New FINRA Rule 3290
Summary
SIFMA provided comments to FINRA on regulatory notice 18-08, regarding a proposal to consolidate FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of an Associated Person) into a single, streamlined rule that will reduce regulatory burdens on member firms, while still addressing fundamental investor protection concerns relating to registered persons’ outside business activities.
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Excerpt
April 27, 2018
By ElectronicMailto pubcom@finra.org.
Jennifer Piorko Mitchell
Office of the Corporate Secretary
Financial IndustryRegulatory Authority
1735 K Street, NW
Washington, DC 20006-1506
Re: FINRA Regulatory Notice 18-08: SIFMA Comment on Proposal to Create New FINRA Rule 3290 to Streamline Requirements Regarding the Outside Business Activities of Registered Persons
Dear Ms. Mitchell:
The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to respond to the request for comment issued by the Financial Industry Regulatory Authority (“FINRA”) in Regulatory Notice 18-08 (“RN 18-08”)2 regarding a proposal to consolidate FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of an Associated Person) into a single, streamlined rule that will reduce regulatory burdens on member firms, while still addressing fundamental investor protection concerns relating to registered persons’ outside business activities.
In May 2017, FINRA issued Regulatory Notice 17-20, a retrospective review of its outside business activities and private securities transactions rules.3 SIFMA provided comments to Regulatory Notice 17-20, expressing support for FINRA’s effort to review the effectiveness and efficiency of FINRA Rules 3270 and 3280, and offering insights regarding how the rules can best meet their investor protection objectives through reasonably efficient means.
I. EXECUTIVE SUMMARY
SIFMA supports FINRA’s efforts to consolidate FINRA Rule 3270 and FINRA Rule 3280 into a single rule governing the outside business activities of registered persons. Proposed Rule 3290 appropriately narrows firms’ obligations to assess and supervise registered persons’ outside business activities to those activities that pose the most risk to firms’ customers.
Without detracting from the support stated herein, our comments on RN 18-08 highlight various issues that warrant consideration by FINRA during its amendment process for the rules governing outside business activities and private securities transactions. Our comments primarily request that FINRA (1) clarify certain definitions, such as “business activity” and “investment-related” activity, under the proposed Rule; (2) provide guidance on certain obligations under the proposed Rule; and (3) address disparities between the disclosure requirements of the proposed Rule and Form U4.
1 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.
2 Regulatory Notice 18-08 (Feb 2018), available at www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-18-08.pdf.
3 See Regulatory Notice 17-20 (May 2017), available at www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-17-20.pdf.