FINRA Rule 2040 governs the payment of transaction-based compensation by member firms to unregistered persons.
Rule 2040(a) – General.
Rule 2040(a) directs persons to look to SEC rules to determine whether the activities in question require registration as a broker-dealer under SEA Section 15(a). The provision also prohibits payments to appropriately registered associated persons unless such payments comply with applicable federal securities laws, FINRA rules, and SEA rules and regulations.
Rule 2040(c) – Foreign Finders.
Rule 2040(c) replaces NASD Rule 1060(b) and NYSE Interpretation 345(a)(i)/03, and provides that a member firm and persons associated with a member firm may pay transaction related compensation to non-registered foreign finders where the finders’ sole involvement is the initial referral to the member firm of non-U.S. customers, and the member firm complies with all the conditions set forth in the rule.
Based solely on its activities in compliance with Rule 2040(c), a foreign finder would not be considered an associated person of the member firm. However, unless otherwise permitted by the federal securities laws or FINRA rules, a person who receives commissions or other transaction-based compensation in connection with securities transactions generally has to be a registered broker-dealer or an appropriately registered associated person of a broker-dealer who is supervised by a broker-dealer. Member firms that engage foreign finders would be required to have reasonable procedures that appropriately address the limited scope of activities permissible under such arrangements. Regulatory Notice.
On March 19, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau jointly announced the following new residential construction statistics for February 2015: (i) BUILDING PERMITS: Privately owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,092,000. This is 3.0 percent (±1.7%) above the revised January rate of 1,060,000, but is 7.7 percent (±2.0%) above the February 2014 estimate of 1,014,000. Release.
On March 17, the U.S. Commodity Futures Trading Commission (Commission) unanimously approved a final rule removing the December 31, 2018 automatic termination of the phased-in compliance period for the Residual Interest Deadline for futures commission merchants (FCMs). Release.
On March 19, the Comptroller of the Currency, Thomas Curry, discussed the Office of the Comptroller of the Currency’s approach to tailoring regulatory and supervisory expectations to the size and complexity of supervised institutions. His remarks were part of testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs. Release. Written Testimony.
On March 19, the U.S. Treasury Department’s State Small Business Credit Initiative (SSBCI) released a new Quarterly Report detailing how the program continues to help small businesses grow and create jobs. More than $1.1 billion is now at work across the country to spur small business lending and investments. Release. Report.
On March 17, the Consumer Financial Protection Bureau (CFPB) announced it is seeking public comment on how the credit card market is functioning and the impact of credit card protections on consumers and issuers. This public inquiry will focus on issues including credit card terms, the use of consumer disclosures, credit card debt collection practices, and rewards programs, among others. Release.
On March 16, the FHFA issued a Progress Report on the initiatives outlined in the 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac and the 2014 Conservatorship Scorecard. The Progress Report describes activities Fannie Mae and Freddie Mac undertook in 2014 to further FHFA’s conservatorship goals: Maintain, Reduce, and Build. Release. Report.
On March 9, Moody’s released its updated methodology for rating privately-financed public infrastructure (PFI/PPP/P3) projects. Report.
On March 9, Fitch released its updated criteria for rating single- and multi-name credit-linked notes. Report.
On March 6, Moody’s released its updated methodology for rating trading companies (companies whose primary business involves trading commodities and/or goods) globally. Report.
On March 6, DBRS released its updated methodology for rating public-private partnerships (PPPs). Report.
On March 10, the CFTC issued a request for comment in response to an order issued by the U.S. District Court for the District of Columbia in the matter Securities Industry and Financial Markets Association, et al. v. United States Commodity Futures Trading Commission remanding eight swaps-related rulemakings to the CFTC to address what the court held to be inadequacies in the CFTC’s explanation of its consideration of costs and benefits in those rulemakings, in particular in connection with cross-border activities. Comments must be received on or before May 11, 2015. Release. Request for Comment.
On February 27, the SEC announced that the Section 31 fee rate for fiscal year 2015 will remain at the current rate of $18.40 per million. Release.