FINRA Reviews Rules on Outside Business Activities and Private Securities Transactions
The Financial Industry Regulatory Authority is requesting comment on its rules governing outside business activities and private securities transactions as part of a new retrospective rule review. Comments must be received by June 29, 2017.
The review centers on rules governing broker-dealer employees’ business and securities activities carried out away from their firm – activities that are outside the regular course or scope of their employment with the firm.
FINRA notes that the rules were designed to protect investors from potentially problematic or risky activities that are unknown to the firm but could be perceived by the investing public as either part of the firm’s business or having the firm’s imprimatur. In addition, the rules protect firms from reputational or litigation risks when employees engage in business and securities activities outside of the firm.
FINRA requested comment in part on whether the rules have effectively addressed the problems they were intended to mitigate, and sought feedback on the economic impact of the rules and the challenges to complying with them.
“Regularly reviewing significant rules to ensure they remain effective at protecting investors in an efficient manner is a key priority that aligns with our FINRA360 initiative,” said FINRA president and CEO Robert Cook. “Successful self-regulation requires continuous renewal and improvement. Meaningful dialogue with stakeholders is essential to that process.”
FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees.
