FINRA Issues Retrospective Rule Review Reports
FINRA issued two Retrospective Rule Review Reports assessing the effectiveness and efficiency of its rules on (i) communications with the public and (ii) gifts, gratuities, and non-cash compensation.
FINRA's Retrospective Rule Review consists of an assessment phase and an action phase. The reports issued today are the culmination of the assessment phase. In the upcoming action phase, FINRA will engage in its usual rulemaking process to propose any amendments to the rules based on the assessments.
In the Communications with the Public Report, FINRA staff concluded that the rules have "largely been effective in meeting their intended investor protection objectives." The report identified several areas where opportunities exist to "enhance the efficiency of the rules," which include:
- aligning filing requirements and review process with the relative risk of the communications;
- creating more simplified and effective risk disclosure;
- providing more guidance regarding the application of content standards;
- adapting rules and guidance to coincide with emerging technologies and communication innovations; and
- updating FINRA's electronic filing system.
The report on Gifts, Gratuities, and Non-Cash Compensation found that generally, the rules have been "effective in meeting their intended investor protections." The report also outlined recommendations to enhance the effectiveness and efficiency of the rules, including:
- updating the existing guidance and addressing issues not covered by prior Notices;
- consolidating FINRA rules governing gifts and non-cash compensation into a single rule;
- amending the non-cash compensation rules to cover all securities products;
- increasing the current limits on gifts from $100 per person per year, including a de minimis threshold below which firms would not have to track gifts given or received, and creating exceptions for gifts related to life events;
- creating a single rule governing business entertainment in all contexts, rather than having multiple rules depending on the products involved; and
- providing firms and product sponsors with more flexibility regarding the location of training or education meetings, permitting firms and sponsors to include limited entertainment as part of training or education meetings, and publishing guidance that gives examples of permissible and impermissible training or education meetings.
See: Report Regarding Communications with the Public; Report on Gifts, Gratuities, and Non-Cash Compensation; Press Release.