View Whole SectionText only Print Print Manager Link
Previous Next

1022. Categories of Principal Registration


View whole section
(a) General Securities Principal
(1) Each person associated with a member who is included within the definition of principal in Rule 1021, and each person designated as a Chief Compliance Officer on Schedule A of Form BD, shall be required to register with the Association as a General Securities Principal and shall pass an appropriate Qualification Examination before such registration may become effective unless such person's activities are so limited as to qualify such person for one or more of the limited categories of principal registration specified hereafter. A person whose activities in the investment banking or securities business are so limited is not, however, precluded from attempting to become qualified for registration as a General Securities Principal, and if qualified, may become so registered.
(A) Subject to paragraphs (a)(1)(B), (a)(2) and (a)(5), each person seeking to register and qualify as a General Securities Principal must, prior to or concurrent with such registration, become registered, pursuant to the Rule 1030 Series, either as a General Securities Representative or a Limited Representative—Corporate Securities.
(B) A person seeking to register and qualify as a General Securities Principal who will have supervisory responsibility over investment banking activities described in NASD Rule 1032(i)(1) must, prior to or concurrent with such registration, become registered as a Limited Representative—Investment Banking.
(C) A person who has been designated as a Chief Compliance Officer on Schedule A of Form BD for at least two years immediately prior to January 1, 2002, and who has not been subject within the last ten years to any statutory disqualification as defined in Section 3(a)(39) of the Act; a suspension; or the imposition of a fine of $5,000 or more for violation of any provision of any securities law or regulation, or any agreement with or rule or standard of conduct of any securities governmental agency, securities self-regulatory organization, or as imposed by any such regulatory or self-regulatory organization in connection with a disciplinary proceeding shall be required to register as a General Securities Principal, but shall be exempt from the requirement to pass the appropriate Qualification Examination. If such person has acted as a Chief Compliance Officer for a member whose business is limited to the solicitation, purchase and/or sale of "government securities," as that term is defined in Section 3(a)(42)(A) of the Act, or the activities described in Rule 1022(d)(1)(A) or Rule 1022(e)(2), he or she shall be exempt from the requirement to pass the appropriate Qualification Examination only if he or she registers as a Government Securities Principal, or a Limited Principal pursuant to Rules 1022(d) or Rule 1022(e), as the case may be, and restricts his or her activities as required by such registration category. A Chief Compliance Officer who is subject to the Qualification Examination requirement shall be allowed a period of 90 calendar days following January 1, 2002, within which to pass the appropriate Qualification Examination for Principals.
(2) A Limited Representative—Corporate Securities seeking registration as General Securities Principal who will have supervisory responsibility over the conduct of business in investment company and variable contracts products and/or direct participation programs as defined herein must, prior to or concurrent with registration as a General Securities principal, become registered pursuant to the Rule 1030 Series hereof, as a Limited Representative—Investment Company and Variable Contracts Products and/or a Limited Representative—Direct Participation Programs.
(3) Except as provided in Rule 1021(c), a person who was registered with NASD as a Principal, shall not be required to pass a Qualification Examination for General Securities Principal and shall be qualified as a General Securities Principal.
(4) A person registered solely as a General Securities Principal shall not be qualified to function as a Limited Principal—Financial and Operations; Limited Principal—Registered Options and Security Futures; Limited Principal—General Securities Sales Supervisor; Municipal Securities Principal; or Municipal Fund Securities Limited Principal, unless that person is also qualified and registered as such.
(5) A person registered solely as a General Securities Principal shall not be qualified to supervise the conduct of a "research analyst" as defined in Rule 1050, or a supervisory analyst qualified pursuant to Rule 344 of the New York Stock Exchange who approves research reports on equity securities as permitted by Rule 2210(b)(1), unless such principal has passed a Qualification Examination as specified by the Board of Governors.
(b) Limited Principal—Financial and Operations
(1) Every member of the Association, that is operating pursuant to the provisions of SEC Rule 15c3-1(a)(1)(ii), (a)(2)(i) or (a)(8), shall designate as Limited Principal—Financial and Operations those persons associated with it, at least one of whom shall be its chief financial officer, who performs the duties described in subparagraph (2) hereof. Each person associated with a member who performs such duties shall be required to register as a Limited Principal—Financial and Operations with the Association and shall pass an appropriate Qualification Examination before such registration may become effective.
(2) The term "Limited Principal—Financial and Operations" shall mean a person associated with a member whose duties include:
(A) final approval and responsibility for the accuracy of financial reports submitted to any duly established securities industry regulatory body;
(B) final preparation of such reports;
(C) supervision of individuals who assist in the preparation of such reports;
(D) supervision of and responsibility for individuals who are involved in the actual maintenance of the member's books and records from which such reports are derived;
(E) supervision and/or performance of the member's responsibilities under all financial responsibility rules promulgated pursuant to the provisions of the Act;
(F) overall supervision of and responsibility for the individuals who are involved in the administration and maintenance of the member's back office operations; or
(G) any other matter involving the financial and operational management of the member.
(3) A person registered solely as a Limited Principal—Financial and Operations shall not be qualified to function in a principal capacity with responsibility over any area of business activity not described in subparagraph (2) hereof.
(c) Limited Principal—Introducing Broker/Dealer Financial and Operations
(1) Every member of the Association, that is subject to the requirements of SEC Rule 15c3-1, other than a member operating pursuant to SEC Rule 15c3-1(a)(1)(ii), (a)(2)(i) or (a)(8) in which case paragraph (b) shall apply, shall designate as Limited Principal—Introducing Broker/Dealer Financial and Operations those persons associated with it, at least one of whom shall be its chief financial officer, who perform the duties described in subparagraph (2) hereof. Each person associated with a member who performs such duties shall be required to register as a Limited Principal—Introducing Broker/Dealer Financial and Operations with the Association and shall pass an appropriate Qualification Examination before such registration may become effective.
(2) The term "Limited Principal—Introducing Broker/Dealer Financial and Operations" shall mean a person associated with a member whose duties include:
(A) final approval and responsibilities for the accuracy of financial reports submitted to any duly established securities industry regulatory body;
(B) final preparation of such reports;
(C) supervision of individuals who assist in the preparation of such reports;
(D) supervision of and responsibility for individuals who are involved in the actual maintenance of the member's books and records from which such reports are derived;
(E) supervision and/or performance of the member's responsibilities under all financial responsibility rules promulgated pursuant to the provisions of the Act;
(F) overall supervision of and responsibility for the individuals who are involved in the administration and maintenance of the member's back office operations; or
(G) any other matter involving the financial and operational management of the member.
(3) Except as provided in Rule 1021(c), a person designated pursuant to the provisions of subparagraph (1) hereof, shall not be required to take the Limited Principal—Introducing Broker/Dealer Financial and Operations Examination and shall be qualified for registration as a Limited Principal—Introducing Broker/Dealer Financial and Operations if such a person is qualified to be registered or is registered as a Limited Principal—Financial and Operations as defined in paragraph (b)(2) hereof.
(4) A person registered solely as a Limited Principal—Introducing Broker/Dealer Financial and Operations shall not be qualified to function in a principal capacity with responsibility over any area of business activity not prescribed in subparagraph (2), hereof. Such person shall not be qualified to function in a principal capacity at a member unless such member operates under subparagraph (1), hereof.
(d) Limited Principal—Investment Company and Variable Contracts Products
(1) Each person associated with a member who is included within the definition of principal in Rule 1021, may register with the Association as a Limited Principal—Investment Company and Variable Contracts Products if:
(A) his activities in the investment banking and securities business are limited to the solicitation, purchase and/or sale of:
(i) redeemable securities of companies registered pursuant to the Investment Company Act of 1940;
(ii) securities of closed-end companies registered pursuant to the Investment Company Act of 1940 during the period of original distribution only; and,
(iii) variable contracts and insurance premium funding programs and other contracts issued by an insurance company except contracts which are exempt securities pursuant to Section 3(a)(8) of the Securities Act of 1933;
(B) he is registered, pursuant to Rule 1030 Series, as either a General Securities Representative or a Limited Representative—Investment Company and Variable Contracts Products; and
(C) he passes an appropriate Qualification Examination for Limited Principal—Investment Company and Variable Contracts Products.
(2) A person registered solely as a Limited Principal—Investment Company and Variable Contracts Products shall not be qualified to function in a principal capacity with responsibility over any area of business activity not prescribed in subparagraph (1) hereof.
(e) Limited Principal—Direct Participation Programs
(1) Each person associated with a member who is included within the definition of principal in Rule 1021 may register with the Association as a Limited Principal—Direct Participation Program if:
(A) his activities in the investment banking and securities business are limited solely to the equity interests in or the debt of direct participation programs as defined in subparagraph (2) hereof;
(B) he is registered pursuant to the Rule 1030 Series, as either a General Securities Representative or a Limited Representative—Direct Participation Programs; and
(C) he passes an appropriate Qualification Examination for Limited Principal—Direct Participation Programs.
(2) For purposes of the Rule 1000 Series, "direct participation programs" shall mean programs that provide for flow-through tax consequences regardless of the structure of the legal entity or vehicle for distribution including, but not limited to, oil and gas programs, cattle programs, condominium securities, Subchapter S corporate offerings and all other programs of a similar nature, regardless of the industry represented by the program, or any combination thereof. Excluded from this definition are real estate investment trusts, tax qualified pension and profit sharing plans pursuant to Sections 401 and 403(a) of the Internal Revenue Code (Code) and individual retirement plans under Section 408 of the Code, tax sheltered annuities pursuant to the provisions of Section 403(b) of the Code and any company including separate accounts registered pursuant to the Investment Company Act of 1940. Also excluded from this definition is any program that is listed on a national securities exchange or any program for which an application for listing on a national securities exchange has been made.
(3) A person registered solely as a Limited Principal—Direct Participation Programs shall not be qualified to function in a principal capacity with responsibility over any area of business activity not prescribed in subparagraph (1) hereof.
(f) Limited Principal—Registered Options and Security Futures
(1) Every member of NASD that is engaged in, or that intends to engage in transactions in security futures or options with the public shall have at least one Registered Options and Security Futures Principal who shall have satisfied the requirements of this subparagraph. Every person engaged in the supervision of options and security futures sales practices, including a person designated pursuant to Rule 3010(a)(2) shall be registered as a Registered Options and Security Futures Principal.
(2) Each person required by subparagraph (f)(1) to be a Registered Options and Security Futures Principal shall pass the appropriate Qualification Examination for Registered Options and Security Futures Principal, or an equivalent examination acceptable to the Association, for the purpose of demonstrating an adequate knowledge of options and security futures trading generally, the Rules of the Association applicable to trading of option and security futures contracts and the rules of registered clearing agencies for options and security futures, and be registered as such before engaging in the duties or accepting the responsibilities of a Registered Options and Security Futures Principal.
(3) Each person required to register and qualify as a Registered Options and Security Futures Principal must, prior to or concurrent with such registration, be or become qualified pursuant to the Rule 1030 Series, as either a General Securities Representative or a Limited Representative—Corporate Securities and a Registered Options and Security Futures Representative.
(4) A person registered solely as a Registered Options and Security Futures Principal shall not be qualified to function in a principal capacity with responsibility over any area of business activity not prescribed in subparagraph (1).
(5) Any person who is registered with NASD as a Registered Options and Security Futures Principal, or who becomes registered as a Registered Options and Security Futures Principal before a revised examination that includes security futures products is offered, must complete a firm-element continuing education program that addresses security futures and a principal's responsibilities for security futures before such person can supervise security futures activities. The deadline for completing a firm-element continuing education program in order to qualify to supervise security futures activities is the earlier of December 31, 2015, or one business day prior to the date a revised examination that includes security futures products is offered. After December 31, 2015, or the business day before such revised examination is offered, a person associated with a member must pass such revised qualification examination (or any other examination covering security futures that is acceptable to NASD) before supervising security futures activities, unless such person has previously completed a firm-element continuing education program addressing security futures and such registration as a Registered Options and Security Futures Principal has not lapsed.
(g) Limited Principal—General Securities Sales Supervisor
(1) Each person associated with a member who is included in the definition of principal in Rule 1021 may register with the Association as a Limited Principal—General Securities Sales Supervisor if:
(A) his supervisory responsibilities in the investment banking and securities business are limited to the securities sales activities of a member, including the training of sales and sales supervisory personnel and the maintenance of records of original entry and/or ledger accounts of the member required to be maintained in branch offices by SEC record keeping rules;
(B) he is registered pursuant to the Rule 1030 series as a General Securities Representative; and
(C) he is qualified to be so registered by passing an appropriate examination.
(2) A person registered in this category solely on the basis of having passed the Qualification Examination for Limited Principal—General Securities Sales Supervisor shall NOT be qualified to:
(A) function in a principal capacity with responsibility over any area of business activity not prescribed in subparagraph (1);
(B) be included for purposes of the principal numerical requirements of Rule 1021(e)(1); or
(C) perform for a member any or all of the following activities:
(i) supervision of the origination and structuring of underwritings;
(ii) supervision of market making commitments;
(iii) supervision of the custody of firm or customer funds or securities for purposes of SEC Rule 15c3-3; or
(iv) supervision of overall compliance with financial responsibility rules for broker-dealers promulgated pursuant to the provisions of the Act.
(3) Any person who is registered with NASD as a Limited Principal—General Securities Sales Supervisor, or who becomes registered as a Limited Principal—General Securities Sales Supervisor before a revised examination that includes security futures products is offered, must complete a firm-element continuing education program that addresses security futures and a principal's responsibilities for security futures before such person can supervise security futures activities. The deadline for completing a firm-element continuing education program in order to qualify to supervise security futures activities is the earlier of December 31, 2015, or one business day prior to the date a revised examination that includes security futures products is offered. After December 31, 2015, or the business day before such revised examination is offered, a person associated with a member must pass such revised qualification examination (or any other examination covering security futures that is acceptable to NASD) before supervising security futures activities, unless such person has previously completed a firm-element continuing education program addressing security futures and such registration as a Limited Principal—General Securities Sales Supervisor has not lapsed.
(h) Limited Principal—Government Securities
(1) All persons associated with a member not previously registered as a principal who are to function as government securities principals shall be registered as such with NASD.
(2) Each person associated with a member must be registered as a Limited Principal—Government Securities if such person is:
(A) engaged in the management or supervision of the member's government securities business, including:
(i) underwriting, trading or sales of government securities;
(ii) financial advisory or consultant services for issuers in connection with the issuance of government securities;
(iii) research or investment advice, other than general economic information or advice, with respect to government securities in connection with the activities described in (i) and (ii) above;
(iv) activities other than those specifically described above that involve communication, directly or indirectly, with public investors in government securities in connection with the activities described in (i) and (ii) above; or
(B) responsible for supervision of:
(i) the processing and clearance activities with respect to government securities; or
(ii) the maintenance of records involving any of the activities described in paragraph (2)(A) above.
(3) Notification of Principal Status
A member shall promptly notify NASD when an individual not previously registered with the member as a principal assumes the duties of a principal on the form designated by the Board accompanied by the applicable fees.
Amended by SR-FINRA-2013-014 eff. Feb. 4, 2013.
Amended by SR-FINRA-2012-055 eff. Dec. 31, 2012.
Amended by SR-FINRA-2009-092 eff. Dec. 31, 2009.
Amended by SR-FINRA-2009-006 eff. Nov. 2, 2009.
Amended by SR-FINRA-2007-035 eff. June 23, 2008.
Amended by SR-NASD-2006-118 eff. Nov. 15, 2006.
Amended by SR-NASD-2005-087 eff. Aug. 1, 2006.
Amended by SR-NASD-2004-078 eff. Aug. 2, 2005.
Amended by SR-NASD-2003-24 eff. March 3, 2003.
Amended by SR-NASD-2002-40 eff. Oct. 15, 2002.
Amended by SR-NASD-99-46 eff. Jan 1, 2002.
Amended by SR-NASD-2000-77 eff. Sept. 17, 2001.
Amended by SR-NASD-97-28 eff. Aug. 7, 1997.
Amended by SR-NASD-95-39 eff. Aug 20, 1996.
Amended by SR-NASD-91-65 eff. Mar. 4, 1992.
Amended by SR-NASD-89-24 eff. Aug. 24, 1989.
Amended by SR-NASD-88-27 eff. Aug. 25, 1988.
Amended by SR-NASD-84-30 eff. Jan. 23, 1985.
Amended by SR-NASD-81-13 eff. Dec. 7, 1981.
Amended by SR-NASD-80-01 eff. June 26, 1980.
Amended by SR-NASD-78-16 eff. May 30, 1979.
Amended by SR-NASD-77-23 eff. Nov. 15, 1978.

Selected Notices: 01-51, 01-52, 03-20, 04-81, 08-28, 09-41.

Previous Next