The SEC recently approved FINRA’s proposed rule change to adopt a new, consolidated rule governing accounts opened or established by associated persons at firms other than the firm at which they are employed.  The rule change takes effect on April 3, 2017.  FINRA Rule 3210 combines and streamlines longstanding provisions of the NASD and NYSE rules that address this area and, in combination with FINRA Rule 3110(d), which addresses securities transactions review and investigation, helps facilitate effective oversight of the trading activities of Associated Persons of member firms.

Accounts that are required to be reported to an Associated Person’s employing member firm

FINRA Rule 3210 requires that an Associated Person must obtain the prior written consent of his or her employer when opening an account at another member or other financial institution in which securities transactions can be effected and in which the Associated Person has a beneficial interest.

In addition to accounts in the Associated Person’s name, the rule specifies accounts in which an Associated Person is presumed to have a beneficial interest.  Those accounts include accounts for the following:

  • 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.

Notification Requirements

FINRA Rule 3210 provides that Associated Persons, prior to opening or otherwise establishing an account subject to the rule, must notify in writing the executing member, or other financial institution, of his or her association with the employer member.

The rule makes allowance for accounts opened by an Associated Person prior to his or her association with the employer member.  Specifically, Supplementary Material .01 provides that, if the account was opened or otherwise established prior to the person’s association with the employer member, the associated person, within 30 calendar days of becoming so associated, must obtain the written consent of the employer member to maintain the account and must notify in writing the executing member or other financial institution of his or her association with the employer member.

Rule 3210 also states that an executing member must, upon written request by the employer member, provide duplicate copies of confirmations and statements with respect to an account subject to the rule.

Accounts that are exempted from the rule requirements

Supplementary Material .03 of the rule provides that the rule’s requirements shall not apply to transactions in UITs, municipal fund securities, Section 529 Plans, variable contracts, or mutual funds.

For more guidance related to this topic, please refer to FINRA Regulatory Notice 2016-22.