Event Recap: Fixed Income Legal and Compliance Roundtable

Yesterday, the BDA was joined by the SEC, FINRA, and MSRB for a Fixed Income Legal and Compliance Roundtable.  55 fixed income professionals from over 30 firms participated in this roundtable at which pressing regulatory and legal issues – impacting institutional and retail fixed income – were discussed.

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The L&C Roundtable was moderated by Dan Deaton of Nixon Peabody and featured:

  • Rebecca Olsen, Director of the SEC Office of Municipal Securities
  • Cindy Friedlander, FINRA Senior Director of Fixed Income Regulation
  • Gail Marshall, MSRB Chief Compliance Officer

The Discussion on FINRA Examination Direction was moderated by Robert Fisher, Nixon Peabody and featured:

  • Jeff Fauci, FINRA Director of Enforcement

The event featured an extensive conversation on currently regulatory matters such as:


The main focus of FINRA’s discussion surrounded Rule 4210, a long-standing advocacy priority for the BDA. FINRA provided a helpful overview of the covered agency proposal that he said should be re-proposed soon. 
In that discussion, in response to a question, FINRA stated that:

  • Limitations on taking a capital charge, which are 25% of TNC and a total of $25 million, will work a little differently with the exceptions;
  • For the latter, only capital chargers taken in lieu of margin will count toward the $25 million.  Thus, if a dealer did not have the responsibility to collect margin because an exception exists (like the $10 million net positions for an account), then any mark-to-market exposure would not count toward the $25 million limits;
  • But this will not work like that for the 25% of TNC.  There, he suggested that the would-be a total net capital position that would be taken into consideration and would be without regard to whether an exception would be available.

Representatives from FINRA also focused on the BDA comments regarding remote issues including supervision questions and communication in the “new normal” Key points included:

  • FINRA worked to clarify how chats on meeting platforms such as Zoom or Webexshould be classified stating that they will try to treat them such as verbal conversations that are not recorded;
  • They also described how they see examinations proceeding in the near future, with a likely emphasis on a hybrid model meaning in most circumstances they will be virtual;
  • They also plan to solicit comments on the temporary relief granted during the past year, including the collection of data from firms, to see if some of these provisions should be made permanent.


  • The MSRB provided a brief update on their work with FINRA in response to the pandemic imposed remote work, and changes to Rule such as G-27 that they continue to monitor;
  • They also noted that they continue to work with FINRA on Pennying, and plan to coordinate on potential next steps-which as this point does not seem imminent; 
  • Staff also discussed the upcoming Retrospective Rule Review.  They are working to clarify existing interpretive guidance and cleaning up existing Rules. This is an effort to ensure everything is more straight forward and this process will also include retiring 15 pieces of previous guidance
  • The MSRB plans to address G-10 during the Board Meeting later this month and plan to see comments pending Board approval to tighten up language in the Rule.  The RFC will likely be released by the end of May.


  • The SEC briefly commented on the pending leadership change, and noted that it will remain mostly business as usual until the change is solidified;
    • While the FIMSAC has been extended, there is no scheduled meeting for 2021. The BDA continues to monitor closely 
  • OMS also noted that while nothing for munis has happened in the ESG space, that we should continue to monitor the corporate disclosure space as a guide to what potentially could be discussed with munis. They also noted the change by issuers in seeking guidance on COVID disclosure instead of avoiding voluntary actions
  • The SEC is also working to streamline its materials including a new link on the homepage for all ESG and climate happenings at the Commission.

FINRA Examinations

Following the Regulator Roundtable portion of the webinar, the BDA hosted Jeff Fauci the Director of FINRA Enforcement, and Robert Fisher from Nixon Peabody for an update on the direction of FINRA enforcement.

Key points included:

  • In general, formal actions trended downward from 2015-2020, but FINRA saw an increase in the past year and that cases are becoming vastly more complicated;
  • FINRA noted that there has been a substantial of 529 plan cases in the past year in which supervisory and suitability concerns were raised;
  • An action regarding G-13 discussed and was noted that there is very little case law on the Rule.  FINRA noted that in circumstances like this, they look at new settlements or enforcement actions of a Rule that hasn’t been broadly applied working to understand if there is a fact pattern and the Rule just has been underutilized, or it is truly a one-off.

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