FINRA Rule 3210 (Accounts at Other Broker-Dealers and Financial Institutions), which replaces the previously used NASD Rule 3050, Incorporated NYSE Rules 407 and 407A and Incorporated NYSE Rule Interpretations 407/01 and 407/02, was approved by the SEC in April of 2016, and became effective in April 2017. This is a consolidated rule governing accounts opened or established by associated persons at firms other than the firm at which they are employed, ensuring that member companies, brokers, and advisors maintain ethical standards.
This means the rules have changed in the investment industry when it comes to declaring a personal interest in newly opened accounts at financial institutions other than where you may be employed or registered. Before an associated person can establish an account at another financial institution, Rule 3210 requires that he or she notify the firm of any accounts in which securities transactions can be effected and in which the associated person has a beneficial interest. NASD Rule 3050 had required reporting of accounts in which an associated person had a financial interest, or with respect to which such person had discretionary authority.
The rule specifies that accounts in which an associated person is presumed to have a beneficial interest in, and to have established, include any account that is held by:
- The spouse of the associated person
- A child of the associated person or of the associated person’s spouse, provided that the child resides in the same household as or is financially dependent upon the associated person
- Any other related individual over whose account the associated person has control; and
- Any other individual over whose account the associated person has control and to whose financial support the associated person materially contributes
It is not only newly-established accounts that are governed under the new rule FINRA Rule 3210. If an employee has existing accounts and becomes a new employee of a member firm, they will be required to declare such accounts. Within 30 calendar days of becoming employed with a FINRA-member firm, the employee must obtain written consent from their employer in order to maintain the accounts. The new employee is also required to notify the financial institution where the accounts are held of their new association and employment with the member firm.
For more information, see: Regulatory Notice 16-22