As the U.S. financial markets commence their move towards a T+2 settlement period, FINRA has introduced a proposed set of rule changes designed to support this change. The current timetable contemplates that the changes would be finalized in the third quarter of 2017, and FINRA is attempting to effect its rule revisions in accordance with that schedule.
In its March 2016 Regulatory Notice 16-09 (http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-16-09.pdf), FINRA has identified its relevant rules that it believes would need to be amended in connection with the move:
- NASD Rule 2830 (Investment Company Securities);
- FINRA Rule 11140 (Transactions in Securities
"Ex-Dividend," "Ex-Rights"
or "Ex-Warrants"); - FINRA Rule 11150 (Transactions in "Ex-Interest" in Bonds Which are Dealt in "Flat");
- FINRA Rule 11210 (Sent by Each Party) (from FINRA's rules relating to comparisons or confirmations and "don't know notices");
- FINRA Rule 11320 (Date of Delivery);
- FINRA Rule 11620 (Computation of Interest); and
- FINRA Rule 11860 (COD Orders) (delivery of securities against payment).
The Regulatory Notice sets forth the proposed rule changes, which principally reflect the wording changes that are needed to reflect the shortening of the settlement cycle.
FINRA will continue to review its rules to verify that impacted rules for securities settlement are identified and considered for amendment as needed. FINRA is requesting comments as to its proposals, including as to whether it has identified all of the relevant rules that would require amendments.
Of course, the necessary amendments to the SEC's Rule 15c6-1, relating to the settlement cycle for securities in the secondary market, would be part of a separate SEC rule-making process.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved
