The Financial Industry Regulatory Authority is taking a two-pronged approach to reviewing how to potentially revamp its rulebook in light of the Securities and Exchange Commission’s Regulation Best Interest, according to the broker-dealer self-regulator’s CEO, Robert Cook.
The first phase, Cook told attendees during a Q&A session at the Financial Services Institute’s 2019 Forum in Washington Tuesday, includes assessing if there are aspects of FINRA’s rules that need to be clarified or changed “now in order to get rid of any perceived or actual obstacles to implementation” of Reg BI.
Cook noted, however, that any potential rule change would have to go through a public comment process.
FINRA will be the enforcer of Reg BI.
The first phase, Cook said during the Q&A with Financial Services Institute President and CEO Dale Brown, could likely be completed “well before” Reg BI’s June 30, 2020, compliance date.
The second phase, which would likely come in “several iterations,” Cook said, “may be a wider scope of inquiry on what are the rules that were adopted in the absence of a best-interest standard that maybe we should revisit now that there’s a best interest standard.”
Now that there’s an “overarching [best-interest] duty” under Reg BI, “maybe there are certain elements of our rulebook that should be changed, deleted, enhanced,” Cook said.
He welcomed attendees to nominate rules for review. “The door’s open for that type of input.”
As to the consolidation of FINRA’s three exam programs, which the broker-dealer self-regulator started last October, “the major changes are still to come,” Cook said. “2020 is going to be the year of implementation of a new exam program where first, it’s one integrated program, [that’s] based on business model of firm; so each firm will be tracked through their business model.”
Examiners, Cook said, will be “organized around that business model,” and there will be “a single point of accountability for risk management and exam oversight.”