FINRA Rule Change to Require Firms Making Markets to Attest They Do Not Receive Compensation From the Issuer (with Lofchie Comment)

FINRA filed with the SEC an immediately effective rule that amends FINRA Rule 6432 ("Compliance with the Information Requirements of SEA Rule 15c2-11") to require members to certify that they have not accepted and will not accept any payment or other consideration for market-making from issuers and related persons. Comments must be submitted on or before 21 days from publication in the Federal Register.

Lofchie Comment: It might be a good thing to allow issuers to provide support to market makers, subject to some regulatory scheme that would prevent market makers from touting the stock. Clearly, the market maker is providing the issuer a substantial benefit in providing liquidity in the issuer's stock, the absence of which is a concern to small issuers. This could be an alternative to the current proposal before Congress that would increase tick sizes in the shares of small issuers, which is intended to be another method of encouraging trading interest in small stocks. See, e.g., SIFMA Urges Congress to Support "Small Cap Liquidity Reform Act" (with Lofchie Comment) (February 11, 2014).

See: Proposed Rule.See also: All FINRA Rule Filings, Deadlines, and Effective Dates in the Cabinet's FINRA Rule Calendar (accessible to Cabinet subscribers only).