Rule 147

Rule 147 Offerings

Rule 147, also known as the intrastate offering exemption, allows for firms to avoid registration with the SEC for intrastate offerings under certain conditions. This exemption seeks to facilitate the financing of local business operations for companies that are organized in the state where it is offering the securities, carry out a significant amount of its business in that state, and make offers and sales only to residents of that state. The Rule 147 exemption is available only if the entire issue is offered and sold exclusively to residents of that single state. If any sales take place to non-residents, Read more about Rule 147 Offerings[…]

Fidelity Bond Requirements (FINRA Rule 4360)

Fidelity Bond Requirements (FINRA Rule 4360)

FINRA Rule 4360 requires each member firm to join the Securities Investor Protection Corporation (SIPC) and to secure fidelity bonding insurance with specified amounts of coverage based on the firm’s net capital requirement. Such firms must maintain fidelity bond coverage that provides for per loss coverage without an aggregate limit of liability. Firms may apply for this level of coverage with any product that meets these requirements, including the Securities Dealer Blanket Bond (SDBB) or a properly endorsed Financial Institution Form 14 Bond (Form 14). Net Capital Requirements The rule requires a member with a net capital requirement of less Read more about Fidelity Bond Requirements (FINRA Rule 4360)[…]

Spinning

Spinning

Spinning is the practice of allocating highly sought-after IPO shares, also known as hot stock, to individuals who are in a position to direct securities business to the firm. This is why portfolio managers are categorized as restricted persons. These individuals are in a position to direct business to a firm and may be willing to do so based on the size of their allocation. Spinning Prohibitions Rule 5131 prohibits the allocation of new issue shares to any account in which an executive officer or director of a public company or covered non-public company, or a person materially supported by Read more about Spinning[…]

Carrying Agreements

Carrying Agreements

Most broker-dealers rely on another member firm to provide clearing, custody, and execution services. Where needed, a carrying firm may provide prime brokerage, exception reports, stock lending and borrowing, financing margin, risk monitoring, direct market access (DMA), and much more. In short, an introducing firm outsources many important jobs. By allowing other firms to perform these critical functions, a fully disclosed introducing firm can focus on its core activities while its clearing firm may look to providing its clients with good service, economies of scale, and expertise in technology. All carrying agreements between an introducing firm and its carrying agent Read more about Carrying Agreements[…]

Proposed Amendments to FINRA Rule 3240

Proposed Amendments to FINRA Rule 3240

Following up on a retrospective review launched in 2019, FINRA released Regulatory Notice 21-43, which shows their proposed amendments to FINRA Rule 3240: Borrowing from or Lending to Customers. With these changes, FINRA is hoping to reduce instances of abuse as well as to modernize the rule. Based on the feedback they received during their retrospective review, FINRA decided to propose 3 main changes. Pre-Existing Arrangements The first proposed change deals with expanding Rule 3240(a) to cover arrangements that pre-exist a new broker-customer relationship. The proposed changes would add verbiage to specifically state that no person associated with a member Read more about Proposed Amendments to FINRA Rule 3240[…]

Annual Compliance Meeting (ACM)

Annual Compliance Meeting (ACM)

FINRA Rule 3110(a)(7) requires all registered representatives and registered principals to participate, at least once each year, in an interview or meeting at which compliance matters relevant to their particular activities are discussed. Annual Compliance Meetings (ACM) give registered persons the opportunity to regularly discuss compliance issues and assists the firm in ensuring that registered persons remain current on applicable regulatory developments or changes in firm policies. Hosting an Annual Compliance Meeting These meetings can be held individually or with a group and typically take place at a central location or at the representative’s or principal’s place of business. These Read more about Annual Compliance Meeting (ACM)[…]