The Financial Industry Regulatory Authority (FINRA) is proposing rules that would limit how much in political contributions brokers would be allowed to make to avoid conflicts of interest. FINRA is now calling for feedback during the comment period regarding the proposed rule, which runs for 21 days after notice is published in the Federal Register.
Under the proposed rule, brokers would have a contribution cap of $350 during an election year and $150 during any other year. Should a broker contribute beyond these caps, there would not be a penalty as long as a refund is issued within four months of the donation’s receipt. A failure to satisfy exemptions will lead to a bar for the broker from being allowed to solicit a government entity or official for business purposes for two years after the donation was made.
It was in 2010 that the U.S. Securities and Exchange Commission (SEC) adopted “pay-to-play” rules that placed investment advisers under the same limits.
In other FINRA news, the self-regulatory organization sent the SEC a measure that would mandate that a broker who has moved to a new firm let clients know that he/she is trying to persuade them to go to the new broker-dealer. The “educational communication” would be prepared by the SRO. It would include questions clients should pose to the broker to find out how the move and the broker’s pay deal might impact the customer. A few of the proposed questions: if there are financial incentives at the new firm that pose a conflict of interest, whether all a client’s holdings could be transferred to the new firm, and what (if any) are the added costs or risks.
Also, on Wednesday, FINRA announced that it was fining and censuring Macquarie Capital $2.95 million for not providing trade data that was accurate and complete in an automated format when the SRO and the SEC asked for the information. The two agencies had asked for blue sheets to help them in their probe into equity trading.
Blue sheets are supposed to give regulators the key information they need about securities transactions, including the type of security, the name of the customer, the type of sale, the share quantity, price, and the date of the trade. Under federal securities laws and FINRA rules, firm must give over this information electronically when it is requested.
According to the regulator, from 1/12 to 9/15, Macquarie had several problems with its electronic system that is supposed to compile and generate its blue sheet data. Because of this, the firm submitted some blue sheets that misreported purchases as sales and sales as purchases on specific customer trades, miscalculated certain transactions’ net amounts, provided inaccurate customer information, and did not report post-trade corrections and cancellations.
FINRA said the firm did not have audit systems in place that were adequate. By settling, Macquarie is not denying or admitting to the FINRA charges.
Finra proposes rules to restrict political contributions by brokers, Investment News, December 28, 2015
FINRA Fines Macquarie Capital (USA) Inc. $2.95 Million for Submitting Inaccurate Blue Sheet Data, FINRA, December 23, 2015
Finra Files Recruitment Disclosure Rule, FA-Mag, December 22, 2015