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SEC Wants Broker-Dealers To Join The National Securities Association

sec_building.gi.topNew York (HedgeCo.Net) – Hedge fund law specialist Sadis & Goldberg reports that the United States Securities and Exchange Commission has announced a proposal to amend Rule 15b9-1 under the Exchange Act to require broker-dealers who trade in off-exchange venues to become members of a national securities association.

The amendments would enhance regulatory oversight of active proprietary trading firms, such as high frequency traders. Under the proposal, these broker-dealers would be regulated by the SEC as well as the Financial Industry Regulatory Authority (“FINRA”).

The proposed amendments to Rule 15b9-1 would narrow an exemption that currently exempts certain broker-dealers from membership in a national securities association if they are: a member of a national securities exchange; carry no customer accounts; and have annual gross income of no more than $1,000 that is derived from securities transactions effected otherwise than on a national securities exchange of which they are a member.

The SEC noted that many high frequency trading firms rely upon the current exemptions and are not members of FINRA. With the proposed amended Rule 15b9-1, the existing proprietary trading exemption would be eliminated and replaced with a narrower exemption allowing floor-based dealers to engage in off-exchange hedging transactions without having to become a member of FINRA. The SEC is allowing 60 days for public comment prior to finalizing the rule afterwards.

It is imperative that broker-dealers carefully evaluate their compliance programs and regulatory response functions in order to be ready for FINRA oversight.

Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
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