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FINRA Rules

FINRA Cannot Collect Fines Against Barred Members through Court

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On October 5, 2011, the Second Circuit in Fiero v. Financial Industry Regulatory Authority, Inc. held that FINRA was not authorized under the Securities Exchange Act of 1934 to enforce disciplinary fines through judicial enforcement. Facts Apellants, Fiero Brothers, Inc., was a FINRA member firm and broker-dealer registered with the SEC and John J. Fiero was the …

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Focus on Sales Literature and Advertising: Tips, Procedures and the BD Use Only Legend

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In this, the second of a two-part series, the focus is on communications with the public.(1)  While many of these points below appear more important to managing broker-dealers and product manufacturers (sponsors), retail broker-dealers may value the information in connection with their own materials and review of materials provided by sponsors. Retail firms’ obligations are …

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FINRA Issues Further Guidance on Know Your Customer and Suitability Rule and Extends Effective Date – Regulatory Notice 11-25

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On May 18, 2011, FINRA issued Regulatory Notice 11-25, which provides further guidance on new consolidated consolidated FINRA rules governing Know Your Customer (Rule 2090) and Suitability (Rule 2111) and extending the implementation date to July 9, 2012 (previously, October 7, 2011). Background FINRA Rule 2090 (Know Your Customer) requires firms to “use reasonable diligence, in regard …

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Focus on Sales Literature and Advertising

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In this, the first of a two-part series, the focus is on communications with the public. While many of these points below appear more important to managing broker-dealers and product manufacturers (sponsors), retail broker-dealers may value the information in connection with their own materials and review of materials provided by sponsors. Retail firms’ obligations are …

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Arbitration Practice – Motion Response and Promissory Note Proceedings

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Motion Practice – Five Day Reply Period for Responses in Arbitration – Regulatory Notice 11-23 Effective June 6, 2011, a moving party will have five days to reply to a response to a motion.  FINRA amended Rules 12206 and 13206 (Time Limits), Rules 12503 and 13503 (Motions), and Rules 12504 and 13504 (Motions to Dismiss) to …

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Fidelity Bonds – Regulatory Notice 11-21

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FINRA Rule 4360 requires each member firm that is required to join the Securities Investor Protection Corporation (SIPC) to maintain blanket fidelity bond coverage with specified amounts of coverage based on the firm’s net capital requirement, with certain exceptions. Such firms must maintain fidelity bond coverage that provides for per loss coverage without an aggregate …

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Third Party Service Providers – Regulatory Notice 11-14

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In March 2011, FINRA issued Regulatory Notice 11-14, requesting comments on proposed new rule 3190 clarifying the scope of a member firm’s obligations and supervisory responsibilities for functions or activities outsourced to a third-party service provider. FINRA Rule 3190 clarifies that: Outsourced functions of a broker-dealer to a third-party service provider does not relieve the firm of …

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FINRA Proposes Rules on Debt Research Reports – Regulatory Notice 11-11

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In March 2011, FINRA issued Regulatory Notice 11-11 requesting comments on a concept proposal to apply objectivity safeguards and disclosure requirements to the publication and distribution of debt research reports. The proposal would provide retail debt research recipients with most of the same protections provided to recipients of equity research, while exempting research provided solely to institutional …

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SEC Approves FINRA New Member Restrictions Regarding Disqualified Persons

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On February 18, 2011, the Securities and Exchange Commission issued Release No. 34-63933, approving FINRA Rule 1113 (Restrictions Pertaining to New Member Applications) and amendments to the FINRA Rule 9520 Series (Eligibility Proceedings) to restrict new applicants’ and certain members’ association with disqualified persons based on the belief that “new member applicant[s] should enter FINRA membership …

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FINRA Rule 4530 – Self-Reporting Misconduct

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New FINRA Rule 4530, representing a consolidation of NASD Rule 3070 and NYSE Rule 351, takes effect on July 1, 2011. The rule increases the level of self-reporting by firms by requiring firms to not only report when a court or self-regulatory body determines a securities violation, but also when the firm concludes or “reasonably …

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