The Financial Industry Regulatory Authority's rulebook "needs constant care and attention," given technology and market changes, and some rules may be out of date, Robert Cook, FINRA's CEO, said Tuesday at FINRA's annual conference in Washington.
Opening up its rulebook is part of the broker-dealer self-regulatory organization's three-pronged FINRA Forward initiative, launched in late April.
The initiative also focuses on enhancing how FINRA supports member firm compliance to better protect investors and safeguard markets, as well as expanding its cybersecurity and fraud prevention activities.
The FINRA Forward initiative "is all about change, constant change," Cook said Tuesday.
FINRA "member firms change and investors change, so we have to change as well," Cook said. "And that change has to be continuous."
Cook said FINRA needs its members "to help us decide what [rules] to focus on," including Securities and Exchange Commission rules that "may be in play here."
The initiative allows FINRA to serve member firms and "redirect our energy into being the best SRO and best membership organization that we can be."
FINRA Forward, Cook described in a recent blog post, is a "series of initiatives to further improve" FINRA's effectiveness and efficiency.
Extended Comment Periods
In response to feedback from several FINRA Advisory Committees and FINRA Regional Committees, as well as a number of FINRA members, FINRA has extended by 30 days the comment periods for three of its rule proposals.
Comments will now be taken until June 11 on FINRA's broad review of its rules and which ones need to be modernized — including rules around remote work and branch offices.
FINRA said in a March 12 regulatory notice that it was also focused on "potential updates to its rules and regulatory approaches that might be appropriate in light of non-FINRA requirements applicable" to broker-dealers.
The comment period on FINRA's capital formation proposal now expires on June 18, while comments on its evolving technology and workforce arrangements plan will be taken until July 14.
Outside Business Activities
As to FINRA's new plan to limit outside business activity reporting requirements to investment-related activities that are considered to be higher risk, Cook said Tuesday that the plan is "trying to simplify a complicated area ... that required a lot of compliance overhead."
Firms, Cook said, had told FINRA "and we agreed it was not the best use of their resources to oversee, for instance, Uber driving ... things that are not investment related at all."
The proposed rule, which consolidates FINRA Rules 3270 and 3280 into a single new rule governing OBAs and private securities transactions, was published March 14 in Regulatory Notice 25-05. The rule eliminates reporting requirements for outside business activities that are not investment related, like bartending or driving for a ride-share service.
The new plan "significantly reduces reporting obligations that have been in existence for decades," FINRA said in its statement. "FINRA is proposing to reduce these obligations to help broker-dealers focus on investment-related outside activities that present higher risks to investors and firms."
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