Wall
Street watchdog kicks off review of rules to gauge impact, costs
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[April 09, 2014]
By Suzanne Barlyn
The Financial Industry Regulatory
Authority, Wall Street's watchdog, on Tuesday launched a review of
its rules to determine whether they are effective and their costs
and benefits are in line with the securities industry's
expectations, according to regulatory notices.
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FINRA embarked on the effort by asking Wall Street to submit
comments and data about current rules on advertising and marketing,
as well as those for gift-giving, according to the notices.
Among the details FINRA wants to know is whether the rules have
addressed problems they were aimed at resolving and if any of them
include ambiguities.
FINRA's "retrospective rule review," in the planning stages since
late 2012, is an effort to determine whether the current rules are
achieving their investor protection goals while not imposing
unnecessary cost burdens on the industry, said Robert Colby, FINRA's
chief legal officer. "Rules go out of date, or sometimes they don't
work as planned," he said in an interview.
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The process could lead to developing new industry rules and changing
existing ones, Colby said. Some rules, however, may stay the same.
Some investor advocates worry that complaints from the industry
about costs the regulations impose could lead to weakening investor
protection standards.
FINRA launched a related effort in 2012 to scrutinize more deeply
the potential costs and benefits of new industry rules and changes
it is developing. The move came, in part, because the U.S.
Securities and Exchange Commission, which must review and approve
changes to FINRA's rules, told the regulator to "better support" the
economic aspects of its proposals, Colby said at the time.
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The SEC became more concerned about costs and benefits of industry
rules when a federal court threw out an important part of the
Dodd-Frank financial oversight law involving shareholders' ability
to nominate corporate directors, saying the agency's economic
analysis was flawed.
Those concerns appear to be trickling down to rules from
self-regulatory groups that the SEC must review and approve.
Last year, FINRA hired its first chief economist, Jonathan Sokobin,
to help oversee the so-called "cost benefit analysis" associated
with developing new industry rules. FINRA also published a framework
for its process last September.
FINRA plans to conduct the reviews of different rules on an ongoing
basis, the regulator said. Factors it will consider to select the
rules will include feedback from members about rules that frequently
raise questions and federal laws that may override FINRA's ability
to change rules, it said.
(Reporting by Suzanne Barlyn; editing by Dan Grebler)
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