Past version: effective from Jun 28 2010 - Dec 4 2011.
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SR-FINRA-2010-052 has been approved by the SEC. Effective December 5, 2011 this version will no longer be applicable. Please consult the appropriate FINRA rule.
Each member shall make and preserve books, accounts, records, memoranda, and correspondence in conformity with all applicable laws, rules, regulations and statements of policy promulgated thereunder and with the Rules of this Association and as prescribed by SEC Rule 17a-3. The record keeping format, medium, and retention period shall comply with Rule 17a-4 under the Securities Exchange Act of 1934.
(b) Marking of Customer Order Tickets
A person associated with a member shall indicate on the memorandum for each transaction in a non-exchange-listed security, as that term is defined in Rule 2320
, the name of each dealer contacted and the quotations received to determine the best inter-dealer market; however, the requirements of this paragraph shall not apply if the member can establish and has documented that:
(1) two or more priced quotations for the security are displayed in an inter-dealer quotation system, as defined in Rule 2320
(f), that permits quotation updates on a real-time basis for which NASD has access to historical quotation information; or
(2) the transaction is effected in compliance with Rule 2320
(f)(3)(B) or (C).
(c) Customer Account Information
Each member shall maintain accounts opened after January 1, 1991 as follows:
(1) for each account, each member shall maintain the following information:
(A) customer's name and residence;
(B) whether customer is of legal age;
(C) signature of the registered representative introducing the account and signature of the member or partner, officer, or manager who accepts the account; and
(D) if the customer is a corporation, partnership, or other legal entity, the names of any persons authorized to transact business on behalf of the entity;
(2) for each account other than an institutional account, and accounts in which investments are limited to transactions in open-end investment company shares that are not recommended by the member or its associated persons, each member shall also make reasonable efforts to obtain, prior to the settlement of the initial transaction in the account, the following information to the extent it is applicable to the account:
(A) customer's tax identification or Social Security number;
(B) occupation of customer and name and address of employer; and
(C) whether customer is an associated person of another member; and
(3) for discretionary accounts, in addition to compliance with subparagraphs (1) and (2) above, and Rule 2510
(b) of these Rules, the member shall:
(A) obtain the signature of each person authorized to exercise discretion in the account;
(B) record the date such discretion is granted; and
(C) in connection with exempted securities other than municipals, record the age or approximate age of the customer.
(4) For purposes of this Rule, Rule 2310
, and Rule 2510
the term "institutional account" shall mean the account of:
(A) a bank, savings and loan association, insurance company, or registered investment company;
(B) an investment adviser registered either with the Securities and Exchange Commission under Section 203 of the Investment Advisers Act of 1940 or with a state securities commission (or any agency or office performing like functions); or
(C) any other entity (whether a natural person, corporation, partnership, trust, or otherwise) with total assets of at least $50 million.
(d) Record of Written Complaints
Each member shall keep and preserve in each office of supervisory jurisdiction, as defined in Rule 3010
, either a separate file of all written complaints of customers and action taken by the member, if any, or a separate record of such complaints and a clear reference to the files containing the correspondence connected with such complaint as maintained in such office.
(e) "Complaint" Defined
A "complaint" shall be deemed to mean any written statement of a customer or any person acting on behalf of a customer alleging a grievance involving the activities of those persons under the control of the member in connection with the solicitation or execution of any transaction or the disposition of securities or funds of that customer.
(f) Requirements When Using Predispute Arbitration Agreements for Customers Accounts
(1) Any predispute arbitration clause shall be highlighted and shall be immediately preceded by the following language in outline form.
This agreement contains a predispute arbitration clause. By signing an arbitration agreement the parties agree as follows:
(A) All parties to this agreement are giving up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.
(B) Arbitration awards are generally final and binding; a party's ability to have a court reverse or modify an arbitration award is very limited.
(C) The ability of the parties to obtain documents, witness statements and other discovery is generally more limited in arbitration than in court proceedings.
(D) The arbitrators do not have to explain the reason(s) for their award.
(E) The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.
(F) The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.
(G) The rules of the arbitration forum in which the claim is filed, and any amendments thereto, shall be incorporated into this agreement.
(2)(A) In any agreement containing a predispute arbitration agreement, there shall be a highlighted statement immediately preceding any signature line or other place for indicating agreement that states that the agreement contains a predispute arbitration clause. The statement shall also indicate at what page and paragraph the arbitration clause is located.
(B) Within thirty days of signing, a copy of the agreement containing any such clause shall be given to the customer who shall acknowledge receipt thereof on the agreement or on a separate document.
(3)(A) A member shall provide a customer with a copy of any predispute arbitration clause or customer agreement executed between the customer and the member, or inform the customer that the member does not have a copy thereof, within ten business days of receipt of the customer's request. If a customer requests such a copy before the member has provided the customer with a copy pursuant to subparagraph (2)(B) of this paragraph, the member must provide a copy to the customer by the earlier date required by this subparagraph (3)(A) or by subparagraph (2)(B).
(B) Upon request by a customer, a member shall provide the customer with the names of, and information on how to contact or obtain the rules of, all arbitration forums in which a claim may be filed under the agreement.
(4) No predispute arbitration agreement shall include any condition that:
(A) limits or contradicts the rules of any self-regulatory organization;
(B) limits the ability of a party to file any claim in arbitration;
(C) limits the ability of a party to file any claim in court permitted to be filed in court under the rules of the forums in which a claim may be filed under the agreement;
(D) limits the ability of arbitrators to make any award.
(5) If a customer files a complaint in court against a member that contains claims that are subject to arbitration pursuant to a predispute arbitration agreement between the member and the customer, the member may seek to compel arbitration of the claims that are subject to arbitration. If the member seeks to compel arbitration of such claims, the member must agree to arbitrate all of the claims contained in the complaint if the customer so requests.
(6) All agreements shall include a statement that "No person shall bring a putative or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any person who has initiated in court a putative class action; or who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: (i) the class certification is denied; or (ii) the class is decertified; or (iii) the customer is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein."
(7) The provisions of this Rule shall become effective on May 1, 2005. The provisions of subparagraph (3) shall apply to all members as of the effective date of this Rule regardless of when the customer agreement in question was executed. Otherwise, agreements signed by a customer before May 1, 2005 are subject to the provisions of this Rule in effect at the time the agreement was signed.
(g) Negotiable Instruments Drawn From A Customer's Account
No member or person associated with a member shall obtain from a customer or submit for payment a check, draft, or other form of negotiable paper drawn on a customer's checking, savings, share, or similar account, without that person's express written authorization, which may include the customer's signature on the negotiable instrument. Each member shall maintain this authorization for a period of three years. This provision shall not, however, require maintenance of copies of negotiable instruments signed by customers.
(h) Order Audit Trail System Record keeping Requirements
(1) Each member that is a Reporting Member, as that term is defined in Rule 6951(m), shall record and maintain, with respect to each order, as that term is defined in Rule 6951(i), for such security that is received or executed at its trading department:
(A) an identification of each registered person who receives the order directly from a customer;
(B) an identification of each registered person who executes the order; and
(C) when an order is originated by the member and transmitted manually to another department, an identification of the department that originated the order.
(2) Each Reporting Member shall maintain and preserve records of the information required to be recorded under paragraph (h)(1) of this Rule for the period of time and accessibility specified in SEC Rule 17a-4(b).
(3) The records required to be maintained and preserved under paragraph (h)(1) of this Rule may be immediately produced or reproduced on "micrographic media" as defined in SEC Rule 17a-4(f)(1)(i) or by means of "electronic storage media" as defined in SEC Rule 17a-4(f)(1)(ii) that meet the conditions set forth in SEC Rule 17a-4(f) and be maintained and preserved for the required time in that form.
(i) Holding of Customer Mail
Upon the written instructions of a customer, a member may hold mail for a customer who will not be at his or her usual address for the period of his or her absence, but (A) not to exceed two months if the member is advised that such customer will be on vacation or traveling or (B) not to exceed three months if the customer is going abroad.
(j) Changes in Account Name or Designation
Before any customer order is executed, there must be placed upon the memorandum for each transaction, the name or designation of the account (or accounts) for which such order is to be executed. No change in such account name(s) (including related accounts) or designation(s) (including error accounts) shall be made unless the change has been authorized by a member or a person(s) designated under the provisions of NASD rules. Such person must, prior to giving his or her approval of the account designation change, be personally informed of the essential facts relative thereto and indicate his or her approval of such change in writing on the order or other similar record of the member. The essential facts relied upon by the person approving the change must be documented in writing and preserved for a period of not less than three years, the first two years in an easily accessible place, as the term "easily accessible place" is used in SEC Rule 17a-4
For purposes of this paragraph (j), a person(s) designated under the provisions of NASD rules to approve account name or designation changes must pass a qualifying principal examination appropriate to the business of the firm.
Rule 2860(b)(17), Options, Maintenance of Records
Rule 8210, Reports and Inspection of Books for Purpose of Investigating Complaints
Rule 9552, Failure to Provide Information or Keep Information Current
IM-2310-2, Fair Dealing with Customers