Board Approved Amendments for Pattern Day Trading Rules, and Received Updates on FINRA Forward, Consolidated Audit Trail and Cybersecurity

FINRA’s Board of Governors met September 17-18. The Board announced the approval of four rule proposals, approved proposed amendments to FINRA’s pattern day trading rules, and received updates on the FINRA Forward initiative, the Consolidated Audit Trail and FINRA’s cybersecurity program.

Rulemaking

The Board received a progress update on the FINRA Forward initiatives to improve FINRA’s effectiveness and efficiency in pursuing its mission. As part of the initiative to modernize FINRA’s rules, the Board’s Regulatory Policy Committee convened in July and approved four rule proposals in order to accelerate FINRA’s rule modernization efforts as part of FINRA Forward. The following approved proposals have been or will be filed with the Securities and Exchange Commission (SEC):

• several amendments to FINRA corporate financing rules to promote capital formation without lessening investor protections;
• a revised proposal for outside activities requirements;
• an amended gifts proposal, which would further increase the gift limit from $250 to $300; and
• a revised proposal to amend the Capital Acquisition Broker (CAB) rules to allow CABs to represent buyers as well as sellers in specified private placement and M&A transactions.

Continuing its focus on FINRA Forward, at its meeting this week, the Board approved amendments that will replace the day trading and pattern day trading rules, including the minimum equity of $25,000 for pattern day traders, with an intraday margin rule that applies the existing maintenance margin rules to intraday exposure. The amendments are a result of FINRA initiating a retrospective review to assess whether the rules needed to be adapted for today’s technological and trading environment. The proposal incorporates feedback FINRA received from member firms, industry groups and investors from the Regulatory Notice launching the retrospective review. The amendments will be filed with the SEC for approval.

The Board also discussed a forthcoming Regulatory Notice that will reduce unnecessary burdens and consolidate prior guidance regarding the use of negative consent for the bulk transfer or assignment of customer accounts.

“The Board’s recent approval and discussion of various rule proposals are a key part of FINRA's ongoing efforts to enhance its regulatory effectiveness and efficiency through the FINRA Forward initiative,” said FINRA Board Chair Scott Curtis. “The Board and FINRA’s leadership team will continue to prioritize helping enable member firms to better serve investors and facilitate strong and fair capital markets.”

Additional Updates

The Board received an update on FINRA’s cybersecurity program and recent developments regarding the Consolidated Audit Trail.

The Board also reaffirmed FINRA’s Financial Guiding Principles, an integral part of FINRA’s commitment to financial transparency.

The next FINRA Board meeting is scheduled for December. More information about the Board's operations, including membership and responsibilities of its committees, is available here.

About FINRA

FINRA is a not-for-profit organization dedicated to investor protection and market integrity. FINRA regulates one critical part of the securities industry—member brokerage firms doing business in the U.S. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.

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