United States: FINRA Clarifies Narrow Exemption From Financial And Operations Principal Requirement

FINRA filed amendments to FINRA Rule 1220(a)(4) to clarify that broker-dealers that previously received an exemption from the requirement to designate a Financial and Operations Principal ("FinOP") will not be required to do so under FINRA's new individual registration rules. The new rules will come into effect on October 1, 2018. The amendments further clarify that while these firms will be required to designate a Principal Financial Officer and Principal Operations Officer, these individuals will not be required to qualify as FinOPs.

Commentary / Mark Highman

These amendments apply solely to firms that received an exemption from the requirement to designate a FinOP prior to September 2001. Since then, FINRA has required all firms to designate a FinOP, who must qualify by passing either the Series 27 exam or Series 28 exam (the introducing firm FinOP exam). (See NASD NtM 01-52.) In addition, commencing October 1, 2018, all firms will be required to designate a Principal Financial Officer and Principal Operations Officer, who must qualify and register as a FinOP and Operations Professional (though these individuals will not be required to take the Series 99 Operations Professional Exam as the Series 27 and 28 FinOP exams automatically qualify an individual to register as an Operations Professional). Firms that are self-clearing or clear for others will be required to designate separate individuals as the Principal Financial Officer and Principal Operations Officer, though the firm's FinOP may serve in either capacity. Other firms will be permitted to designate the same individual as the firm's FinOP, Principal Financial Officer and Principal Operations Officer. (See FINRA Reg. Notice 17-30, p. 17.) More broadly, firms should review their personnel registration procedures for compliance with FINRA's new individual registration rules in light of the October 1 effective date.

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