Header graphic for print
The BD/IA Regulator Providing securities regulatory, enforcement and litigation trends for broker-dealers, investment advisers and investment funds

FINRA Publishes “Frequently Asked Questions” on New Pricing Disclosure Rules for Securities Confirmations

Posted in Broker-Dealer Regulation, FINRA Enforcement

On July 12, 2017, FINRA issued guidance on its recent amendments to Rule 2232. The new requirements, which are scheduled to take effect on May 14, 2018, apply to transactions with retail (and not institutional, as defined in Rule 4512(c)) customers in corporate and agency debt securities. Beginning on the effective date, FINRA will require confirmation disclosure of additional transaction-related information, including mark-ups and mark-downs, time of execution, and a hyperlink to a webpage containing information about the securities being traded. The goal of these new rules is to help retail customers better understand and compare the transaction costs for these transactions.

Specifically, the amended rule provides that, if a member firm executes an offsetting principal trade in a particular security, the firm must disclose the amount of mark-up and mark-down from the prevailing market price for trades with retail customers on the same trading day in the same corporate or agency debt securities. This requirement applies only where the firm’s offsetting principal trade(s) equal or exceed the size of its trade with the retail customer. Additionally, for all retail customer transactions in corporate and agency securities, Rule 2232 will require disclosure of a reference (and hyperlink when confirmation is electronic) to TRACE (FINRA’s Trade Reporting and Compliance Engine) containing the publicly available trading data for the relevant securities. Finally, the execution time, expressed to the second, must be disclosed for all corporate and agency security transactions with retail customers.

In order to help member firms understand these new disclosure requirements, FINRA published answers to Frequently Asked Questions (“FAQ”) about the forthcoming changes.¹ The publication covers a number of different subject areas concerning the new rules, including:

  • the circumstances under which the new requirements are triggered;
  • which types of securities and transactions are subject to the new requirements;
  • the format and content of the disclosures required under the new rules; and
  • the methods to determine the relevant pricing information.

FINRA indicated that it plans to update the FAQ periodically. FINRA is also accepting suggestions for additional topics and questions to be included in the FAQ in the future.

The FAQ can be accessed on FINRA’s website here.

We previously described the rule changes in more detail in the following MoFo publications here and here.


[1] The Municipal Securities Rulemaking Board (the “MSRB”) issued a set of  its own substantially similar FAQs, which may be found here.