FINRA noted that the adopted amendments will become effective on Apr. 28, 2025.
Reported that amendments will apply to new borrowing or lending arrangements and new broker-customer relationships that are entered into on or after Apr. 28, 2025.
Also, modifications made on/after Apr. 28, to arrangements entered before that date.
Will not apply retroactively to arrangements entered into prior to the effective date.
On Jan. 2, FINRA proposed prohibition against borrowing and lending.
FINRA proposed rule change to amend FINRA Rule 3240Borrowing from or lending to customers to strengthen prohibition against borrowing and lending arrangements.
Proposed Amendments
Proposal to strengthen the general prohibition against borrowing and lending arrangements, narrow some of the existing exceptions to that general prohibition.
Also modernize the immediate family exception and enhance the requirements for giving notice to members and obtaining members’ approval of such arrangements.
Change rule title Borrowing from or lending to customers to Prohibition on borrowing from or lending to customers to highlight prohibitions for registered persons.
Clarifies that the rule’s requirements concerning borrowing and lending arrangements apply to arrangements that pre-exist a new broker-customer relationship.
Proposal to define customer to include any customer that has, or in the previous six months had, a securities account assigned to the registered person at any member.
Proposal to extend rule’s requirements to borrowing or lending arrangements involving similar conflicts as ones in arrangements between registered persons, customers.
Proposal for borrowing, lending arrangements to include owner-financing arrangement
Consultation
Comments on proposed rule change due 21 days after publication in federal register.
Jan. 16, 2024 SEC Filing
On Jan. 16, 2024, SEC issued notice of FINRA proposal, for 21-day comment period.
Jan. 22, 2024 SEC Fed Reg Filing
On Jan. 22, 2024, SEC published notice of filing in federal register, comment Feb. 12.
Feb. 2024 FINRA Extension
On Feb. 21, 2024, FINRA extended time for SEC action on proposal until Apr. 19, 2024.
Document dated Feb. 21, 2024, was received on Mar. 13, 2024, due to a fixed feed.
Apr. 18, 2024 SEC Proceedings
On Apr. 18, 2024, SEC instituted proceedings to approve or disapprove; comments on proposal due 21 days after publication in federal register, rebuttal comments 35 days.
Apr. 24, 2024 SEC Fed Reg Proceedings
On Apr. 24, 2024, SEC published order instituting proceedings in the federal register.
Apr. 26, 2024 FINRA Response to Comments
On Apr. 26, 2024, FINRA issued letter responding to comments received on proposal.
Four comment letters were received; two expressed general support for the proposal.
All commenters supported proposed modernization of the immediate family definition.
Addressed NASAA position an outright prohibition would be consistent with Reg BI.
Described the reasoning behind the five tailored exceptions, rather than outright ban.
Jul. 2024 FINRA Second Extension
On Jul. 15, 2024, FINRA extended time for SEC action on proposal until Sep. 18, 2024.
Sep. 17, 2024 SEC Approval
On Sep. 17, 2024, SEC issued approval of FINRA proposed rule re borrowing, lending.
Sep. 23, 2024 SEC Fed Reg Approval
On Sep. 23, 2024, SEC published approval of FINRA proposal in the federal register.
FINRA noted that the adopted amendments will become effective on Apr. 28, 2025.
Reported that amendments will apply to new borrowing or lending arrangements and new broker-customer relationships that are entered into on or after Apr. 28, 2025.
Also, modifications made on/after Apr. 28, to arrangements entered before that date.
Will not apply retroactively to arrangements entered into prior to the effective date.
