FSI Comments on FINRA Rule 2510 Discretionary Account Change

FINRA is proposing to transfer NASD Rule 2510 into the Consolidated FINRA Rulebook as FINRA Rule 3260 and on November 12, 2009 published Regulatory Notice 09-63 seeking comments on its proposal to amend its rules governing discretionary accounts and transactions.

The Financial Services Institute responded on December 28 in a letter from FSI President Dale Brown. The letter noted that the organization generally supports the proposal but does have some concerns about the removal of a provision from NASD Rule 2510 that allows customers to provide written limited discretionary authority over the price and time of a securities order.

As noted in Brown's letter, NASD Rule 2510(d)(1) allows a customer to provide verbal authorization to a financial advisor to exercise limited discretionary authority over the price and time of a transaction within a single trading session. This verbal discretionary authority ends at the close of the trading session on the day that it was granted. If the customer desires the authority over the price and time of a securities transaction to last beyond the close of the trading session, the customer must draft, sign, and date a written statement with those instructions.