Banks and Brokers and Bricks and Clicks: An Evaluation of FINRA’s Proposal to Modify the 'Bank Broker-Dealer Rule'

Abstract:     
This article evaluates the Financial Industry Regulatory Authority’s (FINRA) proposal to adopt a modified version of NASD Rule 2350, known as the “bank broker-dealer rule,” which, if approved by the SEC, would be designated as FINRA Rule 3160 within FINRA’s Consolidated Rulebook (the proposed rule change). The proposed rule change ostensibly seeks to prevent FINRA member firms, who offer broker-dealer products and services through contractual “networking arrangements” with financial institutions – both on and off the premises of those institutions – from undertaking certain business practices that might tend to confuse or harm financial institution customers. The proposed rule change also aims to prevent customer confusion by, inter alia, ensuring that certain disclosures are made to affected customers so they can understand and appreciate the distinction(s) between the financial institution’s products and services and those sold by the broker-dealer affiliate.

Number of Pages in PDF File: 20

Keywords: FINRA, NASD, SEC, federal reserve, comptroller of currency, bank, broker-dealer, stockbroker, networking arrangements, financial institution, 2350, 3160

Accepted Paper Series