FINRA is seeking comment on proposed amendments to FINRA Rule 3240 ("Borrowing from or Lending to Customers") to expand prohibitions against outside borrowing and lending agreements between registered individuals and their customers.
The proposed amendments would (i) expand the general prohibition under the rule to cover lending arrangements that may predate new broker-customer relationships and that may be entered into six months after the customer relationship has ended, (ii) expand the application of the rule to arrangements involving a customer of the registered individual transacting with a family member of the registered individual and (iii) better define the exceptions to the prohibition.
FINRA has specifically requested that commenters address key points of the proposed amendments and suggested that the prohibition could be further expanded.
FINRA is seeking comment on these proposals by February 14, 2022.
Commentary
FINRA has generally been seeking to limit relationships between registered representatives and their customers that are outside of the business and supervision of the firm, and that may provide a benefit to the representative. See, e.g., FINRA Adopts Restrictions on Registered Person Becoming Customer Beneficiary or Trustee. These regulatory limitations and prohibitions are particularly significant because FINRA and other financial regulators are concerned with any aging customer population who may be vulnerable to overreach by their agents.
Primary Sources
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