Industry Bashes FINRA Foreign Finder Pitch
Financial Industry Regulatory Authority plan to eliminate rules on paying foreign finders raises complaints about compliance.
A Financial Industry Regulatory Authority plan to eliminate rules on paying foreign finders will cause compliance headaches at firms that use such services to attract overseas business, according to attorneys and other industry professionals. The proposal also could force many firms that provide execution, settlement or other brokerage services to non-U.S. financial firms to restructure their business, they argued.
Under its proposal to consolidate rules on payments to unregistered persons, FINRA would do away with current NASD and New York Stock Exchange rules that allow firms, under certain circumstances, to compensate foreign finders so long as the finders’ activities are sufficiently limited as to avoid U.S. registration requirements and the compensation paid complies with applicable foreign laws.
In place of these rules, FINRA has proposed that firms should only make such payments if they comply with, among other things, Securities and Exchange Commission rules, regulations and guidance.
But in a series of comment letters, industry professionals countered that SEC positions on foreign finders are at present too thin and unclear. "[C]urrent SEC rules and staff interpretations, as well as case law, in this area are sparse and fact-specific and do not give adequate guidance,” wrote Ethan Johnson, partner with Morgan Lewis & Bockius. He and others urged FINRA to retain the existing rules, or otherwise work with the SEC to draft comprehensive guidance.
A FINRA spokesman declined to comment.