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FINRA Rule 3110(e) (Supervision: Responsibility of Member Firms to Investigate Applicants for Registration) dictates that member firms must “ascertain by investigation the good character, business reputation, qualifications, and experience of an applicant”. In other words, member firms are required to run thorough background checks on all sponsored applicants for registration. Among other things, the information gained from a thorough investigation is used to update the applicant’s Form U4, ensuring that it is accurate and up-to-date. FINRA then uses the information disclosed on Form U4 to determine if an applicant will pose a regulatory risk to the firm and its customers. Read More....

FINRA Rule 4530 (Reporting Requirements) requires FINRA member firms to report to FINRA specified events, such as findings by a regulatory body and quarterly statistical and summary information regarding written customer complaints. FINRA Rule 4530 also requires firms to file copies of specified criminal actions, civil complaints and arbitration claims. Every member must report certain events outlined in the rule within 30-days. All other written customer complaints and/or grievances must be filed by the 15th calendar day following the end of each quarter. FINRA Rule 4530(a) contains a listing of the events that require each member to promptly report to Read More....

A broker-dealer’s new hire process can be long and stressful.  It is always a firm’s goal to hire the best individual in the applicant pool.  Once a firm narrows down its search and decides on a hire, the process is long from over.  FINRA has established several regulations that must be followed during a broker-dealer’s new hire process. Before Registration with FINRA It is not enough to look at a new hire’s resume and interview them.  Even if you feel like the new hire is a good person.  FINRA Rule 3110 (e) mandates that all FINRA-member broker firms conduct background Read More....

On July 9, 2016, FINRA Rule 2341 (Investment Company Securities) superseded NASD Rule 2830 (Investment Company Securities). Some of you may recall that FINRA published Regulatory Notice 15-23 in June 2015 to provide broker-dealers with limited relief from NASD Rule 2830(m). A broker-dealer meeting certain conditions listed in that Regulatory Notice would be relieved from the requirement to promptly transmit customer funds received in connection with sales of securities on a subscription-way basis for the purpose of completing suitability reviews. A broker-dealer qualifying for this limited relief may hold a customer check payable to an issuer or an appropriate third-party Read More....

FINRA is proposing to expand the Trade Reporting and Compliance Engine (TRACE) reporting rules to include most secondary market transactions in marketable U.S. Treasury securities.  The market in U.S. Treasury securities—or Treasuries —is the deepest and most liquid government securities market in the world. Treasuries are traded by broker-dealers as well as commercial bank dealers and principal trading firms (PTFs) that are not registered as broker-dealers with the SEC or members of FINRA. On October 15, 2014, the market for Treasuries experienced an unusually high level of volatility and a rapid round-trip in prices.  In response to the unexplained volatility, Read More....

In April 2016, the Securities and Exchange Commission (SEC) approved a proposed amendment to FINRA Rule 4524 (Supplemental FOCUS Information). The approved amendment alters the instructions to the Derivatives and Other Off-Balance Sheet Items Schedule (OBS), expanding the application of the OBS to certain non-carrying or non-clearing firms with significant amounts of off-balance sheet obligations. Newly filing firms were required to file their initial OBS disclosing off-balance sheet information on or before August 2, 2016. Carrying or clearing firms that were already subject to the OBS reporting requirements before the approved expansion will continue to file on a quarterly basis Read More....