Wall Street watchdog scraps controversial supervision plan

Fri Jun 28, 2013 5:17am IST

A trader looks up at a screen on the floor at the New York Stock Exchange, June 25, 2013. REUTERS/Brendan McDermid

A trader looks up at a screen on the floor at the New York Stock Exchange, June 25, 2013.

Credit: Reuters/Brendan McDermid

Related Topics

Stocks

   

REUTERS - Wall Street's industry-funded watchdog has scrapped a controversial plan that would have required brokerages to supervise business lines that are not related to the securities industry, according to a recent regulatory filing.

The Financial Industry Regulatory Authority, in a long-awaited proposal that would streamline rules for how brokerages should supervise themselves, dropped the idea it had initially proposed to the U.S. Securities and Exchange Commission in 2011.

FINRA, as part of a sweeping supervision proposal it submitted to the SEC on June 21, said it was the "best course" to eliminate the plan. However, other FINRA rules would still apply to business activities by firms and their brokers that are unrelated to the brokerage industry, the group said.

The regulator oversees 4,250 brokerages and about 630,000 brokers.

Brokerages, in numerous letters, had balked at the original plan.

It would have forced them to become deeply involved in monitoring other types of investment businesses that their brokers may have engaged in outside of their firms.

For example, many brokers who are licensed through independent broker dealers, such as LPL Financial Holdings Inc, (LPLA.O) also run registered investment advisory firms, which are not part of the brokerage. Those businesses are regulated by the SEC instead of FINRA.

The plan could have also tied brokerages to moonlighting activities by brokers, such as selling insurance or being landlord, critics said.

Existing FINRA rules, nonetheless, still mean that brokerages have to keep an eye out for business activities that brokers engage in outside of the securities industry, said Gerald Baker, a compliance consultant in Kewadin, Michigan.

FINRA already requires brokers to get advance permission from their brokerages before engaging in business outside of the firm. Many brokerages, however, simply ban the practice.

FINRA's 317 pages of proposed supervision rules aim to consolidate two sets of rules from its predecessor organization, the National Association of Securities Dealers, and the regulatory arm of the New York Stock Exchange. The two entities formed FINRA in a 2007 merger. In 2011, the regulator withdrew a previous version of the plan that it had submitted to the SEC.

Other parts of FINRA's revised proposal, submitted to the SEC on June 21, address supervising brokers of independent firms who work far away from their home offices, reporting findings of internal investigations and keeping track of customer complaints, among other things. (Reporting by Suzanne Barlyn)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India-WTO Row

REUTERS SHOWCASE

Market Eye

Market Eye

Nifty falls most in nearly 3-1/2 weeks; Sensex down over 400 points  Full Article 

Factory Activity

Factory Activity

Factories post fastest growth for 17 months in July  Full Article 

Paying for Bail

Paying for Bail

Jailed Subrata Roy gets office to negotiate hotel sales.  Full Article 

Rupee Dips

Rupee Dips

Rupee posts biggest weekly loss since record lows in August.  Full Article 

Reviving Infosys

Reviving Infosys

CEO Sikka says to improve business with new growth avenues  Full Article 

Outlook Slashed

Outlook Slashed

ArcelorMittal cuts outlook as ore prices hit mining  Full Article 

Re-gaining Momentum

Re-gaining Momentum

China, Asian factory growth gathers pace; Europe falters  Full Article 

Factory Lockout

Factory Lockout

Pfizer says threats to managers force staff lockout at Mumbai factory .  Full Article 

Gold Smuggling

Gold Smuggling

In cat-and-mouse game, India uncovers new gold smuggling route.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage