Before FINRA Rule 1230(b)(6) and its accompanying supplementary material in FINRA Rule 1230.06 take effect on 10/17/11, FINRA proposes to clarify how the Operations Professional requirements will apply to employees of a foreign broker-dealer whose activities relate to certain transactions in foreign securities on behalf of a member’s customers, and are limited to facilitating the clearance and settlement of such transactions.

Prompting the Change.   FINRA was responding to questions from member firms, regarding arrangements between a U.S. broker-dealer and the foreign broker-dealer involving transactions in foreign securities to be executed by the foreign broker-dealer on the foreign market - where the foreign B/D accepts the member’s customer’s instructions to settle the transactions on a DVP/RVP basis through the foreign clearing system and settle directly with the customer’s custodian.

To provide clarification with respect to the application of FINRA Rule 1230(b)(6) to such arrangements, FINRA would amend supplementary material .06 to FINRA Rule 1230(b)(6) to provide that an employee of a foreign B/D whose activities, relating to a transaction in foreign securities on behalf of a customer of a member, are limited to facilitating the clearance and settlement of the transaction shall not be required to register as an Operations Professional pursuant to FINRA Rule 1230(b)(6)(A) where:

• member sending the order for a transaction in foreign securities on behalf of the customer to the foreign B/D is not a direct participant of the applicable foreign clearing system; and

• in executing such order in the foreign market, the foreign B/D accepts the member’s customer’s instructions to settle the transaction in foreign securities on a DVP/RVP basis through the foreign clearing system and settle directly with a custodian for the customer. 

For further details, go to:   [FINRA Rule Filing 11-40, 8/12/11]