The SEC Approves Amendments to FINRA Rule 2231

Publish Date

Type

Compliance Alert

Topics

  • Compliance

The Financial Industry Regulatory Authority (FINRA) filed a proposed rule change with the Securities and Exchange Commission (SEC) on September 29, 2021, to amend FINRA Rule 2231 with respect to Customer Account Statements. The SEC recently approved these proposed changes, which will have the following effects.

Rule 2231 will be amended to:

  • Add new supplementary materials pertaining to:
    • Compliance with Rule 4311 (Carrying Agreements) reminding firms of their obligations under the rule
    • The transmission of customer account statements to other persons or entities, which would include a requirement that customers provide written instructions regarding delivery to a third-party
    • The use of electronic media to satisfy delivery obligations
    • Compliance with Rule 3150 (Holding of Customer Mail) if the firm holds the customer statements
    • Providing information for assets the firm does not carry on behalf of the customer as long as they are separate and distinguishable to the other assets that are carried
  • Incorporate without substantive change specified provisions derived from Temporary Dual FINRA-NYSE Rule Interpretation 409T (Statements of Accounts to Customers) pertaining to information disclosed on customer account statements, externally held assets, use of logos and trademarks, and use of summary statements

The amendment will make other non-substantive and technical changes to Rule 2231 and other FINRA rules FINRA Rule 2231 currently has no supplementary material.

FINRA Rule 2231 and NYSE Rule 409T requires firms to deliver customer account statements to customers at least once each calendar quarter that describes any securities positions, provides current money balances, and details any account activity that has occurred since the prior account statements were sent. However, under Rule 2231, quarterly account statements need not be sent to customers if their accounts are carried solely for executing transactions on a Delivery Versus Payment/Receive Versus Payment basis.

On June 1, 2022, the SEC published an order approving the proposed rule change. FINRA will announce the proposed change’s effective date in a regulatory notice no later than 365 days from the date of the SEC’s approval. FINRA also stated that the proposed rule change would apply prospectively.

How we help

For more information about changes to FINRA Rule 2231, or to find out how we can help your firm comply with FINRA and SEC regulations, please contact your ACA consultant or contact us here.