FINRA Rule 1230(b)(6): New Registration Requirements for Operations Professionals

We’re seeing growing interest in the Financial Industry Regulatory Authority’s new registration, examination and continuing education requirements for operations personnel of FINRA member broker-dealers (including senior management, supervisors, and other “back office” personnel with authority), which go into effect on October 17, 2011. We’ll continue to update this reading list as additional updates on the new rule come in:

New FINRA Rule 1230(b)(6): Operations Professionals Must Register and Pass an Examination (Lowenstein Sandler PC):

“This Rule … will impact every FINRA member broker-dealer, regardless of size or business lines. The Rule will require, for the first time, that certain ‘back office’ operations personnel of FINRA members register with FINRA and pass a qualification examination. Senior management with direct responsibility for ‘back office’ functions also must register and meet examination requirements.” Read more»

FINRA Adopts New Registration Requirement for Operations Professionals (Dechert LLP):

“The Rule creates a function-based registration requirement; therefore, broker-dealers must examine the activities of their operations personnel to determine who will be required to register. Although the list of Covered Persons and Covered Functions is quite broad, FINRA stated that unregistered employees who engage solely in clerical or ministerial activities in connection with a Covered Function are not subject to the Rule.” Read more»

Other FINRA-related Commentary and Analysis

Reporting Broker-Dealer Misconduct Under FINRA Rule 4530 (Fox Rothschild):

“One of the biggest areas of concern arising out of 4530 is the scope of the reporting obligations when a firm internally concludes that there was a rule violation. Notice to Members 11-32 makes clear that not all violations have to be reported, only “conduct that has widespread or potential widespread impact to the firm, its customers or the markets, or conduct that arises from a material failure of the firm’s systems, policies or practices involving numerous customers, multiple errors or significant dollar amounts.’” Read more»

FINRA to Issue More Guidance on Social Media (Morrison & Foerster LLP):

“… FINRA Chairman and CEO Richard G. Ketchum recently noted that FINRA’s Social Networking Task Force continued to examine issues relating to the use of social media by member firms, but had yet to release new guidance on the topic. He said that FINRA intended to provide further guidance on social media issues this year. … Social media issues are currently hot topics, and many firms are finding it hard to wait for FINRA’s guidance.” Read more»

FINRA Rules Could Create a De Facto ‘Uniform’ Fiduciary Standard (Fox Rothschild):

“… the Financial Industry Regulatory Authority has, since the passage of Dodd-Frank, taken steps toward further regulating broker-dealers and is likely to promulgate new rules that may make a uniform duty unnecessary because, through rulemaking, FINRA may impose additional obligations on member firms that would otherwise be consistent with a uniform fiduciary duty standard.” Read more»

FINRA’S Proposed Rules 2210 and 2211 (Morrison & Foerster LLP):

“As part of its continuing effort to create a consolidated rulebook, the Financial Industry Regulatory Authority, Inc. (‘FINRA’) has proposed a new FINRA Rule 2210 that would subsume, subject to certain changes, the provisions of current NASD Rules 2210 and 2211, NASD Interpretive Materials 2210-1 and 2210-4, and the provisions of Incorporated NYSE Rule 472 that do not pertain to research analysts and research reports (collectively, the ‘Proposal’).” Read more»


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