On April 3, 2017, FINRA Rule 3210 for Accounts At Other Broker-Dealers and Financial Institutions officially replaced NASD Rule 3050, Transactions for or by Associated Persons. In summary, FINRA Rule 3210 requires prior notification by an associated person to their member firm before they establish an account at another financial institution. Accounts include any securities transactions in which the Associated Person has a financial interest or with respect to which such person had discretionary authority.
Below are a few key questions on Rule 3210 and accounts held by associated persons at other financial institutions.
What accounts would an associated person have a beneficial interest in?
As dictated by Supplementary Material 3210.02, an associated person would have a beneficial interest in accounts help 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; or
- Any other individual over whose account the associated person has control and to whose financial support the associated person materially contributes.
What types of financial institutions should be considered under FINRA Rule 3210?
In general, other financial institutions may include, but are not limited to:
- Any registered broker-dealer pursuant to Section 15(b)(11) of the Exchange Act;
- Domestic or foreign non-member broker-dealers;
- Investment advisers;
- Banks;
- Insurance companies;
- Trust companies;
- Credit unions; or
- Investment companies.
What steps should an associated person take to notify their member firm?
Presently, FINRA Rule 3210 requires the associated person to obtain written consent from the firm within 30 days of becoming associated. Additionally, the associated person must also notify the executing member regarding his or her association with the firm.
What information should the outside firm obtain?
FINRA Rule 3210(c) states, “An executing member shall, upon written request by an employer member, transmit duplicate copies of confirmations and statements, or the transactional data contained therein, with respect to an account subject to this Rule.” In addition, the receiving member is not bound to provide the material without a written request from the associated person’s employer.
Should statements, confirmations, and transactions be hard copy or electronic delivery?
FINRA released a helpful FAQ Concerning FINRA Rule 3210 which allows members “reasonable flexibility” in the manner of both collection and review of the information. Therefore, information can be in either hard copy or electronic. Firms may use electronic delivery as long as it provides required data under the rule. Additionally, firms may also store this information electronically as long as it complies with the electronic storage notification requirements.
What accounts do not fall under FINRA Rule 3210?
Under Supplementary Material 3210.03, the rule does not apply to certain accounts. For instance, the following types of accounts are exempt:
- Unit investment trusts;
- Municipal fund securities as defined under MSRB Rule D-12;
- Qualified tuition programs pursuant to Section 529 of the Internal Revenue Code; and
- Variable contracts or redeemable securities of companies registered under the Investment Company Act, as amended, or to accounts that are limited to transactions in such securities, or to Monthly Investment Plan type accounts.
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