The FINRA Board of Governors met last week and authorized the staff to file rule changes pertaining to several topics, including:  Credit Default Swaps, Spinning, and TRACE.  Continue reading to learn what's in FINRA's pipeline of rule changes. 1.  Agency Pass-Through Mortgage-Backed Securities and Securities Backed by Small Business Administration Transactions. FINRA will propose amendments to the FINRA Rule 6700 Series, TRACE rules, to disseminate publicly transactions in Agency Pass-Through Mortgage-Backed Securities (Agency Pass-Through MBS's) traded in specified pools, as well as securities backed by Small Business Administration loans (SBA-backed ABS) traded in specified pools or TBA (To Be Announced).  The proposals also will reduce the reporting period for transactions in such securities in 2 phases:  (i) first to 2 hours from the time of execution;  then, (ii) 6 months later, to 1 hour from the time of execution. In connection with the dissemination of such transactions, as part of dissemination protocols, FINRA would set a $10 million dissemination cap, with the result that the disseminated size (volume) of a transaction in excess of $10 million would be displayed as "$10MM+."  SBA TBA transactions would be subject to the dissemination and reporting provisions and the dissemination cap that FINRA previously proposed regarding TBA transactions in FINRA Rule Filing 11-69, which is still pending with the SEC. 2.  Deferred Compensation Arrangements and Filing Exemption for ETF Offerings. FINRA will issue a Regulatory Notice to solicit comments on amendments to FINRA Rule 5110, Corporate Financing Rule, which governs underwriting terms and arrangements in public offerings of securities. Investment banks typically enter into engagement letters with issuers to provide underwriting and financial advisory services that allow issuers to defer payment until after completion of a capital-raising transaction.  The amendments address the termination provisions in engagement letters by specifying the length and terms of such provisions, including the issuer's right to terminate its obligations for cause. The amendments also would eliminate a requirement that ETFs, not registered as investment companies, must file offering documents and other information with FINRA under the Corporate Financing Rule.  Most ETFs are investment companies and are not subject to the rule's filing requirements.  The rule's regulation of underwriting terms and arrangements was not designed for the ETF distribution methodology by which a "basket" of underlying assets is deposited in an ETF's portfolio and "creation units" of shares are provided to broker-dealers in return. 3.  Margin Requirements for Credit Default Swaps. FINRA will propose amendments to FINRA Rule 4240 governing an interim pilot program with respect to margin requirements for credit default swaps (CDS).  The amendments would revise the rule to limit its application to CDS's that are security-based swaps and make certain other conforming revisions in connection with such limitation. The amendments also would extend the rule's implementation to 7/17/12, update the rule's margin requirements in light of the experience of FINRA staff in the rule's administration and make certain clarifying edits. 4.  Spinning. FINRA will propose a rule change that exempts certain funds of funds from the requirement to assess the status of indirect beneficial owners for purposes of purchasing new issues under the spinning provisions of FINRA Rule 5131(b). The proposed exemption would apply to funds of funds that meet the SEC's definition of "private fund" and that have unaffiliated investee funds that meet certain size ($50mn in assets) and ownership (ownership interests of <25%) criteria.  These conditions preserve the important protections of the rule while aiding capital formation by offering meaningful relief to funds of funds. For further details, go to:   [FINRA Letter, 2/17/12].