FINRA Comment Letter – Rule 2040 – Payments to Non-Registered Persons

FINRA Comment Letter – Rule 2040 – Payments to Non-Registered Persons

On December 2,2009, the Financial Industry Regulatory Authority (FINRA) published Regulatory Notice 09-69 (Regulatory Notice) seeking comments on its proposal to amend its rules governing payments to unregistered persons through a proposed FINRA Rule 2040 (Proposed Rule).  As stated by FINRA in the Regulatory Notice, the Proposed Rule is meant to streamline the provisions of current: (i) NASD Rule 1060(b) (Persons Exempt from Registration); (ii) Rule 2410 (Net Prices to Persons Not in Investment Banking or Securities Business); (iii) Rule 2420 (Dealing with Non-Members); (iv) IM-2420-1 (Transactions Between Members and Non-Members) and IM-2420-2 (Continuing Commissions Policy); NYSE Rule 353 (Rebates and Compensation); and (v) NYSE Rule Interpretations 345(a)(i)/01 (Compensation to Non-Registered Persons); /02 (Compensation Paid for Advisory Solicitations); and /03 (Compensation to Non-Registered Foreign Persons Acting as Finders).

While the intent of the Proposed Rule may generally more directly align the rules on the payments made by a FINRA member firm to a non-member firm with that ofthe SEC and SEC staff interpretations of broker-dealer registration requirements, our clients have expressed a number of concerns that are discussed…

View FINRA Regulatory Notice 09-69