SEC Wants Broker-Dealers To Join The National Securities Association 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 is a premier hedge fund database and community for qualified and accredited investors only. Membership in is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!

This entry was posted in Hedge Fund Regulation, HedgeCo News. Bookmark the permalink.

Leave a Reply