FINRA Proposes Pay-to-Play Rules for Capital Acquisition Brokers - State and Federal Communications

August 28, 2017  •  

FINRA Proposes Pay-to-Play Rules for Capital Acquisition Brokers

The Financial Industry Regulatory Authority (FINRA) has filed a proposed rule change with the Securities and Exchange Commission (SEC) to expand its brand-new pay-to-play rules to cover capital acquisition brokers (CAB).

FINRA Rule 2030, which took effect August 20, restricts contributions made to an official of a government entity being provided investment advisory services or being engaged to provide investment advisory services by certain parties. The rule applies to broker-dealers, placement agents, and covered associates acting on behalf of certain regulated investment advisors or soliciting a government entity to invest in certain pooled investment vehicles. FINRA Rule 4580, which took effect the same day, mandates certain record-keeping requirements concerning related contributions.

A firm meeting the statutory definition of a CAB and electing to be governed by the FINRA rule set would be subject to FINRA’s new pay-to-play rules under the proposal. Specifically, FINRA proposes the addition of rules providing all CABs be subject to FINRA Rules 2030 and 4580. If approved, the effective date will be no later than 30 days after FINRA’s announcement of the SEC’s approval.

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