FINRA has proposed a new rule requiring carrying and clearing firms to maintain certain customer records electronically in an automated accessible location to facilitate the liquidation and transfer of customer accounts if the firm goes bust.
Comments on the rule are due by December 9. A full copy of FINRA's proposal disclosed under Regulatory Notice 11-48 can be found on
The customer records, says FiNRA, should include a description of all accounts and ranges on the general ledger including associated persons assigned, mapping of the general ledger accounts to trial balances, description of all critical systems, list of bank accounts, executed agreements with clearing agencies, clearing banks, and custodians, and significant outsourcing agreements.
The new Rule 4516 would require each carrying or clearing firm to designate a contact person responsible for maintaining the records. The records may be maintained electronically, although they must be “uniquely tagged and appropriately indexed." The records must also be accessible or kept within the firm’s principal office.
Introducing broker-dealers -- who interface with customers -- hire carrying or clearing firms to process their transactions so they can avoid the cost of maintaining a full-service back-office.
“If a carrying or clearing member firm can no longer continue to operate due to financial or operational problems, it is essential that regulators be able to take prompt action to protect investors,” wrote FINRA “Regulators may need, among other things, to identify a clearing firm that would be able to take all customer accounts of the liquidating member firm in an expedited manner.”
-- This article first appeared on
