More On Legal & Compliancefrom The Advisor's Professional Library
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
The Securities and Exchange Commission approved Thursday the Financial Industry Regulatory Authority’s rule change to limit self-trading.
The change to FINRA Rule 5210 requires firms to have policies and procedures in place that are reasonably designed to review their trading activity for, and prevent, a pattern or practice of self-trades resulting from orders originating from a single algorithm or trading desk, or related algorithms or trading desks.
FINRA said that it will announce an effective date to reflect this change to FINRA Rule 5210 in a regulatory notice to be published in the near future.
“FINRA’s cross-market surveillance program canvasses 90% of the listed equities market, and this important new rule change will significantly increase FINRA’s ability to deter self-trading that, while not involving fraudulent or manipulative intent, is disruptive to the marketplace," said Thomas Gira, FINRA executive vice president of market regulation, in a statement.
FINRA explains that self-trades are “[t]ransactions in a security resulting from the unintentional interaction of orders originating from the same firm that involve no change in the beneficial ownership of the security.”
The self-regulator notes that self-trades by single or related algorithms or trading desks “raise heightened concerns because this type of trading may not reflect genuine trading interest, particularly if there is a pattern or practice of such trades.”