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In our modernized world of peer-to-peer lending, where pulling a template promissory note from the internet is possible, one area of scrutiny that FINRA member firms often overlook is borrowing from and lending to a customer. FINRA Rule 3240 addresses this topic and provides some limited conditions under which a registered representative may borrow money from (or lend money to) a customer. Generally speaking, broker-dealers widely prohibit borrowing from and lending to a customer. However, Rule 3240 permits borrowing or lending under certain well-defined circumstances: The broker-dealer must have written procedures that permit (and specify the supervision of) the practice Read More....
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The SEC recently approved FINRA’s proposed rule change to adopt a new Rule set for firms that meet the definition of “capital acquisition brokers” and that elect to be governed under this rule set (collectively, the ‘‘CAB rules’’). In the associated Federal Register notice, FINRA states that there are member firms that are solely corporate financing firms that advise companies on mergers and acquisitions, advise issuers on raising debt and equity capital in private placements with institutional investors, or provide advisory services on a consulting basis to companies that need assistance analyzing their strategic and financial alternatives. FINRA explains that Read More....
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Under certain conditions, a broker-dealer may maintain and preserve records by means of “electronic storage media.” SEC Rule 17a-4 defines that term as “any digital storage medium or system” that meets the conditions set forth in the rule. Many common forms of digital storage media (for example, flash drives, backup drives, portable hard drives) are not “electronic storage media” for purposes of Rule 17a-4 because they do not meet the conditions set forth in the rule. For this reason, broker-dealers should not use the term “electronic storage media” loosely to mean any digital storage medium or system. Instead, the term Read More....
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FINRA member firms are required to annually renew their registrations with FINRA, other self-regulatory organizations (SRO’s), and states/jurisdictions. The FINRA annual Renewal Program begins with the fourth quarter each year. Rather than require firms to submit each individual renewal payment to each individual regulatory body, FINRA collects all applicable renewal fees on behalf of itself and participating regulators. It is a good idea to familiarize yourself with the 2017 Registration Renewal Calendar. This calendar outlines the payment and filing deadlines for registration renewals. It also covers the availability of the WebCRD/IARD system during year-end renewal processing. Located in the E-Bill Read More....
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In accordance with FINRA Rule 3270, all registered persons must provide written notice to and receive approval from their firm prior to engaging in any outside business activities. In addition to the obligation on the part of the registered rep, member firms must implement reasonable controls related to reporting, approving, monitoring, and assessing conflicts of interest related to such outside business activities. Per Rule 3270, every FINRA member firm is to require its covered persons to submit a written request for approval prior to engaging in any outside business activity. Such outside business activities include acting as employee, independent contractor, Read More....
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In our August 31 post about FINRA Rule 3110(e) (Supervision: Responsibility of Member to Investigate Applicants for Registration), we discussed the necessity of background checks and the expected depth and breadth of the investigation process. Rule 3110(e) also requires that FINRA member firms adopt written procedures to verify the accuracy and completeness of the information in an applicant’s Form U4. While every member firm is required to create written procedures specifying its process for verifying the information provided in an applicant’s Form U4, FINRA understands that the verification process can vary from firm to firm. For example: one firm may Read More....
