FINRA to Share Details on New Back-Office Staff Rules

The “covered functions” are defined as follows:

• Client on-boarding (customer account data and document maintenance);
• Collection, maintenance, re-investment (i.e., sweeps) and disbursement of funds;
• Receipt and delivery of securities and funds, account transfers;
• Bank, custody, depository and firm account management and reconciliation;
• Settlement, fail control, buy-ins, segregation, possession and control;
• Trade confirmation and account statements;
• Margin;
• Stock loan/securities lending;
• Prime brokerage (services to other broker-dealers and financial institutions);
• Approval of pricing models used for valuations;
• Financial control, including general ledger and treasury;
• Contributing to the process of preparing and filing financial regulatory reports;
• Defining and approving business requirements for sales and trading systems and any other systems related to the covered functions, and validation that these systems meet such business requirements;
• Defining and approving business security requirements and policies for
• information technology, including, but not limited to, systems and data, in connection with the covered functions;
• Defining and approving information entitlement policies in connection with the covered functions; and
• Posting entries to a member’s books and records in connection with the covered functions to ensure integrity and compliance with the federal securities laws and regulations and FINRA rules.

Exceptions Allowed

FINRA said that the rules include “exception to the operations-professional qualification examination requirement for persons who currently hold certain registrations or have held one during the two years immediately prior to registering as an operations professional.”

The exceptions should be those with Series 6 and 7, the organization says.

Also, FINRA explained that “an unregistered employee who gathers documentation and information in a purely clerical or ministerial capacity likely would not be required to register …”

In late May 2010, FINRA first began soliciting comments on the back-office rules. It stated at the time, “These employees perform an integral role inside the firms, and their actions can have meaningful connections to the safety of customer funds, accounts and transactions, and the overall integrity of firm books and records.”

According to the SEC, broker-dealers and other can comment on the recently approved rules over the next 21 days by using the online comment form or sending email to [email protected]. (File Number SR-FINRA-2011-013 should be noted on the subject line.)