Securities Law Prof Blog

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

Tuesday, November 2, 2010

FINRA Issues Guidance on Funding and Liquidity Risk Management Practices

FINRA recently released Regulatory Notice 10-57, dealing with Funding and Liquidity Risk Management Practices.  According to the executive summary:

In adverse circumstances, whether the result of firm-specific events or systemic credit events, the cost of funding a broker-dealer’s operations could become prohibitively expensive; in extreme cases funding could become unavailable. FINRA expects broker-dealers to develop and maintain robust funding and liquidity risk management practices to prepare for adverse circumstances. Further, FINRA expects broker-dealers affiliated with holding companies to undertake these efforts at the broker-dealer level, in addition to their planning at the holding-company level. We are publishing this Notice to provide guidance in this effort.

Many of the practices outlined in this Notice were identified through FINRA examinations and a survey of 15 mid-sized and large broker-dealers that hold inventory positions and carry customer accounts. This Notice does not provide a comprehensive description of all appropriate funding and liquidity risk management practices. Each broker-dealer should determine which practices are best suited to its particular business, whether or not they are mentioned in this Notice. While much of the content in this Notice is directed to broker-dealers that carry inventory positions, other brokerdealers may also find it to be a valuable resource.

Other Regulatory Action | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference FINRA Issues Guidance on Funding and Liquidity Risk Management Practices:


Post a comment