Under amendments to Rule 15b9-1 proposed by the SEC on July 29, 2022, certain proprietary brokerage firms that are currently exempt from registering with FINRA would need to become members of the self-regulatory organization. This would subject these firms to FINRA’s rule book as well as surveillance and examination.
SEC Rule 15(b)(8) requires registered broker-dealers that trade securities to become a member of a securities association unless it effects transactions in securities solely on a national securities exchange of which it is a member. Rule 15b-9 provides an exemption from this requirement under which certain broker-dealers could engage in unlimited proprietary trading of securities on any national securities exchange, even if they are not a member of the exchange or in over-the-counter transactions without triggering the requirement to become a member of FINRA.
Under the proposal, the SEC would narrow the exemption under 15b9-1 so that it would only be available to proprietary trading firms whose trading is solely done on national securities exchanges with which they are a member or trading on other venues where that trading results solely from routing for order protection purposes, or where the transaction results from the execution of the stock leg of a stock-option order.
Many proprietary trading firms execute trades on numerous exchanges and trading venues, including Alternative Trading Systems (ATS). To the extent that these firms are not already registered with FINRA, they may be required to do so if the rule amendment is adopted. Firms that currently rely on the exemption from FINRA registration should pay attention to this proposal and, if the proposal is adopted, be prepared to file for FINRA registration where necessary.
Oyster’s consultants are experts in the FINRA registration process. We have successfully guided many new broker-dealers through the process, from start-ups to complex organizations.
Our team of registration experts you will review your business structure, plan and documentation to determine the best approach. We understand how to design practical and reasonable regulatory compliance programs, including the required supervisory systems and procedures. Take advantage of our experience and let our industry veterans turn one of your firm’s toughest challenges into a smooth process.