FINRA’s Proposed Change to Rules 5122 and 5123

FINRA’s Proposed Change to Rules 5122 and 5123

On October 28, 2020, FINRA filed a proposed rule change to amend Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) that would require members to file retail communications concerning Private Placement offerings. Previously, Rules 5122 and 5123 required all offering documents to be filed with FINRA. However, they weren’t specific enough to include all documents that should have been considered offering documents, such as retail communications.

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NASAA’s New Rule on IAR CE

NASAA’s New Rule on IAR CE

The North American Securities Administrators Association (“NASAA”) recently adopted a new rule that will require Investment Advisor Representatives (“IARs”) to complete 12 credit hours of Continuing Education annually, 6 for IAR Ethics and Professional Responsibility Requirements and 6 for IAR Products and Practice Requirements. This will be the first time IARs have been subject to Continuing Education and as NASAA president Lisa A. Hopkins states, is intended to “promote heightened regulatory compliance while also helping investment adviser representatives better serve their clients by remaining knowledgeable of current regulatory requirements and best practices.”

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Supervisory Control

Supervisory Control: The Basics of Rule 3120

Most broker-dealers are aware of their annual requirement to test and document their firm’s compliance program. But, the question remains if firms are meeting the full requirements of the rule. Below are the basics of the former NASD Rule 3012, now FINRA Rule 3120, for establishing and maintaining a system of supervisory control. Read More…

Supervision

Supervision of Supervisory Personnel

FINRA Rule 3110 provides the requirements for building and maintaining a supervisory structure that is in compliance with rules and regulations. Among other requirements, this rule addresses the documentation and supervision of supervisory personnel in 3110(b)(6). What is FINRA Rule 3110(b)(6)? Rule 3110(b)(6) requires firms to document supervisory functions and responsibilities of each registered supervisory principal. It also establishes procedures to prohibit self-supervision and situations in which the supervisory principal reports to and/or has their compensation or continued employment determined by an individual or individuals that they are supervising. Lastly, it provides a carve-out for those who are unable to Read more about Supervision of Supervisory Personnel[…]

Outside Business Activity

Challenges with Outside Business Activity Disclosures

An outside business activity (“OBA”) is defined as a registered person having any business activity outside the scope of the relationship with their member firm. As defined in FINRA Rule 3270, this may include acting as an employee, independent contractor, sole proprietor, officer, director, or partner for any other entities besides the member firm. Generally, the activity may also involve compensation or a reasonable expectation of compensation.

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Disclosures and Attestations for Associated Persons

Associated person disclosures and attestations are not a “one size fits all” list of documents. The purpose of disclosures and attestations is to educate your employees on the expectations of the firm based on firm procedure and regulatory mandates. Another important purpose is to give representatives a chance to know relevant updates and changes that may require pre-approval and/or added compliance responsibilities.

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