Notice2026-18206
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change To Amend FINRA Rule 4515.01 (Allocations of Orders Made by Investment Advisers)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 8, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 172 (Tuesday, September 8, 2026)</title>
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[Federal Register Volume 91, Number 172 (Tuesday, September 8, 2026)]
[Notices]
[Pages 57174-57175]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-18206]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106259; File No. SR-FINRA-2026-016]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving a Proposed Rule Change To Amend FINRA
Rule 4515.01 (Allocations of Orders Made by Investment Advisers)
September 2, 2026.
I. Introduction
On July 9, 2026, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend FINRA Rule 4515.01
(Allocations of Orders Made by Investment Advisers) to expand the
current exception from the rule's principal approval requirements to
apply to all allocations of bulk investment adviser orders,
irrespective of when allocation instructions are received. The proposed
rule change was published for comment in the Federal Register on July
21, 2026.\3\ The Commission received no comments in response to the
Notice. This order approves the proposed rule change.
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\1\ See 15 U.S.C. 78s(b)(1).
\2\ See 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 105925, 91 FR 45862
(July 21, 2026) (``Notice'').
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II. Summary of the Proposed Rule Change
FINRA Rule 4515 (Approval and Documentation of Changes in Account
Name or Designation) requires members to place the account name(s) or
designation(s) on the customer order form or other similar record
before an order is executed. No change in such account name(s)
(including related accounts) or designation(s) (including error
accounts) shall be made unless the change has been authorized by a
qualified and registered principal designated by the member. The
essential facts relied upon by the principal approving the change must
be documented in writing and preserved in accordance with Exchange Act
Rule 17a-4(b). With respect to any change that takes place prior to the
execution of the trade, the required principal approval and
documentation must occur prior to execution.
FINRA Rule 4515.01 provides a limited exception to the requirements
of Rule 4515 for orders from investment advisers (``IAs'') for which
there is more than one customer (herein referred to as ``IA bulk
orders''). Specifically, members are not required to obtain principal
approval for any account name or designation changes relating to IA
bulk orders provided that the member receives allocation instructions
from the IA no later than the end of the trade date. This exception
applies to outside IAs and associated persons of a member who provide
investment advisory services on behalf of a member acting as an IA.
Further, FINRA Rule 4515.01 prohibits members from knowingly
facilitating the allocation of orders from IAs in a manner other than
in compliance with both (1) the IA's intent at the time of trade
execution to allocate shares on a percentage basis to the participating
accounts; and (2) the IA's fiduciary duty with respect to allocations
for such participating accounts, including but not limited to
allocations based on the performance of a transaction between the time
of execution and the time of allocation.
As described in more detail in the Notice,\4\ FINRA is proposing to
amend Rule 4515.01 to expand the current exception from the rule's
principal approval requirements to apply to all IA bulk orders,
notwithstanding when the allocation instructions are received.
Specifically, FINRA is proposing to amend Rule 4515.01 to remove the
phrase ``provided that members receive specific account designations or
customer names from such investment advisers by no later than the end
of the day on the trade date'' and replace it with the phrase ``without
the principal approval required by this Rule.'' \5\
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\4\ See Notice, supra note 3.
\5\ For the avoidance of doubt, FINRA notes that the proposed
rule change would apply to delivery versus payment (``DVP'') and
receive versus payment (``RVP'') arrangements and to prime brokers
that receive allocation instructions directly from the IA.
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III. Discussion and Commission Findings
After carefully reviewing the proposed rule change, the Commission
finds that the proposed rule change is consistent with the requirements
of the Exchange Act and the rules and regulations thereunder applicable
to a national securities association.\6\ In particular, the Commission
finds that the proposed rule change is consistent with Section
15A(b)(6) of the Exchange Act,\7\ which requires, among other things,
that the association's rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the
[[Page 57175]]
public interest. The Commission concludes that the proposed rule change
is consistent with section 15A(b)(6) of the Exchange Act,\8\ because it
eliminates operational burdens that can delay timely allocation
processing and increase settlement risks, while preserving investor
protection safeguards.
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\6\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation, including FINRA's representation that it has
undertaken an ``economic impact assessment'' to analyze the
regulatory need for the proposed rule change, its potential economic
impacts, including anticipated costs, benefits, and distributional
and competitive effects, relative to the current baseline, and the
alternatives FINRA considered in assessing how best to meet FINRA's
regulatory objectives. See 15 U.S.C. 78c(f); Notice.
\7\ See 15 U.S.C. 78o-3(b)(6).
\8\ See id.
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There have been significant changes in the regulatory landscape
since the adoption of Rule 4515, which mitigate concerns about timely
completion of transactions that existed when FINRA Rule 4515 was
adopted. In February 2023, the Commission amended Exchange Act Rule
15c6-1 to shorten the standard settlement cycle for most broker-dealer
transactions from T+2 to T+1.\9\ T+1 settlement, which became effective
on May 28, 2024, is expected to reduce credit, market and liquidity
risks in securities transactions.\10\
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\9\ See Securities Exchange Act Release No. 80295 (March 22,
2017), 82 FR 15564, 15575 (March 29, 2017) (``SEC T+2 Adopting
Release'') (stating, ``significant advancements in technology and
the changes in market infrastructures and operations that have
occurred since 1993, which are widely assimilated into market
practices, provide a basis to accommodate shortening the standard
settlement cycle to T+2.''); Securities Exchange Act Release No.
96930 (February 15, 2023), 88 FR 13872, 13873 (March 6, 2023) (``SEC
T+1 Adopting Release'') (citing Securities Exchange Act Release No.
94196 (February 9, 2022), 87 FR 10436 (February 24, 2022) (``SEC T+1
Proposing Release'').
\10\ See SEC T+1 Adopting Release at 13926, 13936.
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In addition, many broker-dealers use straight-through processing
(``STP''), which refers generally to processes that allow for the
automation of the entire trade lifecycle from trade execution through
settlement without manual intervention.\11\ As the Commission observed
in proposing T+1 settlement, ``[i]mproved automation in the settlement
process has enabled better straight-through processing and contributed
to increases in affirmation rates on trade date and increases in
settlement rates, with an attendant decrease in exceptions and fails.''
\12\
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\11\ See SEC T+1 Adopting Release at 13873 n.9.
\12\ See SEC T+1 Proposing Release at 10471.
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In contrast, FINRA Rule 4515.01's limitations on allocations of IA
bulk orders could result in delays in allocations if, for example,
allocation instructions are received late in the day from the IA
because the IA is waiting for customer approval or setting up a new
customer account. These processing delays, in turn, create settlement
risk and the risk that customer accounts do not accurately reflect cash
and securities positions. As the Commission highlighted in the SEC T+2
Adopting Release, delays in settlement may cause routine rebalancing or
asset allocation changes in an investor's portfolio to become ``lengthy
and complicated multi-step processes.'' \13\
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\13\ See SEC T+2 Adopting Release at 15572.
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The Commission notes that a number of safeguards to protect
investors and the public interest remain in place even with the
approval of the proposed rule change, including:
<bullet> Exchange Act Rule 15c6-2(a), which requires that broker-
dealers ``[e]nter into a written agreement with the relevant parties to
ensure completion of the allocation, confirmation, affirmation, or any
combination thereof, for the transaction as soon as technologically
practicable and no later than the end of the day on trade date in such
form as necessary to achieve settlement of the transaction'' or
``[e]stablish, maintain, and enforce written policies and procedures
reasonably designed to ensure completion of the allocation,
confirmation, affirmation, or any combination thereof, for the
transaction as soon as technologically practicable and no later than
the end of the day on trade date in such form as necessary to achieve
settlement of the transaction.'' \14\ Among other things, such policies
and procedures must measure and monitor allocation rates and
investigate any discrepancies in trade information.\15\
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\14\ See 17 CFR 240.15c6-2(a)(1)-(2).
\15\ See 17 CFR 240.15c6-2(b)(5).
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<bullet> Exchange Act Rule 17Ad-27, which requires clearing
agencies providing central matching services to develop written
policies and procedures that facilitate STP of securities
transactions.\16\ In adopting this rule, the Commission noted that
``eliminating the use of tools that encourage or require manual
processing, alongside the continued development and implementation of
more efficient automated systems in the institutional trade processing
environment, is essential to reducing risk and costs to ensure the
prompt and accurate clearance and settlement of securities
transactions, particularly in a T+1 environment.'' \17\
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\16\ See 17 CFR 240.17Ad-27.
\17\ See SEC T+1 Adopting Release at 13899.
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<bullet> Section 206 of the Investment Advisers Act of 1940
(``Advisers Act''), which makes it unlawful for an IA to, among other
things, engage in any transaction, practice, or course of business
which operates as a fraud or deceit upon any client or prospective
client, or to engage in any act, practice, or course of business which
is fraudulent, deceptive, or manipulative.\18\ IAs are also subject to
examinations by Commission staff, which can include reviews of
allocation practices.\19\
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\18\ See 15 U.S.C. 80b-6. See Investment Advisers Act Release
No. 5248 (June 5, 2019), 84 FR 33669, 33669 (July 12, 2019)
(Commission Interpretation Regarding Standard of Conduct for
Investment Advisers).
\19\ See SEC Division of Examinations, Fiscal Year 2026:
Examination Priorities 9 (November 17, 2025), <a href="https://www.sec.gov/files/2026-exam-priorities.pdf">https://www.sec.gov/files/2026-exam-priorities.pdf</a>. The report notes allocation
practices as a priority examination item for 2026.
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<bullet> FINRA Rule 4515.01, which continues to prohibit FINRA
members from ``knowingly [facilitating] the allocation of orders from
investment advisers in a manner other than in compliance with both (i)
the investment adviser's intent at the time of trade execution to
allocate shares on a percentage basis to the participating accounts and
(ii) the investment adviser's fiduciary duty with respect to
allocations for such participating accounts, including but not limited
to allocations based on the performance of a transaction between the
time of execution and the time of allocation.''
<bullet> FINRA Rule 2010, which requires FINRA members to ``observe
high standards of commercial honor and just and equitable principles of
trade.''
<bullet> FINRA Rule 3110, which requires members to maintain
policies and procedures reasonably designed to achieve compliance with
applicable securities laws and regulations.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\20\ that the proposed rule change (SR-FINRA-2026-016) be,
and hereby is, approved.
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\20\ See 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ See 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-18206 Filed 9-4-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on September 8, 2026.
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