Recent FINRA Actions for Market Makers and Broker-Dealers

January 29, 2020

There are two recent, noteworthy actions from the Financial Industry Regulatory Authority, Inc. (FINRA) regarding Rule 5250 and Rule 4530 that should be noted by market makers and other broker-dealers, as follows:

FINRA Rule 5250, which prohibits FINRA members from receiving payments for market making, has undergone a retrospective review.  https://www.finra.org/sites/default/files/2020-01/Regulatory-Notice-20-03.pdf.  Although many stakeholders suggested that the rule should be liberalized, FINRA has determined to make no changes to the rule.  As a result, any payments (particularly from issuers) to a FINRA member in connection with market making (including paying the costs of filing a Form 211) continue to be prohibited (with a few narrow exceptions).

Finra Rule 4530.  As part of its retrospective review program, FINRA is requesting comment on the operation of Rule 4530, generally known as the self-reporting rule.  Many firms agonize over whether they need to report violations that they discover internally.  https://www.finra.org/sites/default/files/2020-01/Regulatory-Notice-20-02.pdf