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December 31, 2015 at 05:33 AM
Now that the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board have filed their proposed pay-to-play rules with the Securities and Exchange Commission, the clock will start ticking on when advisors must start complying with the third-party solicitor provision of the SEC’s “pay-to-play” rule, says Karen Barr, president and CEO of the Investment Adviser Association.
While advisors have been required to comply with most provisions of the SEC’s pay-to-play rule since 2011, the SEC delayed the compliance date of the third-party solicitor aspect of the rule so that FINRA and the MSRB would have time to adopt a pay-to-play rule for broker-dealers and municipal advisors, Barr told ThinkAdvisor Thursday.
Earlier in 2015, the SEC staff “stated publicly that [the SEC] would not enforce these provisions until the later effective date of either FINRA- or MSRB-adopted pay-to-play rules,” which must be approved by the SEC. Both FINRA and MSRB filed their proposed rules on Dec. 16.
Barr notes that IAA had concerns with how FINRA’s original proposal would have affected solicitors affiliated with investment advisors, but IAA is “pleased that FINRA eliminated the problematic provision” in its final rule that was sent to the SEC.
The SEC released “much-needed clarity” provided in mid-June frequently asked questions (FAQ) regarding compliance with new provisions in its pay-to-play rule.
FINRA’s proposed rule change would amend FINRA Rules 2030 (Engaging in Distribution and Solicitation Activities with Government Entities) and 4580 (Books and Records Requirements for Government Distribution and Solicitation Activities) to establish “pay-to-play” and related rules that would regulate the activities of member firms that engage in distribution or solicitation activities for compensation with government entities on behalf of investment advisors.
