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Rule 346. Limitations—Employment and Association with Members and Member Organizations

This rule is no longer applicable.

(a) Every member not associated with a member organization must be a registered broker or dealer unless exempted by the Securities Exchange Act of 1934.
(b) Without making a written request and receiving the prior written consent of his member or member organization employer, no member or employee of a member or member organization shall at any time be engaged in any other business; or be employed or compensated by any other person; or serve as an officer, director, partner or employee of another business organization; or own any stock or have, directly or indirectly, any financial interest in any other organization engaged in any securities, financial or kindred business; provided however, that such written request and consent shall not be required with regard to stock ownership or other financial interest in any securities, financial or kindred business which is publicly owned unless a control relationship exists.

(See also requirements of Rules 311, 350 and 407.)
(c) Where a member organization approves an employee's participation in private securities transactions in which regard the employee has or may receive selling compensation, the transaction shall be recorded on the books and records of the member organization, which shall supervise such participation as if the transaction were executed on its behalf.
(d) No member shall qualify more than one member organization for membership.
(e) Every employee of a member organization who is assigned or delegated any responsibility or authority pursuant to Rule 342 shall devote his entire time during business hours to the business of such member organization unless an alternate arrangement has been approved in writing by the member organization.

The written approval of such arrangements must identify any entity for which the supervisory person will be performing services during business hours and must specifically describe the nature of such services. The approval must also set forth the approximate amount of time the supervisory person is expected to devote to each entity, with particular attention paid to the approximate time expected to be required for the person, based upon such person's qualifications and experience, to effectively discharge his or her supervisory responsibilities on behalf of any associated person of a member organization.

In addition, the approval letter must document that the member organization has made a good faith determination that the arrangement will in no way compromise the protection of investors or the public interest; compromise the supervisor's duties at the member organization; or give rise to a material conflict of interest.
(f) Except as otherwise permitted by the Exchange, no member, member organization, approved person, employee or any person directly or indirectly controlling, controlled by or under common control with a member or member organization shall have associated with him or it any person who is known, or in the exercise of reasonable care should be known, to be subject to any "statutory disqualification" defined in Section 3(a)(39) of the Securities Exchange Act of 1934.
Amended:
December 1, 1977;
May 28, 1982. March 29, 1989;
August 31, 1993,
amended by SR-FINRA-2008-034 eff. Jan. 1, 2008.
Amended by SR-FINRA-2008-036 eff. Nov. 11, 2008.

Selected Notice: 08-64.

• • • Supplementary Material: --------------

.11 For the purpose of this rule, control is defined in Rule 2.
.12 For the purposes of this rule, the term associated with a member or member organization shall have the same meaning as the term "associated with a member" is defined in Section 3(a)(21) of the Securities Exchange Act of 1934.
.20 Under the appropriate circumstances the Exchange may, in determining control, treat as a single holding stock which is nominally held by different persons or organizations.
.30 For the purposes of this rule, the term "private securities transaction" shall mean any securities transaction outside the regular course or scope of an associated person's employment with a member organization, including, though not limited to, new offerings of securities which are not registered with the Commission, provided however that transactions subject to the notification requirements of Rule 407, transactions among immediate family members for which no associated person receives any selling compensation, and personal transactions in investment company and variable annuity securities, shall be excluded. The term "immediate family members" means a person's parents, mother-in-law or father-in-law, spouse, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, and children, and any other individual to whom the person provides material support.
.40 For the purposes of this rule, the term "selling compensation" shall mean any compensation paid directly or indirectly from any source in connection with or as a result of the purchase or sale of a security, including, though not limited to, commissions; finder's fees; securities or rights to acquire securities; rights of participation in profits, tax benefits, or dissolution proceeds, as a general partner or otherwise; or expense reimbursements.
Amended:
December 1, 1977.
Amended by SR-FINRA-2008-036 eff. Nov. 11, 2008.

Selected Notice: 08-64.

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