FINRA Announces Updates to Interpretations of Margin Rule Regarding Control and Restricted Securities and Consolidation of Accounts

On July 2, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 20-22 (the Notice) announcing updates to its interpretations regarding (1) FINRA Rule 4210(e)(8), which specifies margin requirements for control and restricted securities, and (2) FINRA Rule 4210(f)(5), which specifies conditions for the consolidation of two or more accounts carried for the same customer.

With respect to FINRA Rule 4210(e)(8), the revised interpretation clarifies the exemption for securities that are “then saleable” pursuant to the terms and conditions of Securities Act Rule 144(b)(1) or Rule 145(d)(2) from the margin requirements generally applicable to control and restricted securities subject to Securities Act Rule 144 or 145(c).

FINRA Rule 4210(f)(5) allows member firms to consolidate two or more accounts carried for a customer if the customer has consented that the money and securities in each account may be used to carry or pay any deficit in all such accounts. The revised interpretation clarifies that though Regulation T only permits firms to maintain multiple margin accounts for a single customer under three specific circumstances, firms may maintain multiple sub-accounts of a customer’s margin account as provided in the interpretations.

The Notice and revised interpretations are available here.

FINRA Provides Guidance on Retail Communications Concerning Private Placements

On July 1, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 20-21 (the Notice) providing guidance on compliance with FINRA Rule 2210 Communications with the Public when creating, reviewing, approving, distributing or using retail communications concerning private placement offerings. Among other things, the Notice reminds members that private placement retail communications of the member firm are subject to FINRA Rule 2210 regarding advertising, which requires a balanced presentation of risks and investment benefits.

The Notice is available here.

FINRA Updates Members on Regulatory Coordination Concerning CAT Reporting Compliance

On June 29, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 20-20, updating members on regulatory coordination efforts concerning compliance with Consolidated Audit Trail (CAT) reporting rules. Specifically, FINRA and the national securities exchanges, as CAT NMS Plan Participants, have entered into a Rule 17d-2 Plan and corresponding Regulatory Services Agreements to coordinate regulation of the CAT compliance rules through FINRA. Additionally, FINRA and the exchanges have also developed a coordinated approach to enforce the CAT compliance rules under the Participants’ respective Minor Rule Violation Plans.

The Notice is available here.