FINRA Proposes New Discretionary Accounts and Transactions Rule

June 23, 2015
Client Alert

The Financial Industry Regulatory Authority is requesting comment on a revised proposal to adopt a new FINRA rule that would consolidate and clarify former National Association of Securities Dealers and New York Stock Exchange rules regarding discretionary accounts and transactions. The NASD and NYSE rules set forth the obligations of a firm and its associated persons regarding the exercise of any discretionary power over a customer’s account, including the obligation of the firm to detect and prevent unauthorized and excessive transactions, and address the obligations of a firm when accepting an order for a customer’s account from someone other than the customer. The proposed rule would consolidate the two rules and provide clarifications regarding approval of such transactions. In addition, the proposal addresses the treatment of customers’ free credit balances, sweep programs, bulk transfers of customers’ accounts, and change of broker-dealer of record. 

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