FINRA finalizes outside activities rule under modernization push

Traders Union
All News
Regulators
FINRA finalizes outside activities rule

Highlights

FINRA finalized a new Outside Activities rule consolidating prior standards, removing reporting of non-investment-related activities to target higher-risk conduct by firms and individuals.
FINRA's intraday margin framework eliminates the 'pattern day trader' designation and $25,000 minimum equity requirement, leaving $2,000 as the minimum only for intraday leveraged margin trades.
FINRA filed an August proposal with the SEC to enable quicker interventions against suspected exploitation of seniors and vulnerable customers and plans possible rule changes for ACATS-related account transfer risks.

Rule changes target compliance and trading standards

As reported by FINRA, the regulator has finalized a new Outside Activities rule that replaces two older rules with a single framework focused on investment-related activities that present greater risk to firms and the public.

The rule removes reporting requirements for non-investment-related activities, allowing member firms' compliance teams and FINRA's regulatory staff to concentrate more closely on higher-risk conduct. FINRA says the final version reflects refinements made after notice and comment, including feedback from more than 200 member firms, investors and other interested parties.

FINRA also says its new intraday margin framework, introduced over the summer, replaces older requirements with standards intended to give investors more flexibility while reducing risk more broadly. The framework eliminates the long-standing "pattern day trader" designation and the related $25,000 minimum equity requirement.

Under the new approach, $2,000 remains the minimum equity required for intraday leveraged trading on margin, but there is no longer any minimum equity requirement for day trading. FINRA says the change removes incentives for investors to make suboptimal trading decisions simply to avoid the designation or remain below the previous threshold.

Implementation support and next regulatory priorities

To support adoption of the new standards, FINRA says it has issued updated interpretations of its margin rule and held several workshops for member firms. It also says it has made educational resources available for investors on the new requirements, intraday trading and margin accounts, and plans additional guidance for the outside activities transition.

With the outside activities and intraday margin projects now complete, FINRA says it is focusing on further rule changes aimed at protecting seniors, vulnerable adults and other customers from suspected fraud and financial exploitation. The regulator filed a proposal with the SEC in August that would let firms intervene more quickly while maintaining safeguards and respecting customer autonomy.

That proposal would encourage broader use of trusted contacts, allow extensions of temporary holds for seniors and vulnerable adults where appropriate, and add an optional "speed bump" hold for customers of any age when fraud is suspected. FINRA also says it plans to seek comment on possible measures to address growing risks tied to fraudulent customer account transfers, including potential changes to rules governing the use of DTCC's Automated Customer Account Transfer Service, or ACATS.

Our earlier article on MEMX Equities’ overnight trading preparations explained how the exchange planned a series of industry tests and set a go-live timeline for a new 9PM ET to 4AM ET session. It also outlined the operational details for firms, including that participation would not require immediate upgrades to MEMO/MEMOIR specifications or new clearing letters, with an option to opt out of overnight session clearing.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.