FINRA embarked on the effort by asking Wall Street to submit
comments and data about current rules on advertising and
marketing, as well as those for gift-giving, according to the
Among the details FINRA wants to know is whether the rules
have addressed problems they were aimed at resolving and if any
of them include ambiguities.
FINRA's "retrospective rule review," in the planning stages
since late 2012, is an effort to determine whether the current
rules are achieving their investor protection goals while not
imposing unnecessary cost burdens on the industry, said Robert
Colby, FINRA's chief legal officer. "Rules go out of date, or
sometimes they don't work as planned," he said in an interview.
The process could lead to developing new industry rules and
changing existing ones, Colby said. Some rules, however, may
stay the same.
Some investor advocates worry that complaints from the
industry about costs the regulations impose could lead to
weakening investor protection standards.
FINRA launched a related effort in 2012 to scrutinize more
deeply the potential costs and benefits of new industry rules
and changes it is developing. The move came, in part, because
the U.S. Securities and Exchange Commission, which must review
and approve changes to FINRA's rules, told the regulator to
"better support" the economic aspects of its proposals, Colby
said at the time.
The SEC became more concerned about costs and benefits of
industry rules when a federal court threw out an important part
of the Dodd-Frank financial oversight law involving
shareholders' ability to nominate corporate directors, saying
the agency's economic analysis was flawed.
Those concerns appear to be trickling down to rules from
self-regulatory groups that the SEC must review and approve.
Last year, FINRA hired its first chief economist, Jonathan
Sokobin, to help oversee the so-called "cost benefit analysis"
associated with developing new industry rules. FINRA also
published a framework for its process last September.
FINRA plans to conduct the reviews of different rules on an
ongoing basis, the regulator said. Factors it will consider to
select the rules will include feedback from members about rules
that frequently raise questions and federal laws that may
override FINRA's ability to change rules, it said.
(Reporting by Suzanne Barlyn; Editing by Dan Grebler)