NYSE Swaps Seat-Holder Era "Approved Person" Label for FINRA-Style Definition
Commentary by Steven Lofchie
NYSE proposed to eliminate its "approved person" category and replace it with a new "associated person" definition modeled on FINRA's. The change would cover member organizations and the persons that control or work for them, without altering NYSE's jurisdiction. NYSE said the existing definition dates from when membership centered on individual seat-holders and is now obsolete.
The new NYSE Rule 2 definition would track FINRA Rule 1011 ("Definitions"). It would cover (i) natural persons registered or applying to register under NYSE rules; (ii) partners, officers, directors, and branch managers; (iii) "Control Persons," meaning persons that control or are controlled by a member organization, plus U.S.-registered broker-dealers under common control; and (iv) member firm employees.
NYSE would not adopt FINRA's coverage of prospective associated persons because the exchange's jurisdiction does not reach applicants. It also would not exclude clerical and ministerial workers.
The exchange would delete Rule 304 ("Approved Persons") and move its non-U.S. person exemption into Rule 2A ("Jurisdiction"). A foreign associated person would give its annual certification to its affiliated member organization rather than to NYSE.
NYSE would replace "approved person" with "associated person" or "Control Person" in about two dozen other rules. It would delete the "approved person" agreement requirement in Rule 311 ("Formation and Approval of Member Organizations") and an obsolete 2008 provision in Rule 304A ("Member Examination Requirements"). Technical edits would fix typographical errors and replace gender-based references with references to the Designated Market Maker.
The exchange filed the proposal as a non-controversial change under Rule 19b-4 ("Filings with respect to proposed rule changes by self-regulatory organizations"). It is not operative for 30 days unless the SEC shortens the period, and the SEC may summarily suspend it within 60 days.
Comments are due October 27, 2026.
Commentary
As a general matter, the exchanges should conform their rules to those of FINRA, other than those rules that relate to trading on the exchange itself. Given the number of exchanges, there is no reason to add to regulatory complexity by having multiple variations of rules governing the same behavior.