FINRA Makes Rule 4530 Changes Regarding Reporting Requirements

  • Client Alert: FINRA Revised Rule 4530, Effective Date: Oct 13,2017: Filing Application Form and the Product and Problem Codes for Reporting Customer Complaints and for Filing Documents Online (RN 17-21)

    In 2016 the DOL made changes to its fiduciary rule. Therefore, FINRA made corresponding changes in its existing Rule 4530 regarding Reporting Requirements.

    New Rule 4530 Reporting Requirements, became effective on June 9, 2017. It includes a new Problem Code 69 to report customer complaint information and information relating to required documents. These additions can be found under Rule 4530 (f) and (g).

    Revised FINRA Rule 4530 requires firms to report written customer complaints regarding theft or misappropriation of funds or securities or forgery, as well as quarterly statistical and summary information about written customer complaints. FINRA requires firms to electronically report the customer complaint information via an Application on the FINRA firm Gateway. Besides the obligation to provide this information, firms also have to provide copies of specified criminal and civil actions.

    The amended FINRA Rule 4530 Filing Application Form contains new fields, which address changes made by the MSRB to extend the customer complaint and related recordkeeping rules, and amends the existing Rule 4530 Product and Problem Code with Attachments A and B.

    In 2017 the SEC approved proposed rule changes from the MSRB in Rule G-8 (Books and Records to be Made by Brokers, Dealers, and Municipal Securities Dealers and Municipal Advisors) to require MSRB regulated firms to retain an electronic complaint log of all written complaints of customers or municipal advisory clients and persons acting on behalf of such costumers or municipal advisory clients. FINRA and MSRB worked together to make the required changes in Rule 4530 to facilitate firm compliance with the requirements of Rule G-8.

    FINRA also added a new Problem Code 15 -Municipal Advisor Conflict of Interest in October. Disclosure is required for a conflict of interest arising in a municipal advisory role, which includes a breach of fiduciary duty, a duty of care or a duty of loyalty. FINRA will also add a new Problem Code 15 -Municipal Advisor Conflict of Interest in October.

    From October 1, 2017, the new Application Form, including the two new fields “Non-Registered Rep Associated Person” and “Municipal Advisory Services” which can be found in the “Related to”- section, as well as the amended Rule 4530 Product and Problem Codes, can be used by firms when submitting information relating to associated persons who are not registered or relating to municipal advisory services.

    When a reportable matter relates to an associated person who is not registered with a firm or relates to municipal advisory services, firms should always select the new fields in the Application Form.

    TAKEAWAY: Accurate and timely Complaint reporting remains a regulatory “hot button”, and a new emphasis on disclosure of conflicts of interest and use of a “complaint log” in the municipal securities world should not be difficult for your firm’s CCO and operations staff to utilize. Examine the new Reports Requirements and consider whether changes to your firm’s WSP’s are required.

    If you have any questions about this Client Alert or any of the Regulatory Notice discussed, please contact Paul A. Lieberman, PLieberman@evw.com, 212 561-3628.

    Laura K. Kues assisted in the preparation of these Alerts. Laura graduated from Johannes Gutenberg University in Mainz (Germany) in June 2015 (First State Exam) with the priority area in Competition Law Intern at Eaton & Van Winkle, LLP (USA) during the 2017 German legal clerkship at the district court of Mainz (Germany).

    © Eaton & Van Winkle, LLP, 2017. All rights reserved. This memorandum was prepared as a service to clients and friends of the firm to report on recent developments that may be of interest to them. The information in it is therefore general, and should not be considered or relied on as legal advice.