FINRA Rule 4210 Debt Securities Survey

FINRA had previously proposed amendments to its Rule 4210 (margin requirements). The proposed amendments (a link is below) relate to the following issues:

(1) revise the definitions and margin treatment of option spread strategies;

(2) clarify the maintenance margin requirement for non-margin eligible equity securities;

(3) clarify the maintenance margin requirements for non-equity securities;

(4) eliminate the current exemption from the freeriding prohibition for designated accounts;

(5) conform the definition of "exempt account"; and

(6) eliminate the requirement to stress test portfolio margin accounts in the aggregate.

We believe that the effect of the proposed amendments on the financing of debt securities was in fact far broader than FINRA had intended (or at least realized). Accordingly, FINRA has distributed a survey to better understand the effects of the proposed rule change on the financing of debt securities.

Submissions of the completed survey are due by September 14, 2012.

Cross-Reference(s): FINRA Rule 4210(c)(1) (Maintenance Margin Guideline)

Lofchie Comment: We would advise broker-dealers that provide debt market financing not only to complete the survey, but also to review the proposed rule changes and provide comments. Firms wishing further information as to the rule changes may contact either Jeff Robins or myself.

View survey here. The survey itself is also available from FINRA and can be completed electronically.See also: FINRA Notice of Filing; FINRA Rule Proposal (links externally to FINRA website).