FINRA has filed a proposed rule change with the Securities and Exchange Commission that would amend FINRA Rule 4522 to except uncertificated investments in unregistered investment funds from the monthly position statement and reconciliation requirements of paragraph (b)(1). The filing, File No. SR-FINRA-2026-019, was submitted under Section 19(b)(1) of the Securities Exchange Act of 1934, 15 U.S.C. § 78s(b)(1) (2018). Carrying and clearing firms that hold private fund interests for customers are the intended beneficiaries, and the proposal would replace a monthly obligation that many of them cannot satisfy with a quarterly one that they can.
The monthly cadence that private fund interests cannot meet
FINRA Rule 4522(b)(1) requires each carrying or clearing member subject to SEA Rule 17a-13, 17 C.F.R. § 240.17a-13 (2025), to receive position statements at least once per month for securities held by clearing corporations, other organizations or custodians, and to reconcile those positions monthly against its own books and records. Differences must be reported to the contra organization and promptly resolved.
That cadence assumes an issuer or custodian able to report a current position every month. Many alternative investments cannot. Where a customer’s interest is expressed as the balance of a capital account rather than a number of shares or units, the issuer often has no current monthly figure to report. FINRA acknowledges in the filing that the same problem arises for interests denominated in units, because those issuers also do not always produce position information on a monthly schedule. The result is a rule that carrying firms breach through no fault of their own, and a compliance burden that discourages firms from carrying these products at all.
What the proposed amendment would do
The proposal would add an exception to the first sentence of Rule 4522(b)(1) for uncertificated investments in unregistered investment funds. The exception would apply where ownership by the member or its customers is recorded directly on an ownership registry maintained by the issuer or its agent, or, where no registry exists, is recognized directly by the issuer. The condition matters: the relief is tied to direct recognition of ownership at the issuer level, not to the character of the product generally.
The proposal would not eliminate reconciliation. FINRA would amend the second sentence of paragraph (b)(1) so that reconciliation occurs at least monthly, or at least quarterly for uncertificated investments excepted from the monthly position statement requirement. A carrying firm relying on the exception would move from twelve reconciliations a year to four, not from twelve to none.
Three obligations the proposal leaves untouched
The quarterly securities counts and verifications required by SEA Rule 17a-13 continue to apply. FINRA states expressly that the amendment does not affect that rule.
FINRA Rule 4522(b) also continues to apply. It requires more frequent counts, examinations, verifications, comparisons and entries where prudent business practice would require them. FINRA notes in the filing that firms should maintain policies and procedures addressing this provision for the very investments the amendment excepts. A firm that reads the proposal as authorizing quarterly treatment in every case has misread it.
Finally, the proposal does not reach funding portals or firms that have elected capital acquisition broker status, because neither is subject to Rule 4522.
The proposal follows staff relief already granted
In January 2026, the staff of the SEC’s Division of Trading and Markets issued a no-action letter to Raymond James & Associates, Inc. addressing reconciliation of capital balance funds. The staff stated it would not recommend enforcement under SEA Rule 17a-13 for failure to record unresolved differences within seven business days, provided the firm performed counts, verifications and comparisons under the conditions described in the letter. Those conditions included maintaining a record of each issuer’s reporting schedule, seeking explanations for deviations, updating books and records within five business days of receiving a position statement, identifying on customer statements the last reported value and its date, and disclosing to customers that the reported value comes from the issuer and may be neither current nor realizable on liquidation.
FINRA followed with a published FAQ treating compliance with the letter’s conditions as compliance with Rule 4522(b)(1) for those funds. The rule filing goes further than both. The no-action letter and the FAQ address capital balance funds as described in the letter; the proposed rule text reaches all uncertificated investments in unregistered investment funds meeting the ownership condition. FINRA frames the change as part of the modernization review announced in Regulatory Notice 25-04 (March 2025), and grounds it in Section 15A(b)(6) of the Exchange Act, 15 U.S.C. § 78o-3(b)(6) (2018).
Timing, and what carrying firms should do now
This filing is a proposal, not an adopted rule. It requires Commission approval, and FINRA has stated that it will announce an effective date by Regulatory Notice if the proposal is approved. FINRA solicited no written comments before filing and received none. As of this writing the Commission has not published its notice of the filing, so no comment deadline has been set; the comment period will open on publication in the Federal Register.
Carrying and clearing firms should not wait for approval to examine their position. Two questions are worth answering now. First, which of the fund interests on the firm’s books would actually qualify — that is, for which of them is customer ownership recorded directly on an issuer registry or recognized directly by the issuer. Second, what the firm’s written supervisory procedures say about the frequency of counts and reconciliations for these products, and whether those procedures would satisfy Rule 4522(b) at a quarterly cadence. Firms currently relying on the FAQ should also note that the FAQ and the proposed rule do not cover the same universe of investments.
For more information. If you have questions about FINRA Rule 4522, SEA Rule 17a-13, or how your firm counts and reconciles alternative investments, contact Evans Law, PC.