Letters

Effectiveness and Efficiency of FINRA’s Rule on the Annual Compliance Meeting

Summary

SIFMA provided comments to FINRA on Regulatory Notice 18-14, the Effectiveness and Efficiency of FINRA’s Rule on the Annual Compliance Meeting.

See also:

FINRA Requests Comment on the Effectiveness and Efficiency of Its Rule on the Annual Compliance Meeting

PDF

Submitted To

FINRA

Submitted By

SIFMA

Date

25

June

2018

Excerpt

June 25, 2018

By Electronic Mail to [email protected].

Jennifer Piorko Mitchell
Office of the Corporate Secretary
FINRA
1735 K Street, NW
Washington, DC 20006-1506

Re: FINRA Regulatory Notice 18-14: SIFMA Comment on the Effectiveness and Efficiency of FINRA’s Rule on the Annual Compliance Meeting

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 18-14 (“RN 18-14”)2 regarding FINRA Rule 3110(a)(7) and Supplementary Material .04, which require each registered representative and registered principal to participate, at least once each year, in an interview or meeting, at which compliance matters relevant to the particular representative or principal are discussed.

I. EXECUTIVE SUMMARY

SIFMA supports FINRA’s effort to retrospectively review the effectiveness and efficiency of FINRA Rule 3110(a)(7) and Supplementary Material .04. SIFMA believes that this process should balance the need to identify outdated and inefficient rules with concerns about investor protection. SIFMA appreciates FINRA’s efforts to incorporate comments, including input provided by some of our member firms, regarding how the rules can best meet their investor-protection objectives through reasonably efficient means.

SIFMA has organized its comments on FINRA Rule 3110(a)(7) based on the questions raised in RN 18-14.

II. SIFMA COMMENTS ON RN 18-14

A. Has the rule effectively addressed the problem(s) it was intended to mitigate? To what extent has the original purposes of and need for the rule been affected by subsequent changes to the markets, the delivery of financial services, the applicable regulatory framework, or other considerations? Are there alternative ways to achieve the goals of the rule that FINRA should consider?

1. General Comments

SIFMA believes that the rule effectively addresses the original purpose of the rule: how to efficiently deliver the required annual compliance meeting. The rule provides firms with a clear and easily understood requirement that allows for the dissemination, with active management participation, of important compliance information to all registered employees.

Given the requirement applies to all firms, there is no competitive disadvantage to any particular member firm, and, since all registered employees must participate, it reduces most potential disagreement regarding topics or the delivery mechanism itself.

SIFMA does not think changes in the marketplace have eliminated or reduced the need for the annual compliance meeting requirement, in fact, it is probably more important than ever.

The current rule specifically permits remote and technology-based delivery methods, which provides efficiency and effectiveness in delivery. Alternatives do exist, but the need for and the basics of delivering a mandatory event will generally need to stay in place, so any change may not meaningfully result in a significant difference in impact.

There appears to be an opportunity to consolidate annual compliance meeting requirements with Continuing Education (“CE”) given the overlap in population and topics and opportunities for increased efficiencies.

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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 See RN 18-14.