FINRA is seeking comments on a review of FINRA Rule 4311 to determine whether it meets the intended investor-protection objectives and is "reasonably efficient" in practice. FINRA Rule 4311 governs requirements for clearing firms entering into agreements with introducing firms for the settlement of transactions and custody of assets of the customers of the introduced firms. FINRA is also soliciting feedback on, among other things, the economic impact of compliance and other challenges for smaller firms.
Comments must be received by May 23, 2018.
Commentary / Steven Lofchie
FINRA's recent rule change imposing margin requirements on TBAs and other transactions has brought to light questions about the financial relationships between introducing firms, their customers, and clearing firms. It is not clear that the regulated parties, or the regulators themselves, fully understand the relationships. That said, the path to improvement may be less about amending the rules than it is about making sure that the rules are clearly communicated and understood. Introducing and clearing firms should take this opportunity to raise the issues they face when implementing these requirements.
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