs and improve service. As a result, outsourcing has yielded enormous benefits to SIA member firms and their public customers. SIFMA promotes the following principles in the regulation of members' outsourcing:
- The regulations of outsourcing activities and any formal or informal guidance on outsourcing should be consistent across the SROs.
- Outsourcing is a cross-border phenomenon. Any regulations should be consistent with and not unnecessarily duplicative of other U.S. and non-U.S. regulations.
- Outsourcing arrangements vary in terms of function, purpose and scope. In order to preserve the economic efficiencies driving the proliferation of outsourcing, such arrangements should not be governed by fixed or inflexible standards.
- Any regulations should exclude longstanding activities not commonly viewed as outsourcing and which are not in need of additional regulation (e.g., independent contractor arrangements, common utility and shared services providers, and professional services firms).
- Any regulations should not prescribe specific contract provisions, which could have unintended negative consequences.
Related Links:
Comment Letter, January 11, 2007
Follow Up To January 8th Meeting On Rule 340: Proposed Revisions
Comment Letter, May 8, 2006
Revisions to Draft Proposed New York Stock Exchange Rules 340 and 342(c) Regarding Outsourcing
Comment Letter, December 1, 2005
Letter Regarding Proposed NYSE Rule 340 ("Outsourcing: Due Diligence and Conditions Required in the Use of Service Providers") and proposed amendment to Rule 342.30(c) ("Annual Report and Certification") re: SR-NYSE 2005-22 (pdf)
US Regulatory Initiatives
NASD Notice to Members 05-48 (July 2005): Outsourcing, Members' Responsibilities When Outsourcing Activities to Third-Party Service Providers(pdf)
-- NASD Interpretation of Notice to Members 05-48
International Regulatory Initiatives
Basel Committee on Banking Supervision - The Joint Forum: Outsourcing in Financial Services - February 2005 (pdf)
IOSCO - Principles On Outsourcing Of Financial Services For Market Intermediaries, Report of the Technical Committee of IOSCO - February 2005 (pdf)