FINRA Proposes Easing Statement, Reconciliation Rules for Alternative Investments

FINRA proposed to ease position statement and reconciliation requirements for firms that custody uncertificated alternative investments.

FINRA would except uncertificated investments in unregistered investment funds from the requirement under FINRA Rule 4522 ("Periodic Security Counts, Verifications and Comparisons") to receive position statements at least monthly. The exception would apply where a member's or its customers' ownership of the investment is directly recorded on the issuer's ownership registry maintained by the issuer or its agent or, if no such registry exists, is directly recognized by the issuer.

Firms relying on the exception would still have to reconcile the securities and money balances but could do so quarterly rather than monthly. They would also remain subject to Rule 4522(b), which calls for more frequent counts and verifications where prudent business practice would so require, and to the quarterly counts and verifications under SEA Rule 17a-13 ("Quarterly security counts to be made by certain exchange members, brokers, and dealers").

FINRA said the change would align its rules with a January 2026 SEC staff no-action letter. In that letter, the staff said it would not recommend enforcement under SEA Rule 17a-13 against a broker-dealer that does not record unresolved differences within seven business days after each quarterly count, so long as the firm satisfies the conditions the letter sets out for the uncertificated alternative investments known as "capital balance funds."

The comment deadline is pending publication in the Federal Register.