BDA SUBMITS COMMENT LETTER: FINRA Requests Comment on the Application of Certain Rules to Government Securities and to Other Debt Securities More Broadly (Regulatory Notice 18-05)

On March 9, 2018, the BDA submitted a letter to FINRA in response to Regulatory Notice (18-05) requesting comment on the Application of Certain Rules to Government Securities and to Other Debt Securities More Broadly. You can view our final comment letter here.

• The BDA believes that the application of the many rules identified in the Notice to government securities and U.S. Treasury securities does not make sense because dealers do not comprise a sufficient amount of the markets in these securities to justify the specificity of rules to them.
  
• FINRA rules already adequately protect investors in U.S. Treasury securities and other government securities (other than municipal securities).
• The BDA believes that the key rules that should apply to these transactions already apply, which include fair dealing, anti-manipulative and anti-fraud rules, fair pricing, and suitability.  These rules adequately provide FINRA and the SEC with the regulatory authority to ensure that dealers fairly and appropriately trade in these securities.

Background

• FINRA Rule 2242 (Debt Research Analysts and Debt Research Reports);
• FINRA Rule 5240 (Anti- Intimidation/Coordination); 5250 (Payments for Market Making);
• FINRA Rule 5270 (Front Running of Block Transactions);
• FINRA Rule 5280 (Trading Ahead of Research Reports);   
• FINRA Rule5320 (Prohibition Against Trading Ahead of Customer Orders);and 
• NASD Rules 1032(f) (Securities Trader), 1032(i) (Limited Representative – Investment Banking) and 1050 (Registration of Research Analysts).