SEC Approves Operations Professional Rule — Certain Operations Professionals Will Be Required to Register With FINRA

June 30, 2011


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:


  • “Senior management with direct responsibility over the covered functions”
  • “Any person designated by the senior management. . .as a supervisor, manager or other person responsible for approving or authorizing work, including work of other persons, in direct furtherance of each of the covered functions . . . provided that there is sufficient designation of such persons by senior management to address each of the applicable covered functions”

     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:

Michael R. Weissmann, Partner, Broker-Dealer, 617.951.8705

Amy Kroll, Partner, Broker-Dealer Group, 202.373.6118

David Boch, Partner, Broker-Dealer Group, 617.951.8485

Roger P. Joseph, Practice Group Leader, Investment Management; Co-chair, Financial Services Area, 617.951.8247

Edwin E. Smith, Partner, Financial Restructuring; Co-chair, Financial Services Area, 617.951.8615

Tim Burke, Practice Group Leader, Broker-Dealer Group; Co-chair, Financial Services Area, 617.951.8620

This article was originally published by Bingham McCutchen LLP.