Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, November 26, 2007

FINRA Solicits Comments on International Prime Brokerage Practices

FINRA recently interviewed representatives from many of the largest prime brokerage firms to determine how the international prime brokerage business is conducted. The interviews covered the various practices used by the prime brokers and how they differed from practices used in domestic prime brokerage.  International prime brokerage is defined as the practice whereby a foreign domiciled customer executes transactions through a member firm(the executing broker) that are settled and carried by another member (the international prime brokerage custodian) on behalf of its affiliated foreign broker-dealer (the foreign prime broker or FPB).

FINRA's review found inconsistencies between member firms with regard to legal documentation/agreements, settlement practices, books and records, and other areas important in defining the roles and obligations of the parties when a prime broker customer (who is generally foreign domiciled) purchases or sells U.S. securities with a foreign prime broker and a U.S. executing broker.  In an attempt to establish consistency among member firms, share best practices, and apply fair and consistent standards to all firms that are active in this business, FINRA is soliciting comments from member firms and other interested parties on its Proposed Guidance regarding the IPB practices described herein.  The Proposed Guidance extends the existing requirements set forth by the SEC in the 1994 No-Action letter to IPB transactions relating to: (1) account arrangement, (2) delivery instructions, (3) affirmation of trades, (4) books and records, (5) documentation, (6) confirmation of trades, (7) notification and (8) net capital.  Regulatory Notice 07-58.

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I am looking for more prime brokerage resources like this. Do you have a list somewhere on your blog of all prime brokerage related posts or news announcements? Thank you in advance for your time and help, I'm still moving up the learning curve on this subject but need to write a couple new articles on it each week.

- Richard

Posted by: Richard Wilson, Prime Brokerage Blogger | Jun 28, 2008 12:46:03 PM

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