FINRA notified member firms that the SEC approved a FINRA-proposed rule set for firms that meet the definition of "capital acquisition broker" ("CAB") and elect to be governed by it.
CABs are firms that engage in a limited range of activities, such as advising companies and private equity funds on capital raising and corporate restructuring, and that act as placement agents under certain limited conditions involving the sales of unregistered securities to institutional investors. Firms that elect to be governed under the CAB rules are not permitted to perform several types of broker-dealer activities, including (i) carrying or maintaining customers' accounts, (ii) handling customers' funds or securities, (iii) accepting customers' trading orders, or (iv) engaging in proprietary trading or market-making. Accordingly, FINRA has established the CAB rules as a separate and narrower set of rules to govern such firms.
The CAB rules will become effective on April 14, 2017. In order to provide new CAB applicants with enough time to apply for FINRA membership and obtain necessary qualifications and registrations, CAB Rules 101-125 (on member application and associated person registration) will become effective on January 3, 2017. FINRA also will begin to accept applications for firms and the associated persons of "CAB" firms on that date.
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