Burr & Forman

10.15.2014   |   Articles / Publications

Burr Alert: Proposed FINRA Rule 2231 Governing Customer Account Statements

 

Through its recent Regulatory Notice 14-35, the Financial Industry Regulatory Authority (“FINRA”) announced and sought comments on its proposed new Rule, FINRA Rule 2231, governing the frequency and availability of customer account statements. This was the third solicitation for comments sought by FINRA for the proposed Rule. The first was announced in April 2009 through SR-FINRA-2009-028 (the “Initial Filing”) and the second in Amendment No. 1 to the Initial Filing. Twelve comment letters were received in response to the Initial Filing and 8 comment letters in response to Amendment No. 1. Through Regulatory Notice 14-35, FINRA seeks comment on the revisions made in light of these comment letters.

In its Initial Filing, FINRA proposed to transfer NASD Rule 2340 and NYSE Rule 409 into the consolidated FINRA Rulebook as FINRA Rule 2231, but only after incorporating significant changes to these existing Rules. Specifically, FINRA sought to increase the frequency at which customer account statements must be sent to customers, requiring member firms to deliver customer account statements “at least once every month to each customer whose account had activity during the period” as opposed to the current quarterly delivery. FINRA also sought to transfer provisions from the current NYSE Rule 409 which only permit customer account statements to be sent to third parties if the customer provides written authorization. These, and other proposals contained in the Initial Filing, sought significant and substantive changes to the policies governing the delivery and availability of customer account statements, and commenters’ feedback was overwhelmingly negative.

With regard to the proposal regarding the frequency for delivery of customer account statements, all 12 comment letters received in response to the Initial Filing objected to the proposed monthly delivery requirement. In addition to other concerns, the chief complaints raised by commenters were that the monthly delivery requirement would (1) “result in significant costs for the industry without meaningful benefits for customers”, (2) create conflicts with the transaction confirmation requirements under Securities and Exchange Act Rule 10b-10 (requiring a broker-dealer to provide its client written confirmation of a securities transaction at or before completion of the transaction), and (3) create conflicts with member firms’ retirement plan reporting obligations. Additionally, commenters pointed out that alternatives such as online account sites and call centers are available to customers wishing to obtain account information more frequently than once a quarter.

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