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May 31, 2019 at 02:18 PM
The Financial Industry Regulatory Authority is accepting comments on a pair of regulatory notices, one a proposed pilot program for a 48-hour delay to price reporting of corporate bond block trade reporting and another that could require a small number of member firms to keep a cushion of cash or securities for the protection of investors.
The latter, Regulatory Notice 19-17, would require a restricted firm to set up a deposit account of cash and/or qualified securities of a certain amount. These funds could be used to cover future arbitration awards and couldn’t be withdrawn without FINRA’s prior written consent.
These firms subject to the proposed rules are expected to be few based on certain preliminary metrics, such as having an unusually high number of disclosure events or a history of hiring brokers with checkered disciplinary records.
Although comments are due July 1, the proposed Restricted Firm Obligations rule already has at least one commenter unhappy with the concept.
“FINRA has a lot of nerve pre‐judging future behavior and demanding funds for itself,” wrote Dan Pisenti of San Francisco’s Whitehall‐Parker Securities. “FINRA wants to profile firms and use this crystal ball to force firms to set up prepaid accounts to cover FINRA’s future shakedown interests…Many firms do not have large amounts of cash available to be held as restricted deposits.”
Separately, Regulatory Notice 19-12, the proposed corporate bond block trade pilot, is designed to look at a couple of recommendations by the Securities and Exchange Commission’s Fixed Income Market Structure Advisory Committee.
