Use of Electronic Signatures Proposed in FINRA Rule Amendment

In a move to align the regulatory requirements with current technology, the Financial Industry Regulatory Authority (FINRA) recently filed a proposed rule change with the SEC regarding the utilization of electronic signatures.  The proposed rule will permit the use of electronic signatures consistent with the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) and will be implemented by an amendment to FINRA Rule 4512(a)(3) “Customer Account Information”.

Under the proposed rule, FINRA member firms will be allowed to obtain electronic signatures of personnel exercising discretionary trading authority over customer accounts maintained by a member.  FINRA acknowledged that given technological advances relating to electronic signatures, including authentication and security, FINRA now believes that the requirement for manual signatures is obsolete. The proposed rule change is also consistent with the requirements of SEA Rule 17a-3(a)(17)(ii), which does not prescribe the type of signature that must be obtained from an authorized individual.  While FINRA Rule 4512(a)(3) would continue to require members to obtain the signature of an associated person, it would provide firms the option of obtaining either a manual or an electronic signature.

If approved by the SEC, the proposed rule change will be published in a regulatory notice no later than 60 days following approval, and will take effect within 30 days following publication.