FINRA proposes a new rule that would require carrying/clearing member firms  to maintain and keep current certain records in a central location.  Comment period runs through 12/9/11. The new record keeping requirements on each carrying or clearing member firm would presumably facilitate:  (i) a more rapid and orderly transfer of customer accounts between or among broker-dealers;  and, (ii) a more orderly liquidation in the event the member firm can no longer continue to operate due to financial or operational problems. FINRA describes the terms and conditions of newly proposed FINRA Rule 4516, Readily Identifiable and Accessible Records, in Regulatory Notice 11-48, Books and Records.  Questions should be directed to:  Marshall Levinson, VP - Member Regulation;  (646) 315-8453;  and Adam Arkel, Asst G.C. - Office of General Counsel;  (202) 728-6961. Background and Discussion. If a carrying or clearing member firm can no longer continue to operate due to financial or operational problems, it is essential that regulators be able to take prompt action to protect investors.  Among other things, a regulator may need to identify a clearing firm that would be able to take all customer accounts of the liquidating member firm in an expedited manner. To accomplish this goal in a timely fashion, certain documents and information must be readily identifiable and accessible.  Accordingly, Paragraph (a) of new FINRA Rule 4516 would require that, unless otherwise permitted by FINRA, in writing, each carrying or clearing member firm must maintain, and keep current, in a manner readily identifiable as such, records containing the information set forth in paragraph (b) of the rule at an area within its principal office that the member firm must specially designate. Such records may be maintained in electronic form.  Specifically, under Paragraph (b) of the rule, the records must contain the following:

• description of all accounts and ranges on the general ledger ("G/L") , including the names of the associated persons assigned primary and supervisory responsibility for each such account pursuant to Rule 4523(b);
• mapping of the G/L accounts and ranges to the trial balance, including a list of all affiliated accounts;
• description of all mission critical systems - as defined in FINRA Rule 4370(g), including recordkeeping systems and the names of contact persons for each;
• list of all bank accounts, authorized signatories, copies of executed agreements with such banks and “no lien” letters where applicable;
• ID of all accounts and ranges on the stock record;
• ID of all foreign and domestic control locations pursuant to SEA Rule 15c3-3 with the names of contact persons at each institution;
• copies of all executed subordination agreements and nonconforming subordination agreements;
• copies of all executed agreements with any clearing agencies, clearing banks and custodians;
• copies of all executed agreements relating to the outsourcing of any significant activities or functions that are critical to the transfer of customer accounts and  the liquidation of the member firm;  and,
• most recent copy of the member firm’s business continuity plan.

Further Specific Requirements. As proposed,...

• these records must be immediately available to and accessible by regulatory personnel - of FINRA, the SEC, the SIPC.
• a member firm subject to the rule would have to enter into an agreement with any clearing agency, clearing bank or custodian with which it does business that requires, upon the commencement of a liquidation of the member firm, that any electronic systems provided to the member firm by the clearing agency, clearing bank or custodian will be made  available, on a read only basis, to representatives or designees of FINRA, the SEC and SIPC.
• all records maintained pursuant to the rule must indicate the date the records were last updated.
• all member firms subject to the rule must designate a contact person responsible for maintaining and keeping current the records required under the rule.
• all member firms would be required to provide the contact information for the designated contact person to FINRA and to keep such information current.

Specific Comments Sought On ... whether any changes should be made to the list of records detailed under Paragraph (b).  Also, FINRA wants to know how much firms believe it would cost to comply with the proposed rule. For further details, go to:  [FINRA RegNote 11-48, October 2011]