More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
FINRA is proposing to transfer NASD Rule 2510 into the Consolidated FINRA Rulebook as FINRA Rule 3260 and on November 12, 2009 published Regulatory Notice 09-63 seeking comments on its proposal to amend its rules governing discretionary accounts and transactions.
The Financial Services Institute responded on December 28 in a letter from FSI President Dale Brown. The letter noted that the organization generally supports the proposal but does have some concerns about the removal of a provision from NASD Rule 2510 that allows customers to provide written limited discretionary authority over the price and time of a securities order.
As noted in Brown's letter, NASD Rule 2510(d)(1) allows a customer to provide verbal authorization to a financial advisor to exercise limited discretionary authority over the price and time of a transaction within a single trading session. This verbal discretionary authority ends at the close of the trading session on the day that it was granted. If the customer desires the authority over the price and time of a securities transaction to last beyond the close of the trading session, the customer must draft, sign, and date a written statement with those instructions.
Brown's letter notes that under the proposed new rule, "a customer would no longer be able to provide written authorization that survives the end of the next trading session," regardless of the customer's desire to do so, and asks FINRA to instead "preserve a customer's ability to provide written limited price and time discretionary authority that survives a single trading session."