Finra to Streamline CMA/NMA Process

Anyone who has ever applied with the Financial Industry Regulatory Authority (FINRA) for a Continued Membership Application (CMA) or a New Membership Application (NMA) for a broker-dealer could understand the lengthiness of the process. It can feel at times, never-ending. During the past few years, FINRA has made two notable changes to the CMA process; namely, charging a minimum of $5,000 for all applications irrespective of the change(s), and creating a new program called Fast Track, in which small or non-impactful changes to a broker-dealer’s membership could essentially bypass the lengthy CMA process.

Oddly enough, nearly every broker-dealer that is about to enter the CMA process has hopes, expectations, and perhaps some dreams of Fast Tracking their application. However, FINRA determines most of these applications will be regularly tracked. Of course, any firm with major changes to business lines or ownership (as per Rule 1017) should not expect to be part of the Fast Track process.

Recently, there seems to be hope that the Member Application Program (MAP) may undergo significant changes to further streamline all processes. This can help in saving applicants both time and expense. At the recently held FINRA’s Board of Governors Meeting in New York, the Board approved the publication of a new Regulatory Notice addressing MAP. Among other things, FINRA will be soliciting comment on proposed amendments to the membership application rules following a retrospective review of the current structure. One of the main goals: restructuring and streamlining the rules to ‘reduce the application review period.‘

Currently, the CMA/NMA process is lengthy and burdensome. Even with the new Gateway platform, this electronic process contains hardcopy forms. In the current process, FINRA can take 180 days from the date it receives the application for membership to complete the procedure and grant the firm licensure. Moreover, the process can feel stuck in a lengthy back-and-forth of requests & re-requests, where an applicant is granted 60 days to respond to the agency’s initial request for additional information, and 30 days for any subsequent requests. If these deadlines are not met, the application will lapse, the fees paid will be forfeited and the applicant will have to start the process all over again.

For us members, the hope is that FINRA’s retrospective look and comment review will remove some of the inefficiencies and help streamline the process even further. While many firms that we speak to appreciate the difficulties of market entry – viewing FINRA’s burdensome procedures as a barrier to entry for competitors – nearly all firms would like to see the CMA process for existing members be streamlined and made more efficient.

The CXG team has an expertise in providing both CMA & NMA application guidance, regulatory and business strategy, and broker-dealer expertise. If you are buying a broker-dealer, interested in starting one from scratch, or making changes to your current firm, reach out and speak with one of our Principals for a free consult.