The SEC Gave Final Regulatory Approval

The Securities and Exchange Commission today gave final regulatory approval related to the consolidation of the member firm regulatory functions of the National Association of Securities Dealers, Inc. and NYSE Regulation, Inc., a wholly-owned subsidiary of New York Stock Exchange LLC.  The Commission approved rule changes that allow for the consolidation of member firm regulation into a single, consolidated self-regulatory organization. The consolidated organization will be known as the Financial Industry Regulatory Authority, or FINRA.

The consolidation is intended to help streamline the broker-dealer regulatory system, combine technologies, and permit the establishment of a single set of rules governing membership matters, with the aim of enhancing oversight of U.S. securities firms and assuring investor protection.

FINRA will operate under SEC oversight.  It will be responsible for regulating all securities firms that do business with the public, including with respect to professional training, testing and licensing of registered persons, arbitration and mediation.  FINRA also will be responsible, by contract, for regulating  The Nasdaq Stock Market, Inc., the American Stock Exchange LLC, and the International Securities Exchange, LLC.  Finally, FINRA will be responsible for operating industry utilities, such as trade reporting facilities and other over-the-counter operations. NYSE Regulation, Inc. will continue to be responsible for the regulatory oversight of trading on the NYSE.

SEC Chairman Christopher Cox said, “The consolidation of NASD’s and NYSE’s member firm regulatory functions is an important step toward making our self-regulatory system not only more efficient, but more effective in protecting investors.  The Commission will work closely with FINRA to eliminate unnecessarily duplicative regulation, including consolidating and strengthening what until have now been two different member rulebooks and two different enforcement systems.”

As a practical matter, this merger means that for the foreseeable future, very little get done as personnel at both organizations jockey for positions or survival.

Jay B. Gould | Partner
Pillsbury Winthrop Shaw Pittman LLP
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