SEC Approves Consolidated FINRA Best Execution Rule

FINRA Reg. Notice 12-13

The SEC approved FINRA's proposed rule change to adopt FINRA Rules 5310 (Best Execution and Interpositioning) and 6438 (Displaying Priced Quotations in Multiple Quotation Mediums) in the consolidated rulebook (Consolidated FINRA Rulebook). FINRA Rule 5310 is the new consolidated rule governing members' best execution requirements that is based largely on NASD Rule 2320 (Best Execution and Interpositioning). The Supplementary Material to Rule 5310 draws substantially from NASD IM-2320 (Interpretive Guidance with Respect to Best Execution Requirements) but includes several new provisions concerning securities with limited quotation or pricing information available, foreign securities, customer instructions on routing orders, and regular and rigorous review of execution quality. Rules 5310 and 6438 become effective on May 31, 2012.

This notice highlights the new supplementary material and provides guidance on the same. All firms handling customer orders should review the new rule and update best execution procedures as necessary.

Effective Date: March 31, 2012

Cross References: FINRA Rule 5310; FINRA Rule 6438; NASD Rule 2320; NASD IM-2320; SEC Release No. 34-65895, 76 FR 77042 (Dec. 9, 2011) (Order Approving SR-FINRA-2011-052); FINRA Rule 5320; FINRA Rule 6420; NASD Rule 3110; NTM 01-22; Lofchie's Guide to Broker-Dealer Regulation, Chapter 8: Trading.

For more information about this document, you may contact one of the following Cadwalader attorneys: Steven D. Lofchie; Jeffrey L. Robins; Glen P. Barrentine; Nihal S. Patel.