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[Release No. 34-106269; File No. SR-FINRA-2026-019]

Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of

Filing of a Proposed Rule Change to Amend FINRA Rule 4522 (Periodic Security Counts,

Verifications and Comparisons) to Simplify Position Statement and Reconciliation

Requirements for Certain Alternative Investments

September 3, 2026.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule

19b-4 thereunder,2 notice is hereby given that on August 25, 2026, the Financial Industry

Regulatory Authority, Inc. (“FINRA”) filed with the Securities and Exchange Commission

(“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below,

which Items have been` prepared by FINRA. The Commission is publishing this notice to solicit

comments on the proposed rule change from interested persons.

Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed

Rule Change

FINRA is proposing to amend FINRA Rule 4522 (Periodic Security Counts,

Verifications and Comparisons) to simply position statement and reconciliation requirements for

certain alternative investments. Specifically, the proposed rule change would amend Rule 4522

to except uncertificated investments in unregistered investment funds from the requirements of

paragraph (b)(1) of the rule, as further set forth in the proposed rule change.

15 U.S.C. 78s(b)(1).

17 CFR 240.19b-4.

The text of the proposed rule change is available on FINRA’s website at

http://www.finra.org and at the principal office of FINRA.

II.

Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the

Proposed Rule Change

In its filing with the Commission, FINRA included statements concerning the purpose of

and basis for the proposed rule change and discussed any comments it received on the proposed

rule change. The text of these statements may be examined at the places specified in Item IV

below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most

significant aspects of such statements.

Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis

for, the Proposed Rule Change

Purpose

Security Count and Verification Challenges Faced by Firms Offering Alternative

Investments

Members that offer various types of alternative investments to their customers have

sought relief from some of the longstanding count and verification requirements under SEA Rule

17a-133 (Quarterly security counts to be made by certain exchange members, brokers, and

dealers) and, related to these, a number of requirements under FINRA Rule 4522 (Periodic

Security Counts, Verifications and Comparisons) that supplement requirements under the SEC

rule.

Broadly, SEA Rule 17a-13 sets forth detailed requirements for broker-dealers that

maintain custody of securities, on a quarterly basis, to among other things conduct physical

examinations and counts of the securities they hold, verify the securities, and compare the results

17 CFR 240.17a-13 (hereinafter “SEA Rule 17a-13”).

of their counts and verifications. The SEC rule requires the broker-dealer in part to record on its

books and records all unresolved differences in a security count difference account no later than

seven business days after the date of each required quarterly security examination, count and

verification. FINRA Rule 4522 works in tandem with the provisions of SEA Rule 17a-13 by

setting forth requirements on carrying or clearing firms to receive position statements no less

than once per month, to reconcile all such securities, to report differences to the contra

organization, and to promptly resolve such differences.

Many alternative investments currently do not fit readily within the framework of the

specific count and verification requirements as set forth in SEA Rule 17a-13 and FINRA Rule

4522. For example, members have pointed out that because in some instances customers’

ownership interests in certain alternative investments are represented in terms of the balance of

the investor’s capital account, rather than in number of shares or other units, issuers of these

investments are not able to provide current quarterly position information. As a result, it is

difficult for members to comply with the express terms of SEA Rule 17a-13, as well as FINRA

Rule 4522, in particular paragraph (b)(1) of that rule, which requires more frequent (not less than

monthly) receipt of position statements and related comparisons and reconciliations.4 Further,

members have also stated that issuers of other types of alternative investments, beyond those

Specifically, paragraph (b)(1) of FINRA Rule 4522 currently requires each carrying or

clearing member that is subject to the requirements of SEA Rule 17a-13 to “[r]eceive

position statements as frequently as good business practice requires, but no less than once

per month with respect to securities held by clearing corporations, other organizations or

custodians. Each such member shall at least once per month reconcile all such securities

and money balances by comparison of the clearing corporations’ or custodians’ position

statements to the member’s books and records and promptly report differences to the

contra organization and such differences shall be promptly resolved by both. Where there

is a higher volume of activity, good business practice may require a more frequent

exchange of statements and their reconciliation . . .”

represented by the balance of the investor’s capital account, such as those represented by number

of shares or units, also are not always able to provide current position information or position

statements to the members with the higher frequency required by FINRA Rule 4522(b)(1). As

part of FINRA’s rule modernization, 5 members have asked for relief from these requirements for

alternative investments.

Recent SEC Staff No-Action Letter

The Commission staff recently issued a no-action letter to a broker-dealer (the “Letter”) 6

stating that the staff will not recommend enforcement action to the Commission under SEA Rule

17a-13 if the broker-dealer does not record on its books and records all unresolved differences

within seven business days after the date of each required quarterly securities count and

verification, as long as it performs the securities count, verification, and comparison with respect

to the uncertificated alternative investments known as “capital balance funds,” as these products

are described in the Letter, under the circumstances listed in the Letter. 7

Achieving Greater Clarity under FINRA Rules

See, e.g., Regulatory Notice 25-04 (March 2025) (FINRA Launches Broad Review to

Modernize Rules Regarding Member Firms and Associated Persons).

See Letter regarding Capital Balance Fund Reconciliations from Raymond A. Lombardo,

Assistant Director, SEC Division of Trading & Markets, to Mark M. Attar of Stradley

Ronon Stevens & Young, LLP and counsel to Raymond James & Associates, Inc., dated

January 6, 2026, https://www.sec.gov/files/tm/no-action/raymond-james-associates-inc010626.pdf.

In general terms, the circumstances in the Letter include: maintaining a record of the

position statement reporting schedule for each capital balance fund issuer; seeking

explanations for any deviations from the schedule; reconciling and updating books and

records within five business days of receipt of a position statement for a capital balance

fund; identifying on customer statements the last reported value for capital balance funds

and the date such value was reported to the broker-dealer; and disclosing to customers

that the capital balance fund value reported on the customer statement is based on

information from the issuer and may not be current or realizable upon liquidation.

To align with the SEC’s specified relief under SEA Rule 17a-13, and to provide greater

clarity for members and their customers that participate in alternative investments, as an interim

measure, FINRA has published 8 guidance to firms, expressing FINRA’s view that compliance

with all circumstances set out in the Letter, as to the capital balance funds described in the Letter,

is deemed to comply with the relevant requirements of FINRA Rule 4522(b)(1) with respect to

the capital balance funds.

However, to address more broadly the difficulty firms have in receiving position

statements no less than monthly from issuers of uncertificated investments in unregistered

investment funds, as well as the associated comparison and reconciliation requirements

thereunder, the proposed rule change would except from paragraph (b)(1) of FINRA Rule 4522

all uncertificated investments in unregistered investment funds as set forth in the proposed rule

language.9 Specifically, the proposed exception would apply where ownership by the member or

its customers of such investments 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.10 As such, FINRA proposes to revise the first sentence of paragraph (b)(1) to state that

See FAQ “FINRA Rule 4522(b)(1) and Certain Capital Balance Funds,” available at:

https://www.finra.org/rules-guidance/guidance/faqs/finra-rule-4522b1-and-certaincapital-balance-funds.

See the proposed amendments to paragraph (b)(1) in Exhibit 5.

FINRA notes, however, that members will continue to be subject to FINRA Rule

4522(b), which states: “Each carrying or clearing member subject to the requirements of

SEA Rule 17a-13 shall make more frequent counts, examinations, verifications,

comparisons and entries where prudent business practice would so require.” This

requirement would continue to apply to uncertificated investments in an unregistered

fund or security excepted from FINRA Rule 4522(b)(1) by the proposed amendments,

and firms should have policies and procedures in place to ensure compliance with this

provision of the rule.

each carrying or clearing member subject to the requirements of SEA Rule 17a-13 shall

“[r]eceive position statements as frequently as good business practice requires, but no less than

once per month with respect to securities held by clearing corporations, other organizations or

custodians, except that this requirement shall not apply to uncertificated investments in

unregistered investment funds, where ownership by the member or its customers of such

investments 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.” In the interest of clarity,

FINRA notes that this proposed amendment to the first sentence of paragraph (b)(1) does not

affect the applicability of SEA Rule 17a-13, in particular the requirement to conduct at least

quarterly the specified securities counts and verifications pursuant to that rule. In that regard,

FINRA proposes to revise the second sentence of paragraph (b)(1) to add the phrase “. . . or at

least once per quarter with respect to uncertificated investments excepted from the monthly

position statement requirement under this paragraph (b)(1) . . .”, so the complete sentence as

amended would read: “Each such member shall at least once per month, or at least once per

quarter with respect to uncertificated investments excepted from the monthly position statement

requirement under this paragraph (b)(1), reconcile all such securities and money balances by

comparison of the clearing corporations’ or custodians’ position statements to the member’s

books and records and promptly report difference to the contra organization and such differences

shall be promptly resolved by both.”11

FINRA believes that adopting the proposed exception for uncertificated investments from

the once-per-month cadence for position statements will help to give members greater clarity

with regard to the treatment of uncertificated investments and to reduce unnecessary compliance

See the proposed amendments to paragraph (b)(1) in Exhibit 5.

burdens given the difficulties involved in receiving the position statements within the express

parameters of the rule as currently written. 12 This in turn may encourage members to offer

alternative investments, thereby expanding the investment opportunities available to customers.

At the same time, the proposed rule change incorporates the quarterly verification requirements

under SEA Rule 17a-13 and as such maintains investor protections.13 Further, FINRA believes

the proposed rule change would help align FINRA Rule 4522 with the no-action relief granted

by the Commission staff.

If the Commission approves the proposed rule change, FINRA will announce the

effective date of the proposed rule change in a Regulatory Notice.

Statutory Basis

FINRA believes that the proposed rule change is consistent with the provisions of Section

15A(b)(6) of the Act,14 which requires, among other things, that FINRA rules be designed to

prevent fraudulent and manipulative acts and practices, to promote just and equitable principles

of trade, and, in general, to protect investors and the public interest. The proposed exception in

the rule change will help to give members greater clarity with regard to the treatment of

uncertificated alternative investments and to reduce unnecessary compliance burdens given the

FINRA notes that the proposed rule change would not impact members that are funding

portals or that have elected to be treated as capital acquisition brokers (“CABs”), given

that neither funding portals nor CABs are subject to FINRA Rule 4522.

Uncertificated investments in unregistered investment funds are typically offered by

issuers, commonly known as private investment companies, venture capital funds or

hedge funds, relying on the exceptions from the definition of “investment company” set

forth in Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act. 15 U.S.C.

80a-3(c)(1) and 15 U.S.C. 80a-3(c)(7). FINRA understands owners of these products are

mostly large institutional investors. See the Economic Impact Assessment in Item II. B.

of this filing.

15 U.S.C. 78o-3(b)(6).

difficulties involved in receiving the position statements within the express parameters of Rule

4522 as currently written. This may encourage members to offer more customers the

opportunity to participate in these investments, thereby serving the public interest by promoting

investor choice.

Self-Regulatory Organization’s Statement on Burden on Competition

FINRA does not believe that the proposed rule change will result in any burden on

competition that is not necessary or appropriate in furtherance of the purposes of the Act.

Economic Impact Assessment

FINRA has undertaken an economic impact assessment to analyze the potential economic

impacts of the proposed rule change, including anticipated costs, benefits, and distributional and

competitive effects, relative to current baseline, and the alternatives considered in assessing how

best to meet FINRA’s regulatory objectives.

Regulatory Need

FINRA Rule 4522 works in tandem with the provisions of SEA Rule 17a-13 to protect

investors by ensuring that, among other things, member firms maintain accurate records of

securities in their possession. As discussed above, however, many alternative investments do not

fit readily within the framework of the specific count and verification requirements of these

rules. The proposed rule change, together with the relief and requirements specified by the SEC,

would reduce the particular compliance challenges related to uncertificated investments while

ensuring that member firms maintain accurate records of these securities in their possession.

Economic Baseline

The proposed rule change would impact all carrying or clearing members, 15 particularly

those that custody alternative investments for customers, specifically uncertificated investments

in unregistered investment funds as is further set forth in the proposed rule change. FINRA does

not know the exact number of these carrying and clearing members or the scope of the

uncertificated investments in unregistered investment funds. Using information provided by

firms in FOCUS Form Custody, FINRA estimates that there are approximately 70 carrying and

clearing firms that currently carry U.S. or foreign private funds and potentially carry these

products. FINRA understands such products are mostly owned by large institutional investors.

FINRA also understands that the relief specified in the Letter would not apply beyond the facts

and circumstances specified in the Letter and that the proposed rule change would provide relief

and greater regulatory clarity more broadly with regard to uncertificated investments in

unregistered investment funds. The number of members that currently offer uncertificated

investments in unregistered investment funds, including the products specified in the Letter, and

how these members comply with the current rule, are not known with specificity by FINRA.

Economic Impacts

The proposed rule change is expected to provide direct and indirect benefits to carrying

or clearing members with regard to the treatment of uncertificated investments in unregistered

investment funds. Members that currently offer investment products within the scope of the

proposed exception, and have difficulty meeting the current FINRA Rule 4522 requirements for

such funds, will benefit from reduced regulatory burden, compliance uncertainty and associated

costs and legal risks. The amount of reduction in regulatory burden and associated costs would

See Section 2.6 of the FINRA 2025 Industry Snapshot, available at:

https://www.finra.org/media-center/reports-studies/2025-industry-snapshot.

depend on the scope and magnitude of activity across products covered by the proposed rule

change, and the members’ practices and procedures for complying with the current rule.

Members that do not currently offer these investment products may begin to offer them if

the relief provided by the proposed rule change is material enough. Doing so may lead to

expanded access to such alternative investment products. The proposed rule change is also

expected to provide indirect benefits to these members’ customers by potentially increasing

investment options and portfolio diversification opportunities. The proposed rule change

maintains investor protections with the additional requirement on recording or recognizing

ownership.

Members that currently offer these products and are in compliance with the current rule

could continue with their current activities. FINRA expects, however, that these members as

well as members that begin to offer these products and could meet current rule requirements

would nevertheless make use of the proposed exception. In particular, these members may

reduce the frequency of verification to at least quarterly after determining that prudent business

practice for specific products does not require monthly verifications. FINRA does not believe

that this will have any impact on the protections currently provided under the baseline.

Members that would choose to take advantage of the proposed exception would need to

familiarize themselves with the proposed rule amendment and make any necessary changes to

their procedures, protocols, and monitoring systems, to ensure compliance. Members will

mostly incur these one-time costs if the benefits from doing so are sufficient.

Anticipated Competitive Effects

Regarding competitive effects, the relief stemming from the proposed rule change would

be available to all members that meet the specified conditions of the proposal. Relative to the

baseline with the relief specified in the Letter, the proposed rule change may enhance

competition among members in providing these alternative investments and across various

unregistered investment funds. The impacts on competition for customers among members

would depend on the magnitude of the direct cost savings and the extent to which those savings

would be shared with clients.

Alternatives Considered

The proposed rule change provides relief requested by member firms as part of rule

modernization. The proposal builds on the relief and requirements in the Letter. No significant

alternatives were considered.

Self-Regulatory Organization’s Statement on Comments on the Proposed Rule

Change Received from Members, Participants, or Others

Written comments were neither solicited nor received

III.

Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 45 days of the date of publication of this notice in the Federal Register or within

such longer period (i) as the Commission may designate up to 90 days of such date if it finds

such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which

the self-regulatory organization consents, the Commission will:

(A) by order approve or disapprove such proposed rule change, or

(B) institute proceedings to determine whether the proposed rule change should be

disapproved.

IV.

Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the

foregoing, including whether the proposed rule change is consistent with the Act. Comments

may be submitted by any of the following methods:

Electronic Comments:

•

Use the Commission’s Internet comment form

(https://www.sec.gov/rules/sro.shtml); or

•

Send an e-mail to rule-comments@sec.gov. Please include File Number SRFINRA-2026-019 on the subject line.

Paper Comments:

•

Send paper comments in triplicate to Secretary, Securities and Exchange

Commission, 100 F Street, NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2026-019. This file number should be

included on the subject line if e-mail is used. To help the Commission process and review your

comments more efficiently, please use only one method. The Commission will post all

comments on the Commission’s Internet website (https://www.sec.gov/rules/sro.shtml). Copies

of the filing will be available for inspection and copying at the principal office of FINRA. Do

not include personal identifiable information in submissions; you should submit only information

that you wish to make available publicly. We may redact in part or withhold entirely from

publication submitted material that is obscene or subject to copyright protection. All

submissions should refer to File Number SR-FINRA-2026-019 and should be submitted on or

before [INSERT DATE 21 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER].

For the Commission, by the Division of Trading and Markets, pursuant to delegated

authority.16

Sherry R. Haywood,

Assistant Secretary

17 CFR 200.30-3(a)(12).

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.