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FINRA Manual
Corporate Organization Notices
2006
06-72 Amendments to Rule 2340 Requiring Customer Account Statements to Include a Statement Reminding Customers to Report Inaccuracies in Their Accounts in Writing; Revised Effective Date: May 31, 2007
06-71 Clarification of Exemption for Market Makers Acting in the Capacity of Exchange Market Maker and Interpretive Guidance Relating to Riskless Principal Transactions
06-70 SEC Approves Amendments Expanding the OATS Requirements to OTC Equity Securities and NASD Publishes Revised OATS Reporting Technical Specifications; Effective Date: June 11, 2007
06-68 SEC Approves Amendments to Rule 2340 to Allow DVP/RVP Customers to Elect Not to Receive Account Statements; Effective Date: November 22, 2006
06-67 SEC Approves Amendments to NASD Rules to Align Them with Regulation NMS; Effective Date: Regulation NMS Trading Phase Date, Currently Scheduled to Occur February 5, 2007.The SEC has extended the Trading Phase Date to March 5, 2007.
06-66 NASD Announces Election Results for District Committees, District Nominating Committees and the National Adjudicatory Council
06-64 SEC Approves Amendments to Rule 10308 Regarding the Classification of Arbitrators; Effective Date: January 15, 2007
06-63 Amendments to Registration Rules Extending the Date by which Eligible Registrants must Complete Continuing Education Program before Engaging in Security Futures Activities; Effective Date: November 15, 2006
06-62 SEC Approves Rule 3160 Regarding Submission and Reporting Requirements for Regulation T and SEC Rule 15c3-3 Extension of Time Requests; Effective Date: March 1, 2007
06-61 SEC Approves Rule 3170 Requiring Members to Electronically File with or Otherwise Submit to NASD Specified Regulatory Notices or Other Documents; Effective Date: December 6, 20061
06-60 SEC Approves Amendments to Rule 2340 Requiring Customer Account Statements to Include a Statement Reminding Customers to Report Inaccuracies in Their Accounts in Writing; Effective Date: March 6, 2007
06-59 Broker-Dealer, Investment Adviser Firm, Agent and Investment Adviser Representative Renewals for 2007; Payment Deadline: December 8, 2006
06-58 SEC Approves Amendments to Rule 2320(a) Regarding Best Execution and New Interpretive Material 2320; Effective Date: November 8, 2006
06-57 SEC Approves Exemption to NASD Rule 5100 (Short Sale Rule) for Securities Included in the NASDAQ-100 Index; Effective Date: October 9, 2006
06-56 SEC Approves Amendments to the Safe Harbor for Business Expansions; Effective Date: November 3, 2006
06-54 Amendments to Option Disclosure Documents Delivery Requirements in Rule 2860; Implementation Date: October 26, 2006
06-53 Guidance on the Requirements for Availability of Bona Fide Market Making Activity Exception to NASD Rule 5100
06-52 NASD Requests Comment on Proposed Amendments to Rules Governing Conflicts of Interest in Public Offerings of Securities; Comment Period Expires October 30, 2006
06-50 NASD Reminds Members of Their Obligation to Provide Accurate Information to Services that Disseminate Trading Volume and Trading Interest
06-48 SEC Approves Amendments to NASD Rules 2210 and 2211 to Require Disclosure of Fees and Expenses in Mutual Fund Performance Sales Material; Effective Date: April 1, 2007
06-47 SEC Approves New Rule 2441 Requiring Disclosure and Consent When Trading on a Net Basis with Customers
06-45 SEC Approves Amendments to NASD Rule 2211 to Require Principal Pre-Use Approval of Certain Member Correspondence Sent to 25 or More Existing Retail Customers within a 30 Calendar-Day Period; Effective Date: December 1, 2006
06-44 Exemption for Registered NASDAQ Market Makers Acting in the Capacity of Exchange Market Maker (This Notice supersedes Notice to Members 06-37)
06-43 NASD Announces Nominees for Regional Industry Member Seats on the National Adjudicatory Council
06-42 Pilot Program to Permit Additional Market Participant Identifier Functionality on the Alternative Display Facility
06-39 SEC Approves Amendments Relating to Automated Reporting of Transactions Subject to Regulatory Transaction Fee; Effective Date: December 1, 2006
06-38 Member Obligations with Respect to the Sale of Existing Variable Life Insurance Policies to Third Parties
06-37 Exemption for Registered NASDAQ Market Makers Acting in the Capacity of Exchange Market Maker (This Notice is superseded by Notice to Members 06-44)
06-35 Revisions to the Series 22, 27, 28, 39 and 55 Examination Programs; Implementation Date: August 15, 2006
06-34 Technical Changes in the Reporting of Statistical and Summary Information Regarding Customer Complaints and Disclosure Events pursuant to Rule 3070
06-33 Frequently Asked Questions regarding Electronic Blue Sheet Submissions; Remediation Dates Extended
06-32 NASD Requests Comment on Providing Public Access to Historic TRACE Data Not Previously Disseminated or Otherwise Publicly Available; Comment Period Expires August 15, 2006
06-31 NASD Requests Comment on Regulatory Relief that Should Be Granted in Response to a Possible Pandemic or Other Major Business Disruption; Comment Period Expires September 15, 2006
06-30 Amendments to the Fee for Extension of Time Requests under Regulation T and SEC Rule 15c3-3; Effective Date: July 1, 2006
06-29 NASD Announces Nomination Procedures for Regional Industry Member Vacancies on the National Adjudicatory Council; Nomination Deadline: July 17, 2006
06-28 SEC Approves New Rule 3210 Applying Short Sale Delivery Requirements to Non-Reporting OTC Equity Securities; Effective Date: July 3, 2006
06-27 SEC Approves Amendments to Rule 6740 Relating to Submission of SEC Rule 15c2-11 Information to NASD; Effective Date: June 29, 2006
06-25 Establishment of Branch Office System Processing Fee and Waiver of Branch Office System Processing Fee and Annual Branch Office Registration Fee For One Branch Office Per Member Per Year; Effective Date: July 3, 2006
06-24 NASD Informs Members of Upcoing District Committee and District Nominating Committee Elections
06-23 NASD Reminds FINOPs of their Obligations under NASD Rule 1022 and Issues Guidance to FINOPS who Work Part-Time, Work Off-Site or Hold Multiple Registrations
06-22 NASD Requests Comment on Publicly Disseminating in TRACE Information Whether a Transaction was Inter-Dealer or Dealer-Customer and, in Dealer-Customer Transactions, Whether the Broker-Dealer was a Buyer or Seller; Comment Period Expires June 15, 2006
06-20 NASD Implements Changes to the Regulation Filing Applications System; Effective Date: July 3, 2006
06-18 SEC Division of Market Regulation Issues Interpretive Guidance Regarding Regulation SHO Close-Out Requirements; Effective Date: May 1, 2006
06-17 NASD Extends Compliance Date for Recent Amendments to NASD's Order Audit Trail System Rules; Compliance Date: July 10, 2006
06-16 NASD Amends Rule 1013 to Adopt a Standardized Application Form (Form NMA) to be Used by All New Member Applicants; Implementation Date: May 20, 2006
06-15 SEC Approves Expansion of NASD's Exemptive Authority under the OATS Rules; NASD Provides Additional Guidance Regarding Exemptive Relief and Encourages Exempted and Other Small Firms to Test the Enhanced OATS Web Interface
06-14 SEC Approves Amendments to the Short Interest Reporting Requirements; Effective Date: July 3, 2006
06-13 Validation of Electronic Blue Sheet Systems: Intermarket Surveillance Group Requires Validation by March 31, 2006
06-12 Extension of Effective Date of NASD Uniform Branch Office Definition and Certain Form BR and Form U4 Filing Requirements from May 1, 2006 to July 3, 2006, Effective Date of Uniform Definition: NASD: July 3, 2006; NYSE: September 9, 2005
06-11 SEC Approves Amendment to NASD Interpretive Material 3013 Regarding Timing of Submission of Report that Evidences Processes to a Member's Board of Directors and Audit Committee; Effective Date: March 17, 2006
06-08 Amendments Relating to the Status of Persons Serving in the Armed Forces of the United States; Effective Dates: IM-1000-2(a) and IM-1000-2(b): November 15, 2005; IM-1000-2(c): March 27, 2006
06-07 SEC Approves Amendments to Anti-Money Laundering Compliance Program Rule and Adoption of Interpretive Material; Effective Date: March 6, 2006
06-06 NASD Requests Comment on Proposed Interpretive Material IM-3060 Addressing Gifts and Business Entertainment; Comment Period Expires February 23, 2006; Comment Period extended to March 3, 2006
06-05 SEC Approves Permanent Rules Concerning Bond Mutual Fund Volatility Ratings; Effective Date: December 27, 2005
06-04 SEC Approves Amendments to NASD Rule 3012 to Require Members Relying on Rule 3012's "Limited Size and Resources" Exception to Notify NASD of their Reliance
06-03 NASD Provides Guidance Regarding New Rule 2111 Prohibiting Members from Trading Ahead of Customer Market Orders Under Certain Circumstances; Effective Date: January 9, 2006
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06-07 SEC Approves Amendments to Anti-Money Laundering Compliance Program Rule and Adoption of Interpretive Material; Effective Date: March 6, 2006
GUIDANCE
Anti-Money Laundering Compliance Programs
SUGGESTED ROUTING |
KEY TOPICS |
| Legal & Compliance Operations Registration Senior Management |
Anti-Money Laundering Compliance Programs IM-3011-1 IM-3011-2 Rule 3011 |
Executive Summary
On December 28, 2005, the Securities and Exchange Commission (SEC) approved amendments to NASD Rule 3011 and the adoption of IM-3011-1 and IM-3011-2.1 The amendments and new interpretive material require a firm to conduct an independent test of its anti-money laundering (AML) compliance program on an annual basis (with the exception of certain types of firms), clarify the persons not considered to be independent for purposes of the independent testing requirement, and require a firm, on a quarterly basis, to review and, if necessary, update the information regarding the firm's AML compliance person. The new rule text and interpretive material are contained in Attachment A and are effective on March 6, 2006.
Questions/Further Information
Questions concerning this Notice may be directed to Brant K. Brown, Counsel, Office of General Counsel, Regulatory Policy and Oversight, at (202) 728-6927.
Discussion
NASD Rule 3011 requires every NASD member firm to develop and implement a written AML program reasonably designed to achieve and monitor the firm's compliance with the requirements of the Bank Secrecy Act2 and the implementing regulations promulgated thereunder by the Department of Treasury. Among other things, Rule 3011 requires that a firm's AML program provide for independent testing for compliance with the AML program. Firms also are required to designate and identify to NASD an individual or individuals responsible for implementing and monitoring the day-to-day operations and internal controls of the firm's AML program and to update this information as appropriate. The purposes of the amendments to Rule 3011 and the interpretive material are to clarify and provide guidance on certain aspects of these two requirements.
Independent Testing
As originally adopted, Rule 3011(c) required that a firm's AML program "provide for independent testing for compliance to be conducted by member personnel or by a qualified outside party." The amendments and IM-3011-1 provide further guidance on this requirement in two ways. First, the amended rule language establishes an expectation that, for most firms, the independent test should be performed at least once each calendar year. The new rule language, however, allows firms that do not execute transactions for customers or otherwise hold customer accounts or act as an introducing broker with respect to customer accounts to test once every two years (on a calendar-year basis) rather than on an annual basis.3
Second, IM-3011-1 clarifies certain types of individuals who NASD would not consider to be "independent," and, hence, not eligible to perform the required independent testing. As an initial matter, IM-3011-1(b) clarifies that the person conducting the independent test must have a working knowledge of applicable requirements under the Bank Secrecy Act and its implementing regulations. IM-3011-1(c) further clarifies that, to ensure sufficient separation of functions for independence purposes, the testing cannot be conducted by the AML compliance person(s) designated in Rule 3011, by any person who performs the AML functions being tested or by any person who reports to any of these persons. NASD, however, recognized that these limitations may effectively prevent certain small firms from using appropriate internal personnel to conduct the tests. Consequently, IM-3011-1(c) allows tests to be conducted by persons who report to either the AML compliance person or persons performing AML functions if (1) the firm has no other qualified personnel to conduct the test; (2) the firm establishes written policies and procedures to address potential conflicts that can arise from allowing the test to be conducted by a person in the reporting chain (e.g., antiretaliation procedures); (3) to the extent possible, the results of the test are reported to someone senior to the person to whom the test conductor reports; and (4) the firm documents its rationale, which must be reasonable, for determining that it has no other alternative than to comply in this manner.4 In addition, if the person does not report the results to a person senior to the AML compliance person or persons performing AML functions, the member must document a reasonable explanation for not doing so.
AML Compliance Person
The amendment to Rule 3011(d) and IM-3011-2 each provide guidance concerning the requirement that firms designate and identify to NASD an individual or individuals responsible for implementing and monitoring the day-to-day operations and internal controls of the firm's AML program. The amendment to Rule 3011(d) clarifies that the AML compliance person is an "associated person" of the member firm. As the SEC noted in approving the amendment, "NASD considers designated AML compliance persons to be associated persons for purposes of their activities on behalf of the member." 5
IM-3011-2 requires firms to review and, if necessary, update the information regarding its AML compliance person within 17 business days after the end of each calendar quarter. This time period is consistent with a member firm's FOCUS reporting schedule and the requirements that a member firm review and update its Executive Representative designation and contact information6 as well as its emergency contact information.7 When firms file their FOCUS reports each quarter, they are reminded of the need to review and update this information on the NASD Contact System.
1 Exchange Act Rel. No. 53030 (Dec. 28, 2005), 71 FR 632 (Jan. 5, 2006) (SR-NASD-2005-066).
2 31 U.S.C. 5311, et seq.
3 Regardless of which category a firm falls into, any firm must test its AML program more frequently if circumstances warrant. See IM-3011-1(a).
4 Consistent with SEC and NASD recordkeeping requirements, the firm must retain a copy of the documented rationale, which will be reviewed by NASD examiners to assess whether the firm's rationale reasonably supported its determination.
5 See Exchange Act Rel. No. 53030, at 3; 71 FR at 634. See also NASD Response to Comments (Dec. 15, 2005), available at www.sec.gov/rules/ sro/nasd/nasd2005066/nasd121505.pdf. This view confirms NASD's previous guidance that AML compliance persons are associated persons of the firm but are not required to register with NASD solely because they serve in that capacity. See Notice to Members 02-80, at n.5 (Dec. 2002).
6 See NASD Rule 1150.
7 See NASD Rule 3520(b)
ATTACHMENT A
New language is underlined; deletions are in brackets.
3011. Anti-Money Laundering Compliance Program
On or before April 24, 2002, each member shall develop and implement a written anti-money laundering program reasonably designed to achieve and monitor the member's compliance with the requirements of the Bank Secrecy Act (31 U.S.C. 5311, et seq.), and the implementing regulations promulgated thereunder by the Department of the Treasury. Each [member organization's] member's anti-money laundering program must be approved, in writing, by a member of senior management. The anti-money laundering programs required by this Rule shall, at a minimum,
IM-3011-1. Independent Testing Requirements
IM-3011-2. Review of Anti-Money Laundering Compliance Person Information
Each member must review and, if necessary, update the information regarding its anti-money laundering compliance person designated pursuant to Rule 3011(d) within 17 business days after the end of each calendar quarter to ensure the information's accuracy.
