Podcast Center
Video Center
Webcasts
Resource Center
Events
May 19, 2014 at 01:54 PM
(Bloomberg) — The Financial Industry Regulatory Authority, Wall Street’s self-regulator, is changing the design of a trading-surveillance system that has drawn opposition from brokers, Chief Executive Officer Rick Ketchum said in a speech.
Smaller brokers that don’t use clearing firms will have more flexibility to send trade and commission data to Finra directly or to use a contractor, Ketchum said today at the authority’s annual conference in Washington. Trade information about products not held by clearing brokers, such as variable annuities and direct mutual funds, won’t have to be submitted in the early stages of the project, he said.
Finra advised brokers in December that the system, known as Cards, would help it automate its analysis of suspicious activity by brokers, including overcharging customers or selling them unsuitable investments. The brokerage data would lessen Finra’s reliance on in-person exams that can miss some regulatory violations.
“We are aggressively engaged in meeting with firms to understand the costs and benefits of Cards,” Ketchum said today. “These meetings have already led to changes from our original concept that will help balance the impact on market participants while maintaining the benefits.”
The Securities Industry and Financial Markets Association has rebelled against Finra’s original concept for the system, saying it would raise privacy and data-security risks for investors and brokers, and could involve large compliance costs. Finra is designing the proposal as it undertakes an effort to subject its rules to an analysis of costs and benefits.
Complaint Response
The regulator is responding to complaints about cost by permitting some variability in data reporting and introducing requirements in stages, Ketchum said.
Finra will incorporate the changes into a regulatory proposal that will be issued as soon as “this summer,” Ketchum said. The proposal would have to be approved by the U.S. Securities and Exchange Commission before it becomes effective.
