Broker-dealers generally agree licensing middle- and back-office operations/infrastructure executives and certain other personnel, but they're looking for FINRA to clarify and limit the scope of the requirement. That's what Securities Industry News reports, based on 49 comments submitted on FINRA's rule proposal filed in May calling for managers of a wide range of post-trade functions to be subject to licensing for the first time. 

    Timing Issue.   FINRA wants existing Ops Execs to pass a licensing exam within 6 to 9 months of the adoption of the licensing requirement.  New employees would have to register as operations professionals and pass an examination before doing their jobs, in the FINRA proposal.  Brokerages would prefer 12 to 18 months for current Ops personnel, and 3 to 4 months for new employees.

    Foreign Affiliates.  Writing on behalf of 11 Canadian brokerage firms, the law firm of Arnold & Porter in New York wrote that FINRA’s proposed licensing requirement should not apply to employees of the foreign affiliates of U.S. broker-dealers. 

    Which Staff Members Need to Register.  SIFMA's Jim McHale said “We do not believe that FINRA necessarily intends to sweep in personnel in the [IT] departments of member firms, per se, but rather a limited number of individuals responsible for (1) ensuring that systems related to sales and trading and to covered functions meet business and regulatory requirements; and (2) information security – firewalls, data access and system entitlements in connection with the covered functions.”  Personnel who “merely perform initial drafts of business requirement documents and who perform routine quality assurance or quality control testing” should not be included.

Cathy Cucharale, VP of operations notes that M. Griffith Investment Services uses several operational staff for many of the functions.  All work is approved and/or reviewed by a registered principal.  If we wanted the operational staff member to have approval functions wouldn’t we just have them take the exams currently available?” she asked.  Extending the registration requirement would burden firms with the costs involved with compliance.

Scottrade cited concerns over FINRA's far-reaching definition of "operations executive" and highlighted the potential problems involved with licensing “associated parties” from firms which are used as outsourcing agents.  “If Scottrade were to outsource foreign securities custody to a member firm and filed the requisite control location letter with the SEC, what sense does it make to require a FINRA registration at the member firm that has supervisory responsibility for its associated persons," questioned general counsel Andrew Small.

For further details, refer to:   [SIN, "Licenses for Operations Execs: Broker-Dealers Seek Narrow Scope
Securities Technology Monitor," 8/17]