On June 16, 2011, the Securities and Exchange Commission (“the “Commission”) approved the Operations Professional Rule which will require certain covered persons performing covered functions as set forth in the rule to become licensed as Operations Professionals. See Bingham Alerts March 21, 2011; June 3, 2010; and December 14, 2009. On June 15, 2011, FINRA submitted to the Commission a Response to Comments and Partial Amendment No. 1 to the proposed rule change. The Commission approved the new rule, as modified by FINRA’s June 15, 2011, amendments, on an accelerated basis. The effective date for the new rule, to be set by FINRA, has not been announced.
Rule Approval and Amendments
In response to comments received by the Commission, FINRA submitted four amendments to the proposed rule:
1. Changed the title of proposed FINRA Rule 1230(b)(6)(A) from “Requirement” to “Covered Persons.”2. Clarified two categories of covered persons as follows:
3. Added a provision permitting FINRA staff to accept as an alternative to the Operations Professional qualification examination requirement any domestic or foreign qualification if it determines that acceptance of such alternative qualification is consistent with the purposes of the rule, the protection of investors and the public interest.
4. Amended the rule to extend the 120-day grace period to pass a qualification examination to non-Day-One Professionals associated with a clearing member.
According to FINRA, the change in the first category of covered person clarifies that only senior management with a direct relationship to the covered functions are subject to registration.
The change in the second category of covered persons, according to FINRA, clarifies that the next tier of management or supervisors are those designated by senior management (so long as the designations are done in accordance with reasonable business practices), giving the firm some degree of control over defining this group of covered persons.
Although FINRA and the SEC received a number of significant comments on the proposed rule, the SEC has adopted FINRA’s proposal with only minor changes. Firms that have not yet started to address these issues should begin immediately to identify the applicable covered functions and the covered persons responsible for them. Firms will need to be prepared to complete the necessary registrations within 60 days after the rule becomes effective.
For additional information concerning this alert, please contact the following lawyers:
This article was originally published by Bingham McCutchen LLP.