Feb 26, 2013
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On September 4, 2012, the Securities and Exchange Commission (the “SEC”) approved FINRA’s new front-running rule, Rule 5270 (“Rule 5270” or “the Rule”). The Rule replaces NASD Interpretive Material IM-2110-3, which, generally speaking, applies only to equities and equity options. The Rule is notable in its scope: it is applicable not only to equity securities but to all securities, including fixed-income securities, but also to “related financial instruments”, a broadly defined category that includes derivatives.
FINRA published Regulatory Notice 12-52 announcing SEC approval. In that Regulatory Notice, FINRA set an effective date for the Rule of June 1, 2013.
With the effective date now approximately three months away, many firms are now adding implementation of the Rule to their already overburdened compliance plate. Firms are discovering that the breadth of the new Rule is creating some daunting challenges in respect of implementation.