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2021 changes to FINRA rules coming up

On Behalf of | Dec 14, 2021 | FINRA |

FINRA has undergone something of an overhaul, which should be on the radar of anyone who’s registered. These are the four main changes that you have to worry about if you’re registered with FINRA in Pennsylvania.

Continuing education

People who have registered with FINRA now have to fulfill their continuing education requirements on an annual basis. This is a big change from once every three years as it was before.

Additionally, registered individuals have yet another thing to complete: the Regulatory Element. This will go into effect on Jan. 1, 2023. The element primarily deals with the requirements and standards that come with industry regulations.

The Regulatory Element will be something that registered individuals have to complete annually. The content for this element must also be completed for every principal registration category or representative that the registered individual holds.

Another change as a result of the additional rules is that the Firm Element is now a requirement for everyone who is registered. Effective on Jan. 1, 2023, this now includes those whose registration is entirely permissive and complies with Rule 1210.02. There will also be a new Maintaining Qualifications Program that will launch March 15, 2022.

Firm restrictions

On Sept. 29, 2021, FINRA set out to combat the serious risks that broker-dealers pose to individuals when they don’t act in their clients’ best interests. As a result of their efforts, Rule 4111, Restricted Firm Obligations, goes into effect on Jan. 1, 2022.

The rule’s purpose is to designate certain broker-dealers as restricted. The designation process is based on criteria that has received the Securities and Exchange Commission’s full approval.

An end to OATS

As of Sept. 1, 2021, FINRA’s Order Audit Trail System is no more. Instead, members now do their trade reporting through a system called Consolidated Audit Trail, or CAT.

On Oct. 1, 2021, changes went into effect regarding two rules: 5122, which deals with Private Placements of Securities Issued by Members, and 5123, handling Private Placement of Securities. Under 5122, broker-dealers now have to provide any prospective investor with all of the following:

  • Private placement memorandum
  • Term sheet or some other official offering document that details how the offering proceeds are intended to be used
  • Offering expenses
  • How much selling compensation the member and its associated individuals will have paid to them

Keeping up with FINRA’s changes is sometimes stressful and daunting. However, by keeping up with these changes, you can ensure that you’re doing the best for your investments.


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