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Corporate Organization
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Rule 345 Employees — Registration, Approval, Records
(a) REGISTRATION
/01 Exceptions
Registration is not required for personnel performing the mechanical function of recording an order and passing it along the usual communication channels, telephoning reports of executions or reading quotations when the person handling the account is unavailable. This interpretation does not include registered trainees or transfers awaiting Exchange approval. It is restricted to employees who:
Registration is not required for personnel performing the mechanical function of recording an order and passing it along the usual communication channels, telephoning reports of executions or reading quotations when the person handling the account is unavailable. This interpretation does not include registered trainees or transfers awaiting Exchange approval. It is restricted to employees who:
• Are deemed capable and qualified by a member organization or allied member for these responsibilities.
• Are specifically authorized to accept orders.
• Are familiar with the normal size of orders in the account.
• Are closely supervised by the person servicing the account.
(Also see Rule 10/01, page 2910)
(Also see Rule 10/01, page 2910)
/02 "Independent Contractors"
The establishment of "independent contractor" status between a natural person registered with and qualified by the Exchange and a member organization is permitted only if it does not in any way compromise such person's characterization and treatment as an "employee" of their associated member organization for purposes of the Rules of the Exchange. Though not an exhaustive list, the following regulatory requirements must be fulfilled by a member organization that enters into an arrangement with any person asserting independent contractor status:
The establishment of "independent contractor" status between a natural person registered with and qualified by the Exchange and a member organization is permitted only if it does not in any way compromise such person's characterization and treatment as an "employee" of their associated member organization for purposes of the Rules of the Exchange. Though not an exhaustive list, the following regulatory requirements must be fulfilled by a member organization that enters into an arrangement with any person asserting independent contractor status:
1. The member organization must directly supervise and control all activities effected on its behalf by independent contractors to the same degree and extent that it is required to regulate the activities of all other persons registered with such member organization, consistent with Rule 342 and all other applicable Exchange rules, for example:
a) The member organization must ensure that any dual employment arrangement involving an independent contractor complies with Exchange Rule 346.
b) The member organization must ensure that: the independent contractor is covered by the organization's fidelity insurance bond; such person is not subject to a "statutory disqualification" (as defined in Section 3(a)(39) of the Securities Exchange Act of 1934); and that he or she is in compliance with applicable state Blue Sky provisions.
c) The member organization must ensure that notification of the initiation and cessation of independent contractor status and other required amendments be appropriately evidenced on Form U4 or Form U5, as applicable.
2. The member organizations must obtain the written concurrence of each individual asserting independent contractor status that he or she will be subject to the direct, detailed supervision, control and discipline of the member organization, and will be bound by the relevant rules, standards and guidelines of the member organization. Further, the prospective independent contractor must attest that he or she will be deemed an employee of the member organization and, as such, will be fully subject to the jurisdiction of the Exchange. The Exchange is a third-party beneficiary of any such attestation. The "Consent to Jurisdiction" form, included below, must be used for this purpose.
"Consent to Jurisdiction" forms executed pursuant to this Interpretation are not required to be submitted to, or approved by, the Exchange. However, all such forms must be maintained together with the corresponding executed independent contractor agreement and must be promptly provided to the Exchange upon request.
This Interpretation does not permit the incorporation of registered representatives nor does it permit the assertion of independent contractor status by any principal executive of a member organization.
CONSENT TO JURISDICTION
In consideration of my application as a "registered person" associated with ______________________________, I agree that:
"Consent to Jurisdiction" forms executed pursuant to this Interpretation are not required to be submitted to, or approved by, the Exchange. However, all such forms must be maintained together with the corresponding executed independent contractor agreement and must be promptly provided to the Exchange upon request.
This Interpretation does not permit the incorporation of registered representatives nor does it permit the assertion of independent contractor status by any principal executive of a member organization.
CONSENT TO JURISDICTION
In consideration of my application as a "registered person" associated with ______________________________, I agree that:
(a) I am and shall remain subject to the direct, detailed supervision, control and discipline of _____________________ with respect to any and all activities engaged in by me related to the securities business, and any other business engaged in by _____________________, and agree to be bound by the relevant, rules, standards and guidelines of _____________________ regarding duties and responsibilities governing my conduct.
(b) For all purposes of the Rules of New York Stock Exchange LLC (the "Exchange") I shall be deemed to be an employee of ____________________________ . I am and shall remain fully subject to the jurisdiction of the Exchange and to the Rules of the Exchange presently obtaining or as they shall from time to time be amended, including, but not by way of limitation, all penalties, prohibitions or limitations provided for therein, as they apply to an "employee" of a member organization of the Exchange, and I shall at all times conduct myself in accordance with said Rules.
_______________________________
Date
_______________________________
Signature of Employee
_______________________________
Name of Employee
_______________________________
Social Security Number
_________________________
Full Name of Member Organization and Address of Branch Office
Date
_______________________________
Signature of Employee
_______________________________
Name of Employee
_______________________________
Social Security Number
_________________________
Full Name of Member Organization and Address of Branch Office
/03 Registered Persons Who Volunteer or Are Called to Active Military Duty
The Exchange will grant specific relief to registered employees of member organizations who volunteer or are called into active military duty. Such registered employees will be placed in a specifically designated "inactive" status upon notification to the Exchange of their volunteering or military call-up. However, such employees will remain registered with the Exchange, and, therefore are eligible to receive transaction-based compensation. Since such employees are "inactive," they may not perform any of the duties performed by a registered representative. However, his or her member organization may make arrangements with another registered representative of the member organization to have the accounts of such registered person serviced and to provide for a sharing of the commissions such accounts generate.
Further, member organizations shall be waived from remitting to the Exchange the annual maintenance fees for such registered employees as prescribed in Rule 345.14.
Such registered employees who volunteer or are called into active military duty shall receive a deferment from the Regulatory Element and Firm Element of the Continuing Education Program as prescribed in Exchange Rule 345A. Continuing Education requirements will be reinstated upon the registered person's return from active military duty.
Dual member organizations of the NYSE and NASD should notify the NASD of their registered employees who volunteer or are called into active military duty by mailing or faxing to the CRD/Public Disclosure Department of the NASD a letter (on firm letterhead) identifying the name and CRD number of the registered person called into active duty, the name and CRD number of the firm, or firms, with whom such person is associated, and a copy of the official call-up notification.
NYSE-only member organizations should notify the Exchange of their registered employees who volunteer or are called into active duty by mailing or faxing to the Exchange's Qualifications and Registrations Department, a letter (on firm letterhead) identifying the name and CRD number of person(s) who volunteer or are called into active duty, the name and CRD number of the firm, or firms, with whom such person is associated, and a copy of the official call-up notification.
The Exchange will grant specific relief to registered employees of member organizations who volunteer or are called into active military duty. Such registered employees will be placed in a specifically designated "inactive" status upon notification to the Exchange of their volunteering or military call-up. However, such employees will remain registered with the Exchange, and, therefore are eligible to receive transaction-based compensation. Since such employees are "inactive," they may not perform any of the duties performed by a registered representative. However, his or her member organization may make arrangements with another registered representative of the member organization to have the accounts of such registered person serviced and to provide for a sharing of the commissions such accounts generate.
Further, member organizations shall be waived from remitting to the Exchange the annual maintenance fees for such registered employees as prescribed in Rule 345.14.
Such registered employees who volunteer or are called into active military duty shall receive a deferment from the Regulatory Element and Firm Element of the Continuing Education Program as prescribed in Exchange Rule 345A. Continuing Education requirements will be reinstated upon the registered person's return from active military duty.
Dual member organizations of the NYSE and NASD should notify the NASD of their registered employees who volunteer or are called into active military duty by mailing or faxing to the CRD/Public Disclosure Department of the NASD a letter (on firm letterhead) identifying the name and CRD number of the registered person called into active duty, the name and CRD number of the firm, or firms, with whom such person is associated, and a copy of the official call-up notification.
NYSE-only member organizations should notify the Exchange of their registered employees who volunteer or are called into active duty by mailing or faxing to the Exchange's Qualifications and Registrations Department, a letter (on firm letterhead) identifying the name and CRD number of person(s) who volunteer or are called into active duty, the name and CRD number of the firm, or firms, with whom such person is associated, and a copy of the official call-up notification.
(a)
(i) COMPENSATION
/01 Compensation to Non-Registered Persons
Rule 345(a) precludes member organizations from paying to non-registered persons compensation based upon the business of customers they direct to member organizations if:
Rule 345(a) precludes member organizations from paying to non-registered persons compensation based upon the business of customers they direct to member organizations if:
a) the compensation is formulated as a direct percentage of the commissions or income generated, or
b) payment is on other than an isolated basis, or
c) the customers have the use of the facilities of such person for the transmission of orders or messages directly to the member organization, or
d) such person has formal discretionary authority to place orders or instructions with the member organizations, or
e) such person regularly engages in activity which may be reasonably expected to result in the procurement of new customer or orders.
The interpretation does not preclude normal clearing and introductory arrangements between member organizations or between member organizations and non-member broker/dealers.
Please refer to /03 below for interpretation with respect to transaction-related compensation arrangements with non-registered foreign persons acting as finders.
Please refer to /03 below for interpretation with respect to transaction-related compensation arrangements with non-registered foreign persons acting as finders.
/02 Compensation Paid for Advisory Solicitations
A member organization, registered with the SEC as an investment adviser, may enter into any arrangement that fully complies with Rule 206(4)-3 ("Cash Payments for Client Solicitations") of the Investment Advisers Act of 1940. Such arrangements will not be deemed contrary to the registration requirements of Rule 345 (see also Rule 10 "Definition of Registered Representative"). Member organizations are advised to check on the applicability of any state registration requirements for member organizations and associated persons.
A member organization, registered with the SEC as an investment adviser, may enter into any arrangement that fully complies with Rule 206(4)-3 ("Cash Payments for Client Solicitations") of the Investment Advisers Act of 1940. Such arrangements will not be deemed contrary to the registration requirements of Rule 345 (see also Rule 10 "Definition of Registered Representative"). Member organizations are advised to check on the applicability of any state registration requirements for member organizations and associated persons.
/03 Compensation to Non-registered Foreign Persons Acting as Finders
Member organizations may pay to non-registered foreign persons transaction-related compensation based upon the business of customers they direct to member organizations if the following conditions are met:
Member organizations may pay to non-registered foreign persons transaction-related compensation based upon the business of customers they direct to member organizations if the following conditions are met:
a) the member organization has assured itself that the non-registered foreign person who will receive the compensation (the "finder") is not required to register in the U.S. as a broker-dealer and has further assured itself that the compensation arrangement does not violate applicable foreign law;
b) the finders are foreign nationals (not U.S. citizens) or foreign entities domiciled abroad;
c) the customers are foreign nationals (not U.S. citizens) or foreign entities domiciled abroad transacting business in either foreign or U.S. securities;
d) customers receive a descriptive document, similar to that required by Rule 206(4)-3(b) of the Investment Advisers Act of 1940, that discloses what compensation is being paid to finders;
e) customers provide written acknowledgement to the member organization of the existence of the compensation arrangement and that such acknowledgement is retained and made available for inspection by the Exchange;
f) records reflecting payments to finders are maintained on the member organization's books and actual agreements between the member organization and persons compensated are available for inspection by the Exchange; and
g) the confirmation of each transaction indicates that a referral or finders fee is being paid pursuant to an agreement.
(b) OFFICERS
/01 Application
All persons having titles that imply authority and responsibility over sales personnel must be qualified as supervisory persons. See Rule 342.13/01.
All persons having titles that imply authority and responsibility over sales personnel must be qualified as supervisory persons. See Rule 342.13/01.
/02 Officers of Division within Member Organizations
See Rule 311(h)/02
See Rule 311(h)/02
/03 Officers of Partnerships
The Exchange does not object to member partnerships designating certain employees as officers, provided the title makes clear the employee's status by defining the specific area of responsibility, e.g., Vice President, Research Department.
The Exchange does not object to member partnerships designating certain employees as officers, provided the title makes clear the employee's status by defining the specific area of responsibility, e.g., Vice President, Research Department.
/04 Persons Previously Approved in Other Capacities
Applicants applying for officer status (See also Rule 345(b)) who are currently registered with the Exchange through the Central Registration Depository ("CRD") in another capacity, will be required to file only page 1 of Form U4 by checking the "officer" box under the "Registration Category" section of the form. The CRD will process this information and post it to the CRD record.
Applicants applying for officer status (See also Rule 345(b)) who are currently registered with the Exchange through the Central Registration Depository ("CRD") in another capacity, will be required to file only page 1 of Form U4 by checking the "officer" box under the "Registration Category" section of the form. The CRD will process this information and post it to the CRD record.
.11 INVESTIGATION AND RECORDS
/01 Application — Investigation
Member organizations must investigate the previous record of persons whom they contemplate employing including, (1) persons required to be registered with the Exchange, (2) persons who regularly have access to the keeping, handling or processing of securities, monies or the original books and records relating to securities or monies and (3) persons having direct supervisory responsibility over persons engaged in the activities referred to in (1) and (2) above.
Investigatory requirements for persons required to be registered with the Exchange (referred to in (1) above) will be satisfied when the member organization fulfills its obligation to verify the information contained in the Uniform Application for Securities Industry Registration Or Transfer (Form U4). Similarly, investigatory requirements pertaining to persons specified in (2) and (3) above shall be satisfied if a member organization verifies the information obtained pursuant to SEA Rule 17a-3(a)(12). (See /02 below.) Notwithstanding the above, further inquiry must be made where appropriate in light of background information developed, the position for which the person is being considered or other circumstances.
For those persons a member organization contemplates employing who are not specifically required to be investigated, a member organization should tailor its investigation in a manner it deems appropriate in light of the position to be held by such person. (See also Rule 346(f) regarding persons subject to "statutory disqualifications").
Member organizations must investigate the previous record of persons whom they contemplate employing including, (1) persons required to be registered with the Exchange, (2) persons who regularly have access to the keeping, handling or processing of securities, monies or the original books and records relating to securities or monies and (3) persons having direct supervisory responsibility over persons engaged in the activities referred to in (1) and (2) above.
Investigatory requirements for persons required to be registered with the Exchange (referred to in (1) above) will be satisfied when the member organization fulfills its obligation to verify the information contained in the Uniform Application for Securities Industry Registration Or Transfer (Form U4). Similarly, investigatory requirements pertaining to persons specified in (2) and (3) above shall be satisfied if a member organization verifies the information obtained pursuant to SEA Rule 17a-3(a)(12). (See /02 below.) Notwithstanding the above, further inquiry must be made where appropriate in light of background information developed, the position for which the person is being considered or other circumstances.
For those persons a member organization contemplates employing who are not specifically required to be investigated, a member organization should tailor its investigation in a manner it deems appropriate in light of the position to be held by such person. (See also Rule 346(f) regarding persons subject to "statutory disqualifications").
/02 Application — Records
Member organizations are reminded to obtain and keep on file all information required under SEA Rule 17a-3(a)(12) for persons included within the definition of "associated person" (see Rule 17a-3(a)(12)(ii)). Further, the Exchange requires that a record be kept of whether a bonding company has ever denied or revoked, or paid out on any bond because of such person.
For persons required to be registered with the Exchange, a duplicate copy of Form U4 signed by an authorized person will satisfy all the recordkeeping requirements of NYSE Rule 345.11.
Member organizations are reminded to obtain and keep on file all information required under SEA Rule 17a-3(a)(12) for persons included within the definition of "associated person" (see Rule 17a-3(a)(12)(ii)). Further, the Exchange requires that a record be kept of whether a bonding company has ever denied or revoked, or paid out on any bond because of such person.
For persons required to be registered with the Exchange, a duplicate copy of Form U4 signed by an authorized person will satisfy all the recordkeeping requirements of NYSE Rule 345.11.
.12 APPLICATIONS
/01 Updating Form U4
Information contained on Form U4 must be kept current. Instructions on Form U4 require that a registered person ensure that the information contained in Form U4 is updated and amended as necessary. In this regard, member organizations have an obligation to ensure that amended forms are submitted to the Exchange in a timely manner.
Information contained on Form U4 must be kept current. Instructions on Form U4 require that a registered person ensure that the information contained in Form U4 is updated and amended as necessary. In this regard, member organizations have an obligation to ensure that amended forms are submitted to the Exchange in a timely manner.
.15 QUALIFICATIONS
/01 Examination Waivers
Where good cause is shown, the examination requirement for a candidate for registration may be waived at the discretion of the Exchange. The Exchange will review requests for waivers in light of several factors including length and type of previous employment and the requirements of other self- regulatory organizations.
In addition, registered representative candidates who meet one of the following conditions may request a waiver of the examination requirements.
Where good cause is shown, the examination requirement for a candidate for registration may be waived at the discretion of the Exchange. The Exchange will review requests for waivers in light of several factors including length and type of previous employment and the requirements of other self- regulatory organizations.
In addition, registered representative candidates who meet one of the following conditions may request a waiver of the examination requirements.
• A former NYSE registered representative who terminated his or her association as such within the last two years, from the date of termination.
• A former NYSE registered representative who within the last ten years has been continuously employed full-time in a general securities business.
/02 Categories of Registration
Registered representative candidates may sit for the Series 7 exam at the first available examination session after they have become employed. Member organizations are reminded that trainees may not perform the functions of a registered representative until approved by the Exchange. (Also see Rule 345(a)/01, page 3450.)
Limited registration candidates are those whose activities are limited solely to the solicitation or handling of the sale or purchase of instruments such as investment company securities and variable contracts, insurance premium funding programs, direct participation programs and municipal securities. Limited purpose registered representative candidates must qualify by passing a qualification examination acceptable to the Exchange.
Limited registration for floor members and floor clerks would permit floor members and floor clerks who have successfully completed the Series 7A examination module to conduct a public business which is limited to accepting orders directly from professional customers for execution on the trading floor. The Floor Member ("Series 15") Examination and the Trading Assistant ("Series 25") Examination are prerequisites for the Series 7A Examination for floor members and floor clerks, respectively.
A professional customer includes a bank, trust company, insurance company, investment trust, state or political subdivision thereof, charitable or nonprofit educational institution regulated under the laws of the United States, or any state, or pension or profit sharing plan subject to ERISA or of an agency of the United States or of a state or political subdivision thereof or any person who has a net worth of at least $45 million of which $40 million are financial assets.
For purposes of the definition of professional customer, the term "person" shall mean the same as that term is defined in Rule 2, except that it shall not include natural persons.
Registered options representative: Each registered representative who transacts any business with the public in options contracts shall qualify as a "Registered Options Representative" by passing the Series 7 examination.
Securities lending representatives and their direct supervisors are not subject to training or examination requirements. Securities lending representatives and their direct supervisors must, however, file a Form U4 and sign a code of ethics agreement (addendum to Form U4).
See Rule 345.10 for definitions of the term "securities lending representative."
Registered representative candidates may sit for the Series 7 exam at the first available examination session after they have become employed. Member organizations are reminded that trainees may not perform the functions of a registered representative until approved by the Exchange. (Also see Rule 345(a)/01, page 3450.)
Limited registration candidates are those whose activities are limited solely to the solicitation or handling of the sale or purchase of instruments such as investment company securities and variable contracts, insurance premium funding programs, direct participation programs and municipal securities. Limited purpose registered representative candidates must qualify by passing a qualification examination acceptable to the Exchange.
Limited registration for floor members and floor clerks would permit floor members and floor clerks who have successfully completed the Series 7A examination module to conduct a public business which is limited to accepting orders directly from professional customers for execution on the trading floor. The Floor Member ("Series 15") Examination and the Trading Assistant ("Series 25") Examination are prerequisites for the Series 7A Examination for floor members and floor clerks, respectively.
A professional customer includes a bank, trust company, insurance company, investment trust, state or political subdivision thereof, charitable or nonprofit educational institution regulated under the laws of the United States, or any state, or pension or profit sharing plan subject to ERISA or of an agency of the United States or of a state or political subdivision thereof or any person who has a net worth of at least $45 million of which $40 million are financial assets.
For purposes of the definition of professional customer, the term "person" shall mean the same as that term is defined in Rule 2, except that it shall not include natural persons.
Registered options representative: Each registered representative who transacts any business with the public in options contracts shall qualify as a "Registered Options Representative" by passing the Series 7 examination.
Securities lending representatives and their direct supervisors are not subject to training or examination requirements. Securities lending representatives and their direct supervisors must, however, file a Form U4 and sign a code of ethics agreement (addendum to Form U4).
See Rule 345.10 for definitions of the term "securities lending representative."
.18 FILING WITH AGENT
/01 Properly Authorized Agent
The "Properly Authorized Agent" is the Central Registration Depository ("CRD") until otherwise noted. Required filings under this Rule 345, where appropriate, may be made with the properly authorized agent.
The "Properly Authorized Agent" is the Central Registration Depository ("CRD") until otherwise noted. Required filings under this Rule 345, where appropriate, may be made with the properly authorized agent.
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Amendment. Amended by SR-FINRA-2008-036 eff. Nov. 11, 2008. Selected Notice: 08-64. |
