As detailed more fully in Regulatory Notice 23-19, FINRA has adopted a short-form membership application process for certain firms that must become FINRA members due to the recent amendments to Rule 15b9-1 of the Securities Exchange Act of 1934. The amendments to Rule 15b9-1 eliminated the de minimis allowance and proprietary trading exclusion. Rescinding these provisions generally eliminated (subject to the exemptions in the amended rule) the ability for proprietary trading dealer firms to rely on Rule 15b9-1 to effect off-member-exchange securities transactions without joining FINRA.
This short-form membership application process is available only to SEC-registered, non-FINRA member firms that must become FINRA members due to the amendments to SEA Rule 15b9-1 and, as of August 23, 2023, had been a member of a national securities exchange with which FINRA has had a regulatory service agreement for the 12-month period prior to August 23, 2023.
Unlike the typical FINRA new membership application (NMA) process that involves a more extensive application and a longer time horizon for a decision (180 days after a substantially complete application), the short-form membership application process is a truncated application and process that is intended to result in a faster membership decision (generally around 60 days). Additionally, firms that apply for membership pursuant to the new process will be assessed one-half of the applicable membership application fee (unless FINRA ultimately determines that the firm must go through the full NMA process).
The SEC’s compliance date for the amended rule is September 6, 2024, but the deadline to participate in FINRA’s short-form membership process is 120 days earlier than the compliance date. The last day to submit a short-form application to FINRA is May 9, 2024.
Even so, FINRA is encouraging firms not to wait until May 9th to submit their short-form application to allow time to work through additional information requests and to provide sufficient time should FINRA determine that the firm must instead proceed through the full NMA process. The additional buffer can also offer firms time to address potential new obligations in areas such as trade reporting and registrations. Firms that miss the May 9th deadline will have to go through the full NMA process.
CRC has extensive experience with navigating the FINRA new member process and is also familiar with the new short-form process. Regardless of which path to FINRA membership is best for your firm, CRC has the knowledge and expertise to help you execute. Although time remains, the window for the short-form application is quickly closing. Reach out today to discuss how we can help you. Contact Mitch Avnet for further details: (646)346-2468 | mavnet@compliance-risk.com
