In early April, the Securities and Exchange Commission (SEC) proposed two new rules that aim to expand dealer registration requirements. These rules attempt to address a current regulatory gap between certain dealers’ registration statuses and the regulation of their activities. If approved, these rules would also require registrants to become members of the Financial Industry Regulatory Authority (FINRA). Here’s what you need to know about the purpose and potential impact of these proposed rules.
The Reason for the Proposed SEC Rules
Under the Securities Exchange Act, “dealers” and “government dealers” are distinguished from “traders.” Essentially, traders are “individuals who buy and sell securities for their own investment accounts and do not carry on a public securities business,” and therefore, are not required to register with the SEC and FINRA. The new rules aim to redefine active trading as dealer or government dealer activities. As a result, a large number of unregistered traders would need to register with the SEC, expanding the number of dealers subject to the rules and regulations of the SEC and FINRA.
How the Rules Could Impact New Registrants
If the rules are adopted, many traders would be reclassified as dealers, requiring them to register with the SEC and become FINRA members. New registrants would need to adhere to numerous rules and regulations, such as recordkeeping requirements, meeting the minimum net capital and financial responsibility requirements, supervision requirements, and more. A substantial amount of paperwork would be necessary for these new registrants to complete, and they would be subject to oversight and disciplinary action under FINRA’s rules.
Trusted Legal Guidance When You Need it Most
As a professional in the financial services industry, it can be difficult to keep up with the latest rule changes and their potential impacts. If you need help with an upcoming FINRA investigation or you simply want clarification about a newly adopted rule, enlist the guidance of a knowledgeable securities law attorney right away. Together, you can assess your situation and determine the most appropriate course of action.
Call Judex Law, LLC, today at (303) 523-4022 to speak with a trusted and friendly securities law attorney.
