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  • 1000. MEMBER APPLICATION AND ASSOCIATED PERSON REGISTRATION

    • 1010. Electronic Filing Requirements for Uniform Forms

      (a) Filing Requirement
      Except as provided in Rule 1013(a)(2), all forms required to be filed by Article IV, Sections 1, 7, and 8, and Article V, Sections 2 and 3, of the FINRA By-Laws shall be filed through an electronic process or such other process FINRA may prescribe to the Central Registration Depository.
      (b) Supervisory Requirements
      (1) In order to comply with the supervisory procedures requirement in Rule 3110, each member shall identify a registered principal(s) or corporate officer(s) who has a position of authority over registration functions, to be responsible for supervising the electronic filing of appropriate forms pursuant to this Rule.
      (2) The registered principal(s) or corporate officer(s) who has or have the responsibility to review and approve the forms filed pursuant to this Rule shall be required to acknowledge, electronically, that he is filing this information on behalf of the member and the member's associated persons.
      (c) Form U4 Filing Requirements
      (1) Except as provided in paragraphs (c)(2) and (c)(3) below, every initial and transfer electronic Form U4 filing and any amendments to the disclosure information on Form U4 shall be based on a manually signed Form U4 provided to the member or applicant for membership by the person on whose behalf the Form U4 is being filed. As part of the member's recordkeeping requirements, it shall retain the person's manually signed Form U4 or amendments to the disclosure information on Form U4 in accordance with SEA Rule 17a-4(e)(1) and make them available promptly upon regulatory request. An applicant for membership also shall retain in accordance with SEA Rule 17a-4(e)(1) every manually signed Form U4 it receives during the application process and make them available promptly upon regulatory request.
      (2) A member may file electronically amendments to the disclosure information on Form U4 without obtaining the subject associated person's manual signature on the form, provided that the member shall use reasonable efforts to:
      (A) provide the associated person with a copy of the amended disclosure information prior to filing; and
      (B) obtain the associated person's written acknowledgment (which may be electronic) prior to filing that the information has been received and reviewed. As part of the member's recordkeeping requirements, the member shall retain this acknowledgment in accordance with SEA Rule 17a-4(e)(1) and make it available promptly upon regulatory request.
      (3) In the event a member is not able to obtain an associated person's manual signature or written acknowledgement of amended disclosure information on Form U4 prior to filing of such information pursuant to paragraph (c)(1) or (2), the member is obligated to file the disclosure information as to which it has knowledge in accordance with Article V, Section 2 of the FINRA By-Laws. The member shall use reasonable efforts to provide the associated person with a copy of the amended disclosure information that was filed.
      (4) A member may file electronically amendments to administrative data on Form U4 without obtaining the subject associated person's signature on the form. The member shall use reasonable efforts to provide the associated person with a copy of the amended administrative information that was filed.
      (d) Fingerprint Information
      Upon filing an electronic Form U4 on behalf of a person applying for registration, a member shall promptly submit fingerprint information for that person. FINRA may make a registration effective pending receipt of the fingerprint information. If a member fails to submit the fingerprint information within 30 days after FINRA receives the electronic Form U4, the person's registration shall be deemed inactive. In such case, FINRA shall notify the member that the person must immediately cease all activities requiring registration and is prohibited from performing any duties and functioning in any capacity requiring registration. FINRA shall administratively terminate a registration that is inactive for a period of two years. A person whose registration is administratively terminated may reactivate the registration only by reapplying for registration and meeting the qualification requirements of the applicable provisions of the Rules 1210 and 1220. Upon application and a showing of good cause, FINRA may extend the 30-day period.
      (e) Form U5 Filing Requirements
      Initial filings and amendments of Form U5 shall be submitted electronically. As part of the member's recordkeeping requirements, it shall retain such records for a period of not less than three years, the first two years in an easily accessible place, in accordance with SEA Rule 17a-4, and make such records available promptly upon regulatory request.

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

      .01 Delegation of Electronic Filing Functions. The designated registered principal(s) or corporate officer(s) required by paragraph (b)(1) to supervise the member's electronic filings may delegate to an associated person (who need not be registered) the electronic filing of the member's appropriate forms via Web CRD. The registered principal(s) or corporate officer(s) responsible for supervising the member's electronic filings may also delegate to the associated person making the electronic filings the requirement in paragraph (b)(2) to acknowledge, electronically, that he is making the filing on behalf of the member and the member's associated persons. However, the registered principal(s) or corporate officer(s) may not delegate any of the supervision, review, and approval responsibilities mandated in paragraphs (b)(1) and (2) and shall take reasonable and appropriate action to ensure that all delegated electronic filing functions are properly executed and supervised.

      .02 Third-Party Agreements. A member may enter into an agreement with a third party pursuant to which the third party agrees to file the required forms electronically on behalf of the member and the member's associated persons. Notwithstanding the existence of such an agreement, the member remains responsible for complying with the requirements of this Rule.

      .03 Filing of Amendments Involving Disclosure Information. In the event a member is not able to obtain an associated person's manual signature or written acknowledgement of amended disclosure information on that person's Form U4 prior to filing of such amendment reflecting the information pursuant to paragraph (c)(3) (examples of reasons why a member may not be able to obtain the manual signature or written acknowledgement may include, but are not limited to, the associated person refuses to acknowledge such information, is on active military service or otherwise is unavailable during the period provided for filing of such amendments under Article V of the FINRA By-Laws), the member shall enter "Representative Refused to Sign/Acknowledge" or "Representative Not Available" or a substantially similar entry in the electronic Form U4 field for the associated person's signature.

      .04 Filing of Amendments Involving Administrative Information. For purposes of paragraph (c)(4) of the Rule, administrative data includes such items as the addition of state or self-regulatory organization registrations, exam scheduling, and updates to residential, business and personal history.

      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2014-045 eff. Dec. 1, 2014.
      Amended by SR-FINRA-2009-019 eff. July 27, 2009.
      Amended by SR-NASD-2003-136 eff. Aug. 28, 2003.
      Amended by SR-NASD-99-67 eff. Nov. 15, 2000.
      Amended and implemented by SR-NASD-99-28 eff. Aug. 16, 1999.
      Adopted by SR-NASD-96-21 on July 15, 1996.

      Selected Notices: 99-56, 99-63, 00-73, 09-40.

    • 1011. Definitions

      Unless otherwise provided, terms used in the Rule 1000 Series shall have the meaning as defined in Rule 0160.
      (a) "Applicant"
      The term "Applicant" means a person that applies for membership in FINRA under Rule 1013 or a member that files an application for approval of a change in ownership, control, or business operations under Rule 1017.
      (b) "Associated Person"
      The term "Associated Person" means: (1) a natural person registered under FINRA rules; or (2) a sole proprietor, or any partner, officer, director, branch manager of the Applicant, or any person occupying a similar status or performing similar functions; (3) any company, government or political subdivision or agency or instrumentality of a government controlled by or controlling the Applicant; (4) any employee of the Applicant, except any person whose functions are solely clerical or ministerial; (5) any person directly or indirectly controlling the Applicant whether or not such person is registered or exempt from registration under the FINRA By-Laws or FINRA rules; (6) any person engaged in investment banking or securities business controlled directly or indirectly by the Applicant whether such person is registered or exempt from registration under the FINRA By-Laws or FINRA rules; or (7) any person who will be or is anticipated to be a person described in (1) through (6) above.
      (c) "Department"
      The term "Department" means the Department of Member Regulation of FINRA.
      (d) "Director"
      The term "Director" means a member of the FINRA Regulation Board.
      (e) "district"
      The term "district" means a district established by the FINRA Regulation Board.
      (f) "district office"
      The term "district office" means an office of FINRA located in a district.
      (g) "FINRA Board"
      The term "FINRA Board" means the Board of Governors of FINRA.
      (h) "FINRA Regulation Board"
      The term "FINRA Regulation Board" means the Board of Directors of FINRA Regulation.
      (i) "Governor"
      The term "Governor" means a member of the FINRA Board.
      (j) "Interested FINRA Staff"
      The term "Interested FINRA Staff" means an employee who directly participates in a decision under Rule 1014 or 1017, an employee who directly supervises an employee with respect to such decision, an employee who conducted an investigation or examination of a member that files an application under Rule 1017, the District Director for the relevant district, and the head of the Department.
      (k) "material change in business operations"
      The term "material change in business operations" includes, but is not limited to:
      (1) removing or modifying a membership agreement restriction;
      (2) market making, underwriting, or acting as a dealer for the first time; and
      (3) adding business activities that require a higher minimum net capital under SEA Rule 15c3-1;
      (l) "principal place of business"
      The term "principal place of business" means the executive office from which the sole proprietor or the officers, partners, or managers of the Applicant direct, control, and coordinate the activities of the Applicant, unless the Department determines that the principal place of business is where: (1) the largest number of Associated Persons of the Applicant are located; or (2) the books and records necessary to provide information and data to operate the business and comply with applicable rules are located.
      (m) "sales practice event"
      The term "sales practice event" means any customer complaint, arbitration, or civil litigation that has been reported to the Central Registration Depository, currently is required to be reported to the Central Registration Depository, or otherwise has been reported to FINRA.
      (n) "Subcommittee"
      The term "Subcommittee" means a subcommittee of the National Adjudicatory Council that is constituted pursuant to Rule 1015 to conduct a review of a Department decision issued under the Rule 1000 Series.
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2008-008 eff. June 26, 2008.
      Amended by SR-NASD-2007-015 eff. May 7, 2007.
      Amended by SR-NASD-2003-07 eff. March 24, 2004.
      Amended by SR-NASD-99-67 eff. Nov. 15, 2000.
      Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
      Amended by SR-NASD-97-28 eff. Aug. 7, 1997.
      Amended by SR-NASD-94-14 eff. July 20, 1994.
      Amended by SR-NASD-91-45 eff. Feb. 1, 1992.
      Adopted by SR-NASD-82-24 eff. July 20, 1984.

      Selected Notice: 04-10, 07-20.

      • IM-1011-1. Safe Harbor for Business Expansions

        This interpretive material concerns the types of business expansions that will not require a member to submit a Rule 1017 application to obtain FINRA's approval of the expansion. This safe harbor applies to: (1) firms that do not have a membership agreement, and (2) firms that have a membership agreement that does not contain a restriction on the factors listed below.
        The safe harbor is not available to a member that has a membership agreement that contains a specific restriction as to one or more of the factors listed below. In that case, the agreement takes precedence because FINRA has determined that a particular restriction should apply as to one or more of the factors, and FINRA has issued a decision with a rationale for that restriction. Similarly, the safe harbor also does not apply if the member has a membership agreement that permits expansion beyond the limits set forth below (e.g., an Applicant requests and obtains approval for 10 registered representatives in the first six months with an additional 10 registered representatives in the next year); in such case, FINRA has specifically considered the firm's expansion plans and approved them.
        The safe harbor is not available to any member that has disciplinary history. For purposes of this Interpretation, "disciplinary history" means a finding of a violation by the member or a principal of the member in the past five years by the SEC, a self-regulatory organization, or a foreign financial regulatory authority of one or more of the following provisions (or a comparable foreign provision) or rules or regulations thereunder: violations of the types enumerated in Section 15(b)(4)(E) and Section 15(c) of the Exchange Act; Section 17(a) of the Securities Act; SEA Rules 10b-5 and 15g-1 through 15g-9; FINRA Rules 2010 (only if the finding of a violation is for unauthorized trading, churning, conversion, material misrepresentations or omissions to a customer, frontrunning, trading ahead of research reports or excessive markups), 2020, 2111, 2150, 4330, 3110 (failure to supervise only), 5210, and 5230; and MSRB Rules G-19, G-30, and G-37(b) and (c), and all predecessor NASD rules to such FINRA rules.
        For those firms to which the safe harbor is available, the following types of expansions are presumed not to be a material change in business operations and therefore do not require a Rule 1017 application. For any expansion beyond these limits, a member should contact its district office prior to implementing the change to determine whether the proposed expansion requires an application under Rule 1017. Expansions in each area are measured on a rolling 12-month basis; members are required to keep records of increases in personnel, offices, and markets to determine whether they are within the safe harbor.
        "Associated Persons involved in sales" includes all Associated Persons, whether or not registered, who are involved in sales activities with public customers, including sales assistants and cold callers, but excludes clerical, back office, and trading personnel who are not involved in sales activities.
        Number of Associated Persons Involved in Sales Safe Harbor — Increase Permitted Within One Year Period Without Rule 1017 Application
        1–10 10 persons
        11 or more 10 persons or a 30 percent increase, whichever is greater

        Number of Offices (registered or unregistered)  
        1–5 3 offices
        6 or more 3 offices or a 30 percent increase, whichever is greater

        Number of Markets Made  
        1–10 10 markets
        11 or more 10 markets or a 30 percent increase, whichever is greater

        Amended by SR-FINRA-2019-009 eff. May 8, 2019.
        Amended by SR-FINRA-2008-008 eff. June 26, 2008.
        Amended by SR-NASD-2006-070 eff. Nov. 3, 2006.
        Amended by SR-NASD-99-67 eff. Nov. 15, 2000.
        Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
        Amended by SR-NASD-97-28 eff. Aug. 7, 1997.
        Amended by SR-NASD-94-14 eff. July 20, 1994.
        Amended by SR-NASD-91-45 eff. Feb. 1, 1992.
        Adopted by SR-NASD-82-24 eff. July 20, 1984.

        Selected Notice: 00-73, 06-56.

    • 1012. General Provisions

      (a) Filing by Applicant or Service by FINRA
      (1) An Applicant for membership shall file an application in the manner prescribed in Rule 1013, including the timely submission of an application fee pursuant to Schedule A to the FINRA By-Laws.
      (2) An Applicant seeking approval of a change of ownership, control, or business operations shall file an application in the manner prescribed in Rule 1017, including the timely submission of an application fee pursuant to Schedule A to the FINRA By-Laws.
      (3) Except where FINRA has otherwise prescribed an electronic or alternative filing process, an Applicant may file an application or any document or information requested under the Rule 1000 Series by first-class mail, overnight courier, or hand delivery. If the Department and the Applicant agree, the Applicant also may file a requested document or information by facsimile.
      (4) FINRA shall serve a notice or decision issued under the Rule 1000 Series by first-class mail on the Applicant or its counsel, unless a Rule specifies a different method of service.
      (5) For purposes of the Rule 1000 Series, service by FINRA or filing by an Applicant shall be deemed complete as follows:
      (A) Service or filing by first-class mail shall be deemed complete on the date of postmark;
      (B) Service or filing by overnight courier shall be deemed complete on the date of delivery to the overnight courier as specified in the airbill;
      (C) Service or filing by hand delivery shall be deemed complete on the date of receipt as evidenced by a date stamp;
      (D) Service or filing by facsimile shall be deemed complete on the date specified in the document and on the written confirmation of transmission; and
      (E) Filing by an electronic system shall be deemed complete on the date specified on the confirmation page generated by the electronic filing system.
      (b) Lapse of Application
      (1) Absent a showing of good cause, an application filed under Rule 1013 or 1017 shall lapse if an Applicant fails to:
      (A) respond fully within 60 days after service of an initial written request for information or documents under Rule 1013, within 30 days after service of an initial written request for information or documents under Rule 1017, within 30 days after service of a subsequent written request for information or documents under Rule 1013 or 1017, or within such other time period agreed to by the Department and the Applicant;
      (B) appear at or otherwise participate in a scheduled membership interview pursuant to Rule 1013(b) or 1017(g); or
      (C) file an executed membership agreement under Rule 1014(d) or Rule 1017(h)(4) within 25 days after service of the agreement, or within such other period agreed to by the Department and the Applicant.
      (2) If an Applicant wishes to continue to seek membership or approval of a change in ownership, control, or business operations, then the Applicant shall be required to submit a new application in the manner prescribed in Rule 1013 or 1017, respectively, including the timely submission of an application fee pursuant to Schedule A to the FINRA By-Laws. FINRA shall not refund any fee for a lapsed application.
      (c) Ex Parte Communications
      (1) The prohibitions against ex parte communications shall become effective when FINRA staff has knowledge that an Applicant intends to file a written request for review by the National Adjudicatory Council under Rule 1015.
      (2) Unless on notice and opportunity for an Applicant and Interested FINRA Staff to participate, or to the extent required for the disposition of ex parte matters as authorized by FINRA rules:

      (A) an Applicant, a counsel or representative of an Applicant, or an Interested FINRA Staff shall not make or knowingly cause to be made an ex parte communication relevant to the merits of a membership proceeding under the Rule 1000 Series to a Governor, a member of the National Adjudicatory Council or a Subcommittee thereof, or a FINRA employee who is participating or advising in a decision of such a person with respect to that proceeding; and
      (B) a Governor, a member of the National Adjudicatory Council or a Subcommittee thereof, or a FINRA employee who is participating or advising in the decision of such a person with respect to a membership proceeding shall not make or knowingly cause to be made to an Applicant, a counsel or representative of the Applicant, or an Interested FINRA Staff an ex parte communication relevant to the merits of that proceeding.
      (3) A Governor, a member of the National Adjudicatory Council or a Subcommittee thereof, or a FINRA employee participating or advising in the decision of such a person, who receives, makes, or knowingly causes to be made a communication prohibited by this paragraph shall place in the record of the membership proceeding:

      (A) all such written communications;
      (B) memoranda stating the substance of all such oral communications; and
      (C) all written responses and memoranda stating the substance of all oral responses to all such communications.
      (d) Recusal or Disqualification
      A Governor or a member of the National Adjudicatory Council or a Subcommittee thereof shall not participate in a matter governed by the Rule 1000 Series as to which that person has a conflict of interest or bias, or if circumstances otherwise exist where his or her fairness might reasonably be questioned. In such a case, the person shall recuse himself or shall be disqualified as follows:
      (1) The Chair of the FINRA Board shall have authority to direct the disqualification of a Governor, and a majority of the Governors of the FINRA Board excluding the Chair shall have authority to direct the disqualification of the Chair of the FINRA Board.
      (2) The Chair of the National Adjudicatory Council shall have authority to direct the disqualification of a member of the National Adjudicatory Council or a member of a Subcommittee appointed pursuant to Rule 1015, and the Vice Chair of the National Adjudicatory Council shall have authority to direct the disqualification of the Chair of the National Adjudicatory Council.
      (e) Computation of Time
      (1) Calendar Day
      In the Rule 1000 Series, "day" means calendar day.
      (2) Formula
      In computing a period of time under the Rule 1000 Series, the day of the act, event, default, or lapse from which the period of time designated begins to run shall not be included. The last day of the period so computed shall be included unless it is a Saturday, Sunday, or Federal holiday, in which event the period runs until the end of the next day that is not a Saturday, Sunday, or Federal holiday. Intermediate Saturdays, Sundays, and Federal holidays shall be excluded from the computation when the period prescribed is 10 days or less.
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2012-018 and SR-FINRA-2012-036 eff. Aug. 27, 2012.
      Amended by SR-FINRA-2012-031 eff. July 23, 2012.
      Amended by SR-FINRA-2008-008 eff. June 26, 2008.
      Amended by SR-NASD-2007-015 eff. May 7, 2007.
      Amended by SR-NASD-99-67 eff. Nov. 15, 2000.
      Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
      Amended by SR-NASD-97-28 eff. Aug. 7, 1997.
      Amended by SR-NASD-94-14 eff. July 20, 1994.
      Adopted by SR-NASD-82-24 eff. July 20, 1984.

      Selected Notices: 00-73, 07-20, 12-32, 12-33.

    • 1013. New Member Application and Interview

      (a) Filing of Application
      (1) How to File
      An Applicant for FINRA membership shall file its application with the Department in the manner prescribed by FINRA. An Applicant shall submit an application that includes:
      (A) Form NMA;
      (B) an original signed and notarized paper Form BD, with applicable schedules;
      (C) an original FINRA-approved fingerprint card for each Associated Person who will be subject to SEA Rule 17f-2;
      (D) a new member assessment report;
      (E) a detailed business plan that adequately and comprehensively describes all material aspects of the business that will be, or are reasonably anticipated to be, performed at and after the initiation of business operations, including future business expansion plans, if any, and includes:
      (i) a trial balance, balance sheet, supporting schedules, and computation of net capital, each of which has been prepared as of a date that is within 30 days before the filing date of the application;
      (ii) a monthly projection of income and expenses, with a supporting rationale, for the first 12 months of operations;
      (iii) an organizational chart;
      (iv) the intended location of the Applicant's principal place of business and all other offices, if any, whether or not such offices would be required to be registered under FINRA rules, and the names of the persons who will be in charge of each office;
      (v) a list of the types of securities to be offered and sold and the types of retail or institutional customers to be solicited;
      (vi) a description of the methods and media to be employed to develop a customer base and to offer and sell products and services to customers, including the use of the Internet, telephone solicitations, seminars, or mailings;
      (vii) a description of the business facilities and a copy of any proposed or final lease;
      (viii) the number of markets to be made, if any, the type and volatility of the products, and the anticipated maximum inventory positions;
      (ix) any plan to enter into contractual commitments, such as underwritings or other securities-related activities;
      (x) any plan to distribute or maintain securities products in proprietary positions, and the risks, volatility, degree of liquidity, and speculative nature of the products;
      (xi) any other activity that the Applicant may engage in that reasonably could have a material impact on net capital within the first 12 months of business operations; and
      (xii) a description of the communications and operational systems the Applicant will employ to conduct business with customers or other members and the plans and procedures the Applicant will employ to ensure business continuity, including: system capacity to handle the anticipated level of usage; contingency plans in the event of systems or other technological or communications problems or failures that may impede customer usage or firm order entry or execution; system redundancies; disaster recovery plans; system security; disclosures to be made to potential and existing customers who may use such systems; and supervisory or customer protection measures that may apply to customer use of, or access to, such systems;
      (F) a copy of any decision or order by a federal or state authority or self-regulatory organization taking permanent or temporary adverse action with respect to a registration or licensing determination regarding the Applicant or an Associated Person;
      (G) a list of all Associated Persons;
      (H) documentation of any of the following events, unless the event has been reported to the Central Registration Depository:
      (i) a regulatory action against or investigation of the Applicant or an Associated Person by the SEC, the Commodity Futures Trading Commission, a federal, state, or foreign regulatory agency, or a self-regulatory organization that is pending, adjudicated, or settled;
      (ii) an investment-related civil action for damages or an injunction against the Applicant or an Associated Person that is pending, adjudicated, or settled;
      (iii) an investment-related customer complaint or arbitration that is required to be reported on Form U4;
      (iv) a criminal action (other than a minor traffic violation) against the Applicant or an Associated Person that is pending, adjudicated, or that has resulted in a guilty or no contest plea; and
      (v) a copy of any document evidencing a termination for cause or a permitted resignation after investigation of an alleged violation of a federal or state securities law, a rule or regulation thereunder, a self-regulatory organization rule, or an industry standard of conduct;
      (I) a description of any remedial action, such as special training, continuing education requirements, or heightened supervision, imposed on an Associated Person by a state or federal authority or self-regulatory organization;
      (J) a written acknowledgment that heightened supervisory procedures and special educational programs may be required pursuant to Notice to Members 97-19 for an Associated Person whose record reflects disciplinary actions or sales practice events;
      (K) a copy of final or proposed contracts with banks, clearing entities, or service bureaus, and a general description of any other final or proposed contracts;
      (L) a description of the nature and source of Applicant's capital with supporting documentation, including a list of all persons or entities that have contributed or plan to contribute financing to the Applicant's business, the terms and conditions of such financing arrangements, the risk to net capital presented by the Applicant's proposed business activities, and any arrangement for additional capital should a business need arise;
      (M) a description of the financial controls to be employed by the Applicant;
      (N) a description of the Applicant's supervisory system and a copy of its written supervisory procedures, internal operating procedures (including operational and internal controls), internal inspections plan, written approval process, and qualifications investigations required by Rule 3110;
      (O) a description of the number, experience, and qualifications of supervisors and principals and the number, experience, and qualifications of persons to be supervised by such personnel, the other responsibilities of the supervisors and principals with the Applicant, their full-time or part-time status, any business activities that the supervisors or principals may engage in outside of their association with the Applicant, the hours per week devoted to such activities, and an explanation of how a part-time supervisor or principal will be able to discharge his or her designated functions on a part-time basis;
      (P) a description of Applicant's proposed recordkeeping system;
      (Q) a copy of the Applicant's written training plan to comply with Firm Element continuing education requirements described in Rule 1240(b), including the name of the Associated Person responsible for implementation; and
      (R) a FINRA Entitlement Program Agreement and Terms of Use and a FINRA Member Firm Account Administrator Entitlement Form.
      (2) Uniform Registration Forms
      Upon approval of the Applicant's FINRA Member Firm Account Administrator Entitlement Form, the Applicant shall submit its Forms U4 for each Associated Person who is required to be registered under FINRA rules, any amendments to its Forms BD or U4, and any Form U5 electronically via Web CRD.
      (3) Rejection of Application That Is Not Substantially Complete
      If the Department determines within 30 days after the filing of an application that the application is not substantially complete, the Department may reject the application and deem it not to have been filed. In such case, within the 30 day period, the Department shall serve a written notice on the Applicant of the Department's determination and the reasons therefor. FINRA shall refund the application fee, less $500, which shall be retained by FINRA as a processing fee. If the Applicant determines to continue to seek membership, the Applicant shall submit a new application under this Rule and fee pursuant to Schedule A to the FINRA By-Laws.
      (4) Request For Additional Documents Or Information
      Within 30 days after the filing of an application, the Department shall serve an initial request for any additional information or documents necessary to render a decision on the application. The Department may serve subsequent requests for additional information or documents at any time during the membership application process.
      Unless otherwise agreed by the Department and the Applicant, the Applicant shall file any additional information and documents with the Department within 60 days after service of the Department's initial request and 30 days after service of any subsequent request.
      (5) Withdrawal of Application
      If an Applicant withdraws an application within 30 days after filing the application, FINRA shall refund the application fee, less $500, which shall be retained by FINRA as a processing fee. If the Applicant determines to again seek membership, the Applicant shall submit a new application under this Rule and fee pursuant to Schedule A to the FINRA By-Laws.
      (b) Membership Interview
      (1) Requirement for Interview
      Before the Department serves its decision on an application for new membership in FINRA, the Department shall conduct a membership interview with a representative or representatives of the Applicant.
      (2) Service of Notice
      At least seven days before the membership interview, the Department shall serve on the Applicant a written notice that specifies the date and time of the interview and the representative or representatives of the Applicant who are required to participate in the interview. The Department shall serve the notice by facsimile or overnight courier. The Applicant and the Department may agree to a shorter or longer period for notice or a different method of service under this subparagraph.
      (3) Time
      Unless the Department directs otherwise for good cause shown, a membership interview shall be scheduled to occur within 90 days after the filing of an application or within 60 days after the filing of all additional information or documents requested, whichever is later.
      (4) Place
      Unless the Department and the Applicant otherwise agree, the membership interview shall be conducted in the district office for the district in which the Applicant has or intends to have its principal place of business.
      (5) Updated Financial Documents
      On or before the date of the membership interview, the Applicant shall file an updated trial balance, balance sheet, supporting schedules, and computation of net capital. The Applicant shall prepare such documents as of a date that is within 45 days before the date of the membership interview, unless the Applicant and the Department agree on a longer period. The Applicant shall promptly notify the Department in writing of any material adverse change in its financial condition that occurs before a decision constituting final action of FINRA is served on the Applicant.
      (6) Review of Standards for Admission
      During the membership interview, the Department shall review the application and the standards for admission to membership with the Applicant's representative or representatives.
      (7) Information From Other Sources
      During the membership interview, the Department shall provide to the Applicant's representative or representatives any information or document that the Department has obtained from the Central Registration Depository or a source other than the Applicant and upon which the Department intends to base its decision under Rule 1014. If the Department receives such information or document after the membership interview or decides to base its decision on such information after the membership interview, the Department shall promptly serve the information or document and an explanation thereof on the Applicant.
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2013-015 eff. Feb. 5, 2013.
      Amended by SR-FINRA-2012-031 eff. July 23, 2012.
      Amended by SR-FINRA-2008-008 eff. June 26, 2008.
      Amended by SR-NASD-2007-015 eff. May 7, 2007.
      Amended by SR-NASD-2006-038 eff. May 20, 2006.
      Amended by SR-NASD-2003-136 eff. Aug. 28, 2003.
      Amended by SR-NASD-99-67 eff. Nov. 15, 2000.
      Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
      Amended by SR-NASD-97-28 eff. Aug. 7, 1997.
      Amended by SR-NASD-94-14 eff. July 20, 1994.
      Adopted by SR-NASD-82-24 eff. July 20, 1984.

      Selected Notices: 00-73, 06-16, 07-20, 12-32, 13-11.

      • IM-1013-1. Membership Waive-In Process for Certain New York Stock Exchange Member Organizations

        This Interpretive Material sets forth a membership waive-in process for certain New York Stock Exchange ("NYSE") member organizations to become members of FINRA as part of the consolidation of the member firm regulatory functions of NASD and NYSE Regulation, Inc. ("NYSE Regulation"). It applies to firms that, as of July 25, 2007, (1) are approved NYSE member organizations or (2) have submitted an application to become an NYSE member organization and are subsequently approved for NYSE membership (together "NYSE-only member organizations"), provided that such firms were not also NASD members as of July 30, 2007. Such firms are eligible to automatically become FINRA members and to automatically register all associated persons whose registrations are approved with NYSE in registration categories recognized by FINRA upon submission to the Department of a signed waive-in membership application ("Waive-In Application") with the following information:
        (1) General company information, including Central Registration Depository (CRD®) Number and contact person.
        (2) An attestation that all information on the applicant's CRD form, as of the date of submission of the Waive-In Application is accurate and complete and fully reflects all aspects of the applicant's current business, including, but not limited to, ownership structure, management, product lines and disclosures.
        (3) The identity of the firm's Executive Representative.
        (4) Completed and signed Entitlement Forms.
        (5) A signed FINRA Membership Agreement.
        (6) Representations that the NYSE applicant's Uniform Application for Broker-Dealer Registration (Form BD) will be amended as needed to keep current and accurate; that all individual and entity registrations with FINRA will be kept current; and that all information and statements contained in the Waive-In Application are current, true and complete.
        The Department shall review the Waive-In Application within three business days of receipt and, if complete, issue a letter notifying the applicant that it has been approved for membership. The Membership Agreement shall become effective on the date of such notification letter.
        Firms admitted pursuant to this Interpretive Material shall be subject to the FINRA By-Laws and Schedules to By-Laws, including Schedule A, and FINRA rules, other than FINRA Rules 1011 through 1016, 1019 through 1021, 2231, 3260 and 4540, provided that their securities business is limited to floor brokerage on the NYSE, or routing away to other markets orders that are ancillary to their core floor business under NYSE Rule 70.40 ("permitted floor activities"). If an NYSE-only member organization admitted pursuant to this Interpretive Material seeks to expand its business operations to include any activities other than the permitted floor activities, such firm must apply for and receive approval to engage in such business activity pursuant to Rule 1017. Upon approval of such business expansion, the firm shall be subject to the FINRA By-Laws and Schedules to By-Laws, including Schedule A, and all FINRA rules.
        Pursuant to IM-Section 4(b)(1) and (e) to Schedule A of the FINRA By-Laws, a firm applying to waive in for membership pursuant to this Interpretive Material shall not be assessed certain registration and application fees set forth in Sections 4(b)(1) and (e) to Schedule A of the FINRA By-Laws.
        Amended by SR-FINRA-2019-009 eff. May 8, 2019.
        Amended by SR-FINRA-2008-022 eff. Dec. 15, 2008.
        Adopted by SR-NASD-2007-056 eff. Oct 12, 2007.

        Selected Notice: 08-57.

      • IM-1013-2. Membership Waive-In Process for Certain NYSE American LLC Member Organizations

        This Interpretive Material sets forth a membership waive-in process for certain NYSE American LLC ("NYSE American") member organizations to become members of FINRA as part of the acquisition by NYSE Euronext of the Amex Membership Corporation. It applies to any NYSE American member organization that (i) holds a valid 86 Trinity Permit as of the date such firm transfers its equities operations to the NYSE American Trading Systems and (ii) is not currently a FINRA member. Such firms are eligible to automatically become FINRA members and to automatically register all associated persons whose registrations are approved with NYSE American in registration categories recognized by FINRA upon submission to the Department of a signed waive-in membership application ("Waive-In Application") with the following information:
        (1) General company information, including Central Registration Depository (CRD®) Number and contact person;
        (2) An attestation that all information on the applicant's® form, as of the date of submission of the Waive-In Application, is accurate and complete and fully reflects all aspects of the applicant's current business, including, but not limited to, ownership structure, management, product lines and disclosures;
        (3) The identity of the firm's Executive Representative;
        (4) Completed and signed Entitlement Forms (unless previously submitted);
        (5) A signed FINRA Membership Agreement; and
        (6) Representations that the NYSE American applicant's Uniform Application for Broker-Dealer Registration (Form BD) will be amended as needed to keep current and accurate; that all individual and entity registrations with FINRA will be kept current; and that all information and statements contained in the Waive-In Application are current, true and complete.
        The Department shall review the Waive-In Application within three business days of receipt and, if complete, issue a letter notifying the applicant that it has been approved for membership. The Membership Agreement shall become effective on the date of such notification letter.
        Firms admitted pursuant to this Interpretive Material shall be member organizations of both NYSE and NYSE American and as such are subject to FINRA rules (provided that firms admitted to FINRA membership under IM-1013-1 also are subject to FINRA rules), other than FINRA Rules 1011 through 1016, 1019 through 1021, 2231, 3260 and 4540, the FINRA By-Laws and Schedules to By-Laws, including Schedule A, and the FINRA Rule 8000 and Rule 9000 Series, provided that their NYSE or NYSE American securities business is limited to floor-based activities in either NYSE-traded or NYSE American-traded securities, or routing away to other markets orders that are ancillary to their core NYSE or NYSE American floor business under NYSE Rule 70.40 or NYSE American Equities Rule 70.40 ("permitted floor activities"). If a firm admitted pursuant to this Interpretive Material seeks to expand its business operations to include any activities other than the permitted floor activities or makes changes to its securities business that would otherwise require FINRA membership, such firm must apply for and receive approval to engage in such business activity pursuant to Rule 1017. Upon approval of such business expansion, the firm shall be subject to the FINRA By-Laws and Schedule to By-Laws, including Schedule A, and all FINRA rules.
        Pursuant to IM-Section 4(b)(1) and (e) to Schedule A of the FINRA By-Laws, a firm applying to waive in for membership pursuant to this Interpretive Material shall not be assessed certain registration and application fees set forth in Sections 4(b)(1) and (e) to Schedule A of the FINRA By-Laws.
        Amended by SR-FINRA-2019-009 eff. May 8, 2019.
        Adopted by SR-FINRA-2008-043 eff. Oct. 1, 2008.

    • 1014. Department Decision

      (a) Standards for Admission
      After considering the application, the membership interview, other information and documents provided by the Applicant, other information and documents obtained by the Department, and the public interest and the protection of investors, the Department shall determine whether the Applicant meets each of the following standards:
      (1) The application and all supporting documents are complete and accurate.
      (2) The Applicant and its Associated Persons have all licenses and registrations required by state and federal authorities and self-regulatory organizations.
      (3) The Applicant and its Associated Persons are capable of complying with the federal securities laws, the rules and regulations thereunder, and FINRA rules, including observing high standards of commercial honor and just and equitable principles of trade. In determining whether this standard is met, the Department shall take into consideration whether:
      (A) a state or federal authority or self-regulatory organization has taken permanent or temporary adverse action with respect to a registration or licensing determination regarding the Applicant or an Associated Person;
      (B) an Applicant's or Associated Person's record reflects a sales practice event, a pending arbitration, or a pending private civil action;
      (C) an Applicant or Associated Person is the subject of a pending, adjudicated, or settled regulatory action or investigation by the SEC, the Commodity Futures Trading Commission, a federal, state, or foreign regulatory agency, or a self-regulatory organization; an adjudicated, or settled investment-related private civil action for damages or an injunction; or a criminal action (other than a minor traffic violation) that is pending, adjudicated, or that has resulted in a guilty or no contest plea or an Applicant, its control persons, principals, registered representatives, other Associated Persons, any lender of 5 percent or more of the Applicant's net capital, and any other member with respect to which these persons were a control person or a 5 percent lender of its net capital is subject to unpaid arbitration awards, other adjudicated customer awards, or unpaid arbitration settlements;
      (D) an Associated Person was terminated for cause or permitted to resign after an investigation of an alleged violation of a federal or state securities law, a rule or regulation thereunder, a self-regulatory organization rule, or industry standard of conduct;
      (E) a state or federal authority or self-regulatory organization has imposed a remedial action, such as special training, continuing education requirements, or heightened supervision, on an Associated Person; and
      (F) a state or federal authority or self-regulatory organization has provided information indicating that the Applicant or an Associated Person otherwise poses a threat to public investors.
      (4) The Applicant has established all contractual or other arrangements and business relationships with banks, clearing corporations, service bureaus, or others necessary to:
      (A) initiate the operations described in the Applicant's business plan, considering the nature and scope of operations and the number of personnel; and
      (B) comply with the federal securities laws, the rules and regulations thereunder, and FINRA rules.
      (5) The Applicant has or has adequate plans to obtain facilities that are sufficient to:
      (A) initiate the operations described in the Applicant's business plan, considering the nature and scope of operations and the number of personnel; and
      (B) comply with the federal securities laws, the rules and regulations thereunder, and FINRA rules.
      (6) The communications and operational systems that the Applicant intends to employ for the purpose of conducting business with customers and other members are adequate and provide reasonably for business continuity in each area set forth in Rule 1013(a)(1)(E)(xii);
      (7) The Applicant is capable of maintaining a level of net capital in excess of the minimum net capital requirements set forth in SEA Rule 15c3-1 adequate to support the Applicant's intended business operations on a continuing basis, based on information filed under Rule 1013(b)(5). The Department may impose a reasonably determined higher net capital requirement for the initiation of operations after considering:
      (A) the amount of net capital sufficient to avoid early warning level reporting requirements, such as SEA Rule 17a-11;
      (B) the amount of capital necessary to meet expenses net of revenues for at least 12 months, based on reliable projections agreed to by the Applicant and the Department;
      (C) any planned market making activities, the number of markets to be made, the type and volatility of products, and the anticipated maximum inventory positions;
      (D) any plan to enter into other contractual commitments, such as underwritings or other securities-related activities;
      (E) any plan to distribute or maintain securities products in proprietary positions, and the risks, volatility, degree of liquidity, and speculative nature of the products; and
      (F) any other activity that the Applicant will engage in that reasonably could have a material impact on net capital within the first 12 months of business operations.
      (8) The Applicant has financial controls to ensure compliance with the federal securities laws, the rules and regulations thereunder, and FINRA rules.
      (9) The Applicant has compliance, supervisory, operational, and internal control practices and standards that are consistent with practices and standards regularly employed in the investment banking or securities business, taking into account the nature and scope of Applicant's proposed business.
      (10) The Applicant has a supervisory system, including written supervisory procedures, internal operating procedures (including operational and internal controls), and compliance procedures designed to prevent and detect, to the extent practicable, violations of the federal securities laws, the rules and regulations thereunder, and FINRA rules. In evaluating the adequacy of a supervisory system, the Department shall consider the overall nature and scope of the Applicant's intended business operations and shall consider whether:
      (A) the number, location, experience, and qualifications of supervisory personnel are adequate in light of the number, location, experience, and qualifications of persons to be supervised; the Central Registration Depository record or other disciplinary history of supervisory personnel and persons to be supervised; and the number and locations of the offices that the Applicant intends to open and the nature and scope of business to be conducted at each office;
      (B) the Applicant has identified specific Associated Persons to supervise and discharge each of the functions in the Applicant's business plan, and to supervise each of the Applicant's intended offices, whether or not such offices are required to be registered under FINRA rules;
      (C) the Applicant has identified the functions to be performed by each Associated Person and has adopted procedures to assure the registration with FINRA and applicable states of all persons whose functions are subject to such registration requirements;
      (D) each Associated Person identified in the business plan to discharge a supervisory function has at least one year of direct experience or two years of related experience in the subject area to be supervised;
      (E) the Applicant will solicit retail or institutional business;
      (F) the Applicant will recommend securities to customers;
      (G) the location or part-time status of a supervisor or principal will affect such person's ability to be an effective supervisor;
      (H) the Applicant should be required to place one or more Associated Persons under heightened supervision pursuant to Notice to Members 97-19;
      (I) any remedial action, such as special training or continuing education requirements or heightened supervision, has been imposed on an Associated Person by a state or federal authority or self-regulatory organization; and
      (J) any other condition that will have a material impact on the Applicant's ability to detect and prevent violations of the federal securities laws, the rules and regulations thereunder, and FINRA rules.
      (11) The Applicant has a recordkeeping system that enables Applicant to comply with federal, state, and self-regulatory organization recordkeeping requirements and a staff that is sufficient in qualifications and number to prepare and preserve required records.
      (12) The Applicant has completed a training needs assessment and has a written training plan that complies with the continuing education requirements imposed by the federal securities laws, the rules and regulations thereunder, and FINRA rules.
      (13) FINRA does not possess any information indicating that the Applicant may circumvent, evade, or otherwise avoid compliance with the federal securities laws, the rules and regulations thereunder, or FINRA rules.
      (14) The application and all supporting documents otherwise are consistent with the federal securities laws, the rules and regulations thereunder, and FINRA rules.
      (b) Granting or Denying Application
      (1) In reviewing an application for membership, the Department shall consider whether the Applicant and its Associated Persons meet each of the standards in paragraph (a). Where the Department determines that the Applicant or its Associated Persons are the subject of any of the events set forth in Rule 1014(a)(3)(A) and (C) through (E), a presumption exists that the application should be denied. The Applicant may overcome the presumption by demonstrating that it can meet each of the standards in paragraph (a), notwithstanding the existence of any of the events set forth in Rule 1014(a)(3)(A) and (C) through (E).
      (2) If the Department determines that the Applicant meets each of the standards in paragraph (a), the Department shall grant the application for membership.
      (3) If the Department determines that the Applicant does not meet one or more of the standards in paragraph (a) in whole or in part, the Department shall:
      (A) grant the application subject to one or more restrictions reasonably designed to address a specific financial, operational, supervisory, disciplinary, investor protection, or other regulatory concern based on the standards for admission in Rule 1014(a); or
      (B) deny the application.
      (c) Decision
      (1) Time
      The Department shall serve a written decision on the membership application within 30 days after the conclusion of the membership interview or after the filing of additional information or documents, whichever is later.
      (2) Content
      If the Department denies the application, the decision shall explain in detail the reason for denial, referencing the applicable standard or standards in paragraph (a). If the Department grants the application subject to restrictions, the decision shall explain in detail the reason for each restriction, referencing the applicable standard or standards in paragraph (a) upon which the restriction is based and identify the specific financial, operational, supervisory, disciplinary, investor protection, or other regulatory concern that the restriction is designed to address and the manner in which the restriction is reasonably designed to address the concern.
      (3) Failure to Serve Decision
      If the Department fails to serve a decision within 180 days after the filing of an application or such later date as the Department and the Applicant have agreed in writing, the Applicant may file a written request with the FINRA Board requesting that the FINRA Board direct the Department to serve a decision. Within seven days after the filing of such a request, the FINRA Board shall direct the Department to serve its written decision immediately or to show good cause for an extension of time. If the Department shows good cause for an extension of time, the FINRA Board may extend the 180 day time limit by not more than 90 days.
      (d) Submission of Membership Agreement
      If the Department grants an application, with or without restriction, the Applicant's approval for membership shall be contingent upon the Applicant's filing of an executed written membership agreement, satisfactory to the Department, undertaking to:
      (1) abide by any restriction specified in the Department's decision; and
      (2) obtain the Department's approval of a change in ownership, control, or business operations pursuant to Rule 1017, including the modification or removal of a membership agreement restriction.
      The Applicant shall not waive the right to file a written request for review under Rule 1015 by executing a membership agreement under this paragraph.
      (e) Service and Effectiveness of Decision
      The Department shall serve its decision and the membership agreement on the Applicant in accordance with Rule 1012. The decision shall become effective upon service and shall remain in effect during the pendency of any review until a decision constituting final action of FINRA is issued under Rule 1015 or 1016, unless otherwise directed by the National Adjudicatory Council, the FINRA Board, or the SEC.
      (f) Effectiveness of Restriction
      A restriction imposed under this Rule shall remain in effect and bind the Applicant and all successors to the ownership or control of the Applicant unless:
      (1) removed or modified by a decision constituting final action of FINRA issued under Rule 1015, 1016, or 1017;
      (2) stayed by the National Adjudicatory Council, the FINRA Board, or the SEC.
      (g) Final Action
      Unless the Applicant files a written request for a review under Rule 1015, the Department's decision shall constitute final action by FINRA.
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2008-008 eff. June 26, 2008.
      Amended by SR-NASD-2006-038 eff. May 20, 2006
      Amended by SR-NASD-2003-07 eff. March 24, 2004.
      Amended by SR-NASD-99-67 eff. Nov. 15, 2000.
      Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
      Amended by SR-NASD-97-28 eff. Aug. 7, 1997.

      Selected Notices: 00-73, 04-10, 06-16.

    • 1015. Review by National Adjudicatory Council

      (a) Initiation of Review by Applicant
      Within 25 days after service of a decision under Rule 1014 or 1017, an Applicant may file a written request for review with the National Adjudicatory Council. A request for review shall state with specificity why the Applicant believes that the Department's decision is inconsistent with the membership standards set forth in Rule 1014, or otherwise should be set aside, and state whether a hearing is requested. The Applicant simultaneously shall file by first-class mail a copy of the request to the district office where the Applicant filed its application.
      (b) Transmission of Documents
      Within ten days after the filing of a request for review, the Department shall:
      (1) transmit to the National Adjudicatory Council copies of all documents that were considered in connection with the Department's decision and an index to the documents; and
      (2) serve on the Applicant a copy of such documents (other than those documents originally submitted by Applicant) and a copy of the index.
      (c) Membership Application Docket
      The Department shall promptly record in FINRA's membership application docket each request for review filed with the National Adjudicatory Council under this Rule and each material subsequent event, filing, and change in the status of a membership proceeding.
      (d) Appointment of Subcommittee
      The National Adjudicatory Council or the Review Subcommittee defined in Rule 9120 shall appoint a Subcommittee to participate in the review. The Subcommittee shall be composed of two or more persons who shall be current or past members of the National Adjudicatory Council or former Directors or Governors.
      (e) Powers of Subcommittee
      If a hearing is requested, the Subcommittee shall conduct the hearing. If a hearing is not requested, the Subcommittee may serve a notice directing that a hearing be held. If a hearing is not requested or directed, the Subcommittee shall conduct its review on the basis of the record developed before the Department and any written submissions made by the Applicant or the Department in connection with the request for review.
      (f) Hearing
      (1) Notice
      If a hearing is requested or directed, the hearing shall be held within 45 days after the filing of the request with the National Adjudicatory Council or service of the notice by the Subcommittee. The National Adjudicatory Council shall serve written notice of the date and time of the hearing to the Applicant by facsimile or overnight courier not later than 14 days before the hearing.
      (2) Counsel
      The Applicant and the Department may be represented by counsel at a hearing conducted pursuant to this Rule.
      (3) Evidence
      Formal rules of evidence shall not apply to a hearing under this Rule. Not later than five days before the hearing, the Applicant and the Department shall exchange copies of their proposed hearing exhibits and witness lists and provide copies of the same to the National Adjudicatory Council. If the Applicant or the Department fails to provide copies of its proposed hearing exhibits or witness list within such time, the Subcommittee shall exclude the evidence or witnesses from the proceeding, unless the Subcommittee determines that good cause is shown for failure to comply with the production date set forth in this subparagraph.
      (4) Transcript
      The hearing shall be recorded and a transcript prepared by a court reporter. A transcript of the hearing shall be available for purchase from the court reporter at prescribed rates. The Applicant, the Department, or a witness may seek to correct the transcript. A proposed correction of the transcript shall be submitted to the Subcommittee within a reasonable period of time prescribed by the Subcommittee. Upon notice to the Applicant and the Department, the Subcommittee may direct the correction to the transcript as requested or sua sponte.
      (g) Additional Information, Briefs
      At any time during its consideration, the Subcommittee or the National Adjudicatory Council may direct the Applicant or the Department to file additional information or briefs. Any additional information or brief filed shall be provided to all parties before the National Adjudicatory Council renders its decision.
      (h) Abandonment of Request for Review
      If an Applicant fails to specify the grounds for its request for review under Rule 1015(a)(1), appear at a hearing for which it has notice, or file information or briefs as directed, the National Adjudicatory Council or the Review Subcommittee may dismiss the request for review as abandoned, and the decision of the Department shall become the final action of FINRA. Upon a showing of good cause, the National Adjudicatory Council or the Review Subcommittee may withdraw a dismissal entered pursuant to this paragraph.
      (i) Subcommittee Recommendation
      The Subcommittee shall present a recommended decision in writing to the National Adjudicatory Council within 60 days after the date of the hearing held pursuant to paragraph (f), and not later than seven days before the meeting of the National Adjudicatory Council at which the membership proceeding shall be considered.
      (j) Decision
      (1) Proposed Written Decision
      After considering all matters presented in the review and the Subcommittee's recommended written decision, the National Adjudicatory Council may affirm, modify, or reverse the Department's decision or remand the membership proceeding with instructions. The National Adjudicatory Council shall prepare a proposed written decision pursuant to subparagraph (2).
      (2) Contents
      The decision shall include:
      (A) a description of the Department's decision, including its rationale;
      (B) a description of the principal issues raised in the review;
      (C) a summary of the evidence on each issue; and
      (D) a statement whether the Department's decision is affirmed, modified, or reversed, and a rationale therefor that references the applicable standards in Rule 1014.
      (3) Issuance of Decision After Expiration of Call for Review Periods
      The National Adjudicatory Council shall provide its proposed written decision to the FINRA Board. The FINRA Board may call the membership proceeding for review pursuant to Rule 1016. If the FINRA Board does not call the membership proceeding for review, the proposed written decision of the National Adjudicatory Council shall become final. The National Adjudicatory Council shall serve the Applicant with a written notice specifying the date on which the call for review period expired and stating that the final written decision will be served within 15 days after such date. The National Adjudicatory Council shall serve its final written decision within 15 days after the date on which the call for review period expired. The decision shall constitute the final action of FINRA for purposes of SEA Rule 19d-3, unless the National Adjudicatory Council remands the membership proceeding.
      (4) Failure to Issue Decision
      If the National Adjudicatory Council fails to serve its final written decision within the time prescribed in subparagraph (3), the Applicant may file a written request with the FINRA Board requesting that the FINRA Board direct the National Adjudicatory Council to serve its decision immediately or to show good cause for an extension of time. Within seven days after the filing of such a request, the FINRA Board shall direct the National Adjudicatory Council to serve its written decision immediately or to show good cause for an extension of time. If the National Adjudicatory Council shows good cause for an extension of time, the FINRA Board may extend the 15 day time limit by not more than 15 days.
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2008-008 eff. June 26, 2008.
      Amended by SR-NASD-99-67 eff. Nov. 15, 2000.
      Amended by SR-NASD-99-76 eff. Sept. 11, 2000.
      Amended by SR-NASD-99-15 eff. Dec. 31, 1999.
      Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
      Amended by SR-NASD-97-28 eff. Aug. 7, 1997.
      Adopted by SR-NASD-90-54 eff. Jan. 9, 1991.

      Selected Notices: 00-56, 00-73.

    • 1016. Discretionary Review by FINRA Board

      (a) Call For Review By Governor
      A Governor may call a membership proceeding for review by the FINRA Board if the call for review is made within the period prescribed in paragraph (b).
      (b) 15 Day Period; Waiver
      A Governor shall make his or her call for review at the next meeting of the FINRA Board that is at least 15 days after the date on which the FINRA Board receives the proposed written decision of the National Adjudicatory Council. By unanimous vote of the FINRA Board, the FINRA Board may shorten the period to less than 15 days. By an affirmative vote of the majority of the FINRA Board then in office, the FINRA Board may, during the 15 day period, vote to extend the period to more than 15 days.
      (c) Review At Next Meeting
      If a Governor calls a membership proceeding for review within the time prescribed in paragraph (b), the FINRA Board shall review the membership proceeding not later than the next meeting of the FINRA Board. The FINRA Board may order the Applicant and the Department to file briefs in connection with review proceedings pursuant to this paragraph.
      (d) Decision of FINRA Board, Including Remand
      After review, the FINRA Board may affirm, modify, or reverse the proposed written decision of the National Adjudicatory Council. Alternatively, the FINRA Board may remand the membership proceeding with instructions. The FINRA Board shall prepare a written decision that includes all of the elements described in Rule 1015(j)(2).
      (e) Issuance of Decision
      The FINRA Board shall serve its written decision on the Applicant within 15 days after the meeting at which it conducted its review. The decision shall constitute the final action of FINRA for purposes of SEA Rule 19d-3, unless the FINRA Board remands the membership proceeding.
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2008-008 eff. June 26, 2008.
      Amended by SR-NASDR-99-67 eff. Nov. 15, 2000.
      Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
      Adopted by SR-NASD-97-28 eff. Aug. 7, 1997.

    • 1017. Application for Approval of Change in Ownership, Control, or Business Operations

      (a) Events Requiring Application
      A member shall file an application for approval of any of the following changes to its ownership, control, or business operations:
      (1) a merger of the member with another member, unless both are members of the New York Stock Exchange, Inc. or the surviving entity will continue to be a member of the New York Stock Exchange, Inc.;
      (2) a direct or indirect acquisition by the member of another member, unless the acquiring member is a member of the New York Stock Exchange, Inc.;
      (3) direct or indirect acquisitions or transfers of 25 percent or more in the aggregate of the member's assets or any asset, business or line of operation that generates revenues composing 25 percent or more in the aggregate of the member's earnings measured on a rolling 36-month basis, unless both the seller and acquirer are members of the New York Stock Exchange, Inc.;
      (4) a change in the equity ownership or partnership capital of the member that results in one person or entity directly or indirectly owning or controlling 25 percent or more of the equity or partnership capital; or
      (5) a material change in business operations as defined in Rule 1011(k).
      (b) Filing and Content of Application
      (1) The member shall file with the Department the application in the manner prescribed by FINRA.
      (2) An applicant shall submit an application that includes a Form CMA including a detailed description of the change in ownership, control, or business operations.

      (A) If the application requests approval of a change in ownership or control, the application also shall include the names of the new owners, their percentage of ownership, and the sources of their funding for the purchase and recapitalization of the member.
      (B) If the application requests the removal or modification of a membership agreement restriction, the application also shall:

      (i) present facts showing that the circumstances that gave rise to the restriction have changed; and
      (ii) state with specificity why the restriction should be modified or removed in light of the standards set forth in Rule 1014 and the articulated rationale for the imposition of the restriction.
      (C) If the application requests approval of an increase in Associated Persons involved in sales, offices, or markets made, the application shall set forth the increases in such areas during the preceding 12 months.
      (c) Effecting Change and Imposition of Interim Restrictions
      (1) A member shall file an application for approval of a change in ownership or control at least 30 days prior to such change. A member may effect a change in ownership or control prior to the conclusion of the proceeding, but the Department may place new interim restrictions on the member based on the standards in Rule 1014, pending final Department action.
      (2) A member may file an application to remove or modify a membership agreement restriction at any time. An existing restriction shall remain in effect during the pendency of the proceeding.
      (3) A member may file an application for approval of a material change in business operations, other than the modification or removal of a restriction, at any time, but the member may not effect such change until the conclusion of the proceeding, unless the Department and the member otherwise agree.
      (d) Rejection Of Application That Is Not Substantially Complete
      If the Department determines within 30 days after the filing of an application that the application is not substantially complete, the Department shall reject the application and deem it not to have been filed. In such case, within the 30 day period, the Department shall serve a written notice on the Applicant of the Department's determination and the reasons therefor. FINRA shall refund the application fee, less $500, which shall be retained by FINRA as a processing fee. If the Applicant determines to continue to apply for approval of a change in ownership, control, or business operations, the Applicant shall submit a new application under this Rule and fee pursuant to Schedule A to the FINRA By-Laws.
      (e) Request for Additional Documents and Information
      Within 30 days after the filing of an application, the Department shall serve a request for any additional information or documents necessary to render a decision on the application. The Department may request additional information or documents at any time during the application process. Unless otherwise agreed to by the Department and the Applicant, the Applicant shall file such additional information or documents with the Department within 30 days after the Department's request.
      (f) Withdrawal of Application
      If an Applicant withdraws an application within 30 days after filing the application, FINRA shall refund the application fee, less $500, which shall be retained by FINRA as a processing fee. If the Applicant determines to again apply for approval of a change in ownership, control, or business operations, the Applicant shall submit a new application under this Rule and fee pursuant to Schedule A to the FINRA By-Laws.
      (g) Membership Interview
      (1) The Department may require the Applicant to participate in a membership interview within 30 days after the filing of the application, or if the Department requests additional information or documents, within 30 days after the filing of the additional information or documents by the Applicant.
      (2) At least seven days before the membership interview, the Department shall serve on the Applicant a written notice that specifies the date and time of the interview and persons who are required to participate in the interview. The Department shall serve the notice by facsimile or overnight courier. The Applicant and the Department may agree to a shorter or longer period for notice or a different method of service.
      (3) Unless the Department and the Applicant otherwise agree, the membership interview shall be conducted in the district office for the district in which the Applicant has its principal place of business.
      (4) During the membership interview, the Department shall review the application and the considerations for the Department's decision set forth in paragraph (h)(1) with the Applicant's representative or representatives. The Department shall provide to the Applicant's representative or representatives any information or document that the Department has obtained from the Central Registration Depository or a source other than the Applicant and upon which the Department intends to base its decision under paragraph (h). If the Department receives such information or document after the membership interview or decides to base its decision on such information after the membership interview, the Department shall promptly serve the information or document and an explanation thereof on the Applicant.
      (h) Department Decision
      (1) The Department shall consider the application, the membership interview, other information and documents provided by the Applicant or obtained by the Department, the public interest, and the protection of investors. In rendering a decision on an application submitted under Rule 1017(a), the Department shall consider whether the Applicant and its Associated Persons meet each of the standards in Rule 1014(a). Where the Department determines that the Applicant or its Associated Person are the subject of any of the events set forth in Rule 1014(a)(3)(A) and (C) through (E), a presumption exists that the application should be denied. The Applicant may overcome the presumption by demonstrating that it can meet each of the standards in Rule 1014 (a), notwithstanding the existence of any of the events set forth in Rule 1014(a)(3)(A) and (C) through (E).

      (A) In rendering a decision on an application for approval of a change in ownership or control, or an application for approval of a material change in business operations that does not involve modification or removal of a membership agreement restriction, the Department shall determine if the Applicant would continue to meet the standards in Rule 1014(a) upon approval of the application.
      (B) In rendering a decision on an application requesting the modification or removal of a membership agreement restriction, the Department shall consider whether maintenance of the restriction is appropriate in light of:

      (i) the standards set forth in Rule 1014;
      (ii) the circumstances that gave rise to the imposition of the restriction;
      (iii) the Applicant's operations since the restriction was imposed;
      (iv) any change in ownership or control or supervisors and principals; and
      (v) any new evidence submitted in connection with the application.
      (2) The Department shall serve a written decision on the application within 30 days after the conclusion of the membership interview or the filing of additional information or documents, whichever is later. If the Department does not require the Applicant to participate in a membership interview or request additional information or documents, the Department shall serve a written decision within 45 days after the filing of the application under paragraph (a). The decision shall state whether the application is granted or denied in whole or in part, and shall provide a rationale for the Department's decision, referencing the applicable standard in Rule 1014.
      (3) If the Department fails to serve a decision within 180 days after filing of an application or such later date as the Department and the Applicant have agreed in writing, the Applicant may file a written request with the FINRA Board requesting that the FINRA Board direct the Department to issue a decision. Within seven days after the filing of such a request, the FINRA Board shall direct the Department to issue a written decision immediately or to show good cause for an extension of time. If the Department shows good cause for an extension of time, the FINRA Board may extend the time limit for issuing a decision by not more than 30 days.
      (4) If the Department approves an application under this Rule in whole or part, the Department may require an Applicant to file an executed membership agreement.
      (i) Service and Effectiveness of Decision
      The Department shall serve its decision on the Applicant in accordance with Rule 1012. The decision shall become effective upon service and shall remain in effect during the pendency of any review until a decision constituting final action of FINRA is issued under Rule 1015 or 1016, unless otherwise directed by the National Adjudicatory Council, the FINRA Board, or the SEC.
      (j) Request for Review; Final Action
      An Applicant may file a written request for review of the Department's decision with the National Adjudicatory Council pursuant to Rule 1015. The procedures set forth in Rule 1015 shall apply to such review, and the National Adjudicatory Council's decision shall be subject to discretionary review by the FINRA Board pursuant to Rule 1016. If the Applicant does not file a request for a review, the Department's decision shall constitute final action by FINRA.
      (k) Removal or Modification of Restriction on Department's Initiative
      The Department shall modify or remove a restriction on its own initiative if the Department determines such action is appropriate in light of the considerations set forth in paragraph (h)(1). The Department shall notify the member in writing of the Department's determination and inform the member that it may apply for further modification or removal of a restriction by filing an application under paragraph (a).
      (l) Lapse or Denial of Application for Approval of Change in Ownership
      If an application for approval of a change in ownership lapses, or is denied and all appeals are exhausted or waived, the member shall, no more than 60 days after the lapse or exhaustion or waiver of appeal:
      (1) submit a new application under this Rule and fee pursuant to Schedule A to the FINRA By-Laws;
      (2) unwind the transaction; or
      (3) file a Form BDW.
      For the protection of investors, the Department may shorten the 60-day period. For good cause shown by the member, the Department may lengthen the 60-day period. The Department shall serve written notice on the Applicant of any change in the 60-day period and the reasons therefor. During the 60-day or other imposed period, the Department may continue to place interim restrictions on the member for the protection of investors.
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2013-015 eff. Feb. 5. 2013.
      Amended by SR-FINRA-2012-018 and SR-FINRA-2012-036 eff. Aug. 27, 2012.
      Amended by SR-FINRA-2012-031 eff. July 23, 2012.
      Amended by SR-FINRA-2008-008 eff. June 26, 2008.
      Amended by SR-NASD-2003-07 eff. March 24, 2004.
      Amended by SR-NASD-99-67 eff. Nov. 15, 2000.
      Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
      Adopted by SR-NASD-97-28 eff. Aug. 7, 1997.

      Selected Notices: 00-73, 04-10, 12-32, 12-33, 13-11.

    • 1018. Reserved

       

    • 1019. Application to the SEC for Review

      A person aggrieved by final action of FINRA under the Rule 1000 Series may apply for review by the SEC pursuant to Section 19(d)(2) of the Exchange Act. The filing of an application for review shall not stay the effectiveness of a decision constituting final action of FINRA, unless the SEC otherwise orders.
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-FINRA-2008-008 eff. June 26, 2008.
      Adopted by SR-NASD-97-28 eff. Aug. 7, 1997.

      Selected Notices: 91-11, 92-2, 94-22.

    • 1020. Approval of Change in Exempt Status Under SEA Rule 15c3-3

      (a) Application — For the purposes of this Rule, the term "member" shall be limited to any member of FINRA who is subject to SEA Rule 15c3-3 and is not designated to another self-regulatory organization by the Commission for financial responsibility pursuant to Section 17 of the Exchange Act and SEA Rule 17d-1 promulgated thereunder. Further, the term shall not be applicable to any member that is subject to Section 402.2(c) of the rules of the Treasury Department.

      (b) A member operating pursuant to any exemptive provision as contained in subparagraph (k) of SEA Rule 15c3-3, shall not change its method of doing business in a manner which will change its exemptive status from that governed by subparagraph (k)(1) or (k)(2)(ii) to that governed by subparagraph (k)(2)(i); or from subparagraph (k)(1), (k)(2)(i) or (k)(2)(ii) to a fully computing firm that is subject to all provisions of SEA Rule 15c3-3; or commence operations that will disqualify it for continued exemption under SEA Rule 15c3-3 without first having obtained the prior written approval of FINRA.

      (c) In making the determination as to whether to approve, deny in whole or in part an application made pursuant to paragraph (b), FINRA staff shall consider among other things the type of business in which the member is engaged, the training, experience and qualifications of persons associated with the member, the member's procedures for safeguarding customer funds and securities, the member's overall financial and operational condition and any other information deemed relevant in the particular circumstances and the time these measures would remain in effect.

      Cross Reference–

      Rule 2261, Disclosure of Financial Condition
      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Amended by SR-NASD-99-76 eff. Sept. 11, 2000
      Amended by SR-NASD-95-39 eff. Oct. 10, 1996
      Adopted eff. Nov. 7, 1985

      Selected Notice: 00-56.

    • 1021. Foreign Members

      A member which does not maintain an office in the United States responsible for preparing and maintaining financial and other reports required to be filed with the SEC and FINRA must:
      (a) prepare all such reports, and maintain a general ledger chart of account and any description thereof, in English and U.S. dollars;
      (b) reimburse FINRA for any expenses incurred in connection with examinations of the member to the extent that such expenses exceed the cost of examining a member located within the continental United States in the geographic location most distant from the District Office of appropriate jurisdiction;
      (c) ensure the availability of an individual fluent in English and knowledgeable in securities and financial matters to assist representatives of FINRA during examinations; and
      (d) utilize, either directly or indirectly, the services of a broker-dealer registered with the SEC, a bank or a clearing agency registered with the SEC located in the United States in clearing all transactions involving members of FINRA, except where both parties to a transaction agree otherwise.

      Amended by SR-FINRA-2019-009 eff. May 8, 2019.
      Adopted by SR-NASD-82-17 eff. Apr. 11, 1983.

    • 1100. MEMBER APPLICATION

      • 1120. Member Application Process

        • 1122. Filing of Misleading Information as to Membership or Registration

          No member or person associated with a member shall file with FINRA information with respect to membership or registration which is incomplete or inaccurate so as to be misleading, or which could in any way tend to mislead, or fail to correct such filing after notice thereof.
          Amended by SR-FINRA-2009-009 eff. Aug. 17, 2009.

          Selected Notice: 09-33.

    • 1200. REGISTRATION AND QUALIFICATION

      • 1210. Registration Requirements

        Each person engaged in the investment banking or securities business of a member shall be registered with FINRA as a representative or principal in each category of registration appropriate to his or her functions and responsibilities as specified in Rule 1220, unless exempt from registration pursuant to Rule 1230. Such person shall not be qualified to function in any registered capacity other than that for which the person is registered, unless otherwise stated in the rules.

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

        .01 Minimum Number of Registered Principals. Each member, except a member with only one associated person, shall have at least two officers or partners who are registered as General Securities Principals pursuant to Rule 1220(a)(2), provided that a member that is limited in the scope of its activities may instead have two officers or partners who are registered in a principal category under Rule 1220(a) that corresponds to the scope of the member's activities. The requirement that a member have a minimum of two principals shall apply to persons seeking admission as members and existing members.

        Pursuant to the Rule 9600 Series, FINRA may waive the requirement that a member have a minimum of two principals in situations that indicate conclusively that only one person associated with an applicant for membership or existing member should be required to register as a principal.

        In addition to the requirement that a member have a minimum of two principals, an applicant for membership or existing member shall have at least one person: (1) registered as a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal, as applicable, pursuant to Rule 1220(a)(4)(A); (2) designated as a Principal Financial Officer pursuant to Rule 1220(a)(4)(B); and (3) designated as a Principal Operations Officer pursuant to Rule 1220(a)(4)(B). An applicant for membership or existing member, if the nature of its business so requires, shall also have at least one person registered as: (1) an Investment Banking Principal pursuant to Rule 1220(a)(5); (2) a Research Principal pursuant to Rule 1220(a)(6); (3) a Securities Trader Principal pursuant to Rule 1220(a)(7); and (4) a Registered Options Principal pursuant to Rule 1220(a)(8).

        .02 Permissive Registrations. A member may make application for or maintain the registration as a representative or principal, pursuant to Rule 1220, of any associated person of the member and any individual engaged in the investment banking or securities business of a foreign securities affiliate or subsidiary of the member. Individuals maintaining such permissive registrations shall be considered registered persons and subject to all FINRA rules, to the extent relevant to their activities.

        Consistent with the requirements of Rule 3110, members shall have adequate supervisory systems and procedures reasonably designed to ensure that individuals with permissive registrations do not act outside the scope of their assigned functions. With respect to an individual who solely maintains a permissive registration(s), the individual's direct supervisor shall not be required to be a registered person. However, for purposes of compliance with Rule 3110(a)(5), a member shall assign a registered supervisor who shall be responsible for periodically contacting such individual's direct supervisor to verify that the individual is not acting outside the scope of his or her assigned functions. If such individual is permissively registered as a representative, the registered supervisor shall be registered as a representative or principal. If the individual is permissively registered as a principal, the registered supervisor shall be registered as a principal. Moreover, the registered supervisor of an individual who solely maintains a permissive registration(s) shall not be required to be registered in the same representative or principal registration category as the permissively-registered individual.

        .03 Qualification Examinations and Waivers of Examinations. Before the registration of a person as a representative can become effective under Rule 1210, such person shall pass the Securities Industry Essentials ("SIE") and an appropriate representative qualification examination as specified in Rule 1220(b). Before the registration of a person as a principal can become effective under Rule 1210, such person shall pass an appropriate principal qualification examination as specified in Rule 1220(a).

        If the job functions of a registered representative, other than an individual registered as an Order Processing Assistant Representative or a Foreign Associate, change so as to require the person to register in another representative category, the person shall not be required to pass the SIE. Rather, the registered person would need to pass only an appropriate representative qualification examination as specified in Rule 1220(b). All associated persons shall be eligible to take the SIE. In addition, individuals who are not associated persons shall be eligible to take the SIE. However, passing the SIE alone shall not qualify an individual for registration with FINRA. To be eligible for registration with FINRA, an individual shall pass an applicable representative or principal qualification examination as specified in Rule 1220 and satisfy all other applicable prerequisite registration requirements.

        Pursuant to the Rule 9600 Series, FINRA may, in exceptional cases and where good cause is shown, waive the applicable qualification examination(s) and accept other standards as evidence of an applicant's qualifications for registration. Age or disability will not individually of themselves constitute sufficient grounds to waive a qualification examination. Experience in fields ancillary to the investment banking or securities business may constitute sufficient grounds to waive a qualification examination. FINRA shall only consider waiver requests submitted by a member for individuals associated with the member who are seeking registration in a representative or principal registration category. Moreover, FINRA shall consider waivers of the SIE alone or the SIE and the applicable representative and principal examination(s) for such individuals. FINRA shall not consider a waiver of the SIE for individuals who are not associated persons or for associated persons who are not registering as representatives or principals.

        .04 Requirements for Registered Persons Functioning as Principals for a Limited Period. Subject to the requirements of Rule 1220.03, a member may designate any person currently registered, or who becomes registered, with the member as a representative to function as a principal for a period of 120 calendar days prior to passing an appropriate principal qualification examination as specified under Rule 1220(a), provided that such person has at least 18 months of experience functioning as a registered representative within the five-year period immediately preceding the designation and has fulfilled all applicable prerequisite registration, fee and examination requirements prior to designation as a principal. However, in no event may such person function as a principal beyond the initial 120 calendar day period without having successfully passed an appropriate principal qualification examination as specified under Rule 1220(a). The requirements above apply to designations to any principal category, including those categories that are not subject to a prerequisite representative registration requirement. Further, a person registered as an Order Processing Assistant Representative or a Foreign Associate shall not be eligible to be designated as a principal under Supplementary Material .04 of this Rule.

        Subject to the requirements of Rule 1220.03, a member may designate any person currently registered, or who becomes registered, with the member as a principal to function in another principal category for a period of 120 calendar days prior to passing an appropriate qualification examination as specified under Rule 1220. However, in no event may such person function in such other principal category beyond the initial 120 calendar day period without having successfully passed an appropriate qualification examination as specified under Rule 1220.

        .05 Rules of Conduct for Taking Examinations and Confidentiality of Examinations. Associated persons taking the SIE shall be subject to the SIE Rules of Conduct. Associated persons taking any representative or principal examination shall be subject to the Rules of Conduct for representative and principal examinations. A violation of the SIE Rules of Conduct or the Rules of Conduct for representative and principal examinations by an associated person shall be deemed to be a violation of Rule 2010. If FINRA determines that an associated person has violated the SIE Rules of Conduct or the Rules of Conduct for representative and principal examinations, the associated person may forfeit the results of the examination and may be subject to disciplinary action by FINRA.

        Individuals taking the SIE who are not associated persons shall agree to be subject to the SIE Rules of Conduct. If FINRA determines that such individuals cheated on the SIE or that they misrepresented their qualifications to the public subsequent to passing the SIE, they may forfeit the results of the examination and may be prohibited from retaking the SIE.

        FINRA considers all of its qualification examinations content to be highly confidential. The removal of examination content from an examination center, reproduction, disclosure, receipt from or passing to any person, or use for study purposes of any portion of such qualification examination or any other use that would compromise the effectiveness of the examinations and the use in any manner and at any time of the questions or answers to the examinations shall be prohibited and shall be deemed to be a violation of Rule 2010. An applicant cannot receive assistance while taking the examination and shall certify that no assistance was given to or received by him or her during the examination.

        .06 Waiting Periods for Retaking a Failed Examination. Any person who fails to pass a qualification examination prescribed by FINRA shall be permitted to take that examination again after a period of 30 calendar days has elapsed from the date of such person's last attempt to pass that examination, except that any person who fails to pass an examination three or more times in succession within a two-year period shall be prohibited from again taking that examination until a period of 180 calendar days has elapsed from the date of such person's last attempt to pass that examination.

        The waiting periods for retaking a failed examination shall apply to the SIE and the representative and principal examinations specified under Rule 1220. Individuals taking the SIE who are not associated persons shall agree to be subject to the same waiting periods for retaking the SIE.

        .07 All Registered Persons Must Satisfy the Regulatory Element of Continuing Education. All registered persons, including those individuals who solely maintain permissive registrations pursuant to Rule 1210.02, shall satisfy the Regulatory Element of continuing education as specified in Rule 1240(a).

        If a person registered with a member has a continuing education deficiency with respect to that registration as provided under Rule 1240(a), such person shall not be permitted to be registered in another registration category under Rule 1220 with that member or to be registered in any registration category under Rule 1220 with another member, until the person has satisfied the deficiency.

        .08 Lapse of Registration and Expiration of SIE. Any person who was last registered as a representative two or more years immediately preceding the date of receipt by FINRA of a new application for registration as a representative shall be required to pass a representative qualification examination appropriate to his or her category of registration as specified in Rule 1220(b). Any person who last passed the SIE or who was last registered as a representative, whichever occurred last, four or more years immediately preceding the date of receipt by FINRA of a new application for registration as a representative shall be required to pass the SIE in addition to a representative qualification examination appropriate to his or her category of registration as specified in Rule 1220(b).

        Any person who was last registered as a principal two or more years immediately preceding the date of receipt by FINRA of a new application for registration as a principal shall be required to pass a principal qualification examination appropriate to his or her category of registration as specified in Rule 1220(a).

        Any person whose registration has been revoked pursuant to Rule 8310 shall be required to pass a principal or representative qualification examination appropriate to his or her category of registration as specified in Rule 1220(a) or Rule 1220(b), respectively, to be eligible for registration with FINRA.

        For purposes of Supplementary Material .08 of this Rule, an application shall not be considered to have been received by FINRA if that application does not result in a registration.

        .09 Waiver of Examinations for Individuals Working for a Financial Services Industry Affiliate of a Member. Upon request by a member, FINRA shall waive the applicable qualification examination(s) for an individual designated with FINRA as working for a financial services industry affiliate of a member if the following conditions are met:

        (a) Prior to the individual's initial designation, the individual was registered as a representative or principal with FINRA for a total of five years within the most recent 10- year period, including for the most recent year with the member that initially designated the individual;
        (b) The waiver request is made within seven years of the individual's initial designation;
        (c) The initial designation and any subsequent designation(s) were made concurrently with the filing of the individual's related Form U5;
        (d) The individual continuously worked for the financial services industry affiliate(s) of a member since the individual's last Form U5 filing;
        (e) The individual has complied with the Regulatory Element of continuing education as specified in Rule 1240(a); and
        (f) The individual does not have any pending or adverse regulatory matters, or terminations, that are reportable on the Form U4, and has not otherwise been subject to a statutory disqualification as defined in Section 3(a)(39) of the Exchange Act while the individual was designated as eligible for a waiver.
        As used in Supplementary Material .09 of this Rule, a "financial services industry affiliate of a member" is a legal entity that controls, is controlled by or is under common control with a member and is regulated by the SEC, CFTC, state securities authorities, federal or state banking authorities, state insurance authorities, or substantially equivalent foreign regulatory authorities.

        .10 Status of Persons Serving in the Armed Forces of the United States. The following provisions address the status of current and former registered persons serving in active duty in the Armed Forces of the United States:

        (a) Inactive Status of Currently Registered Persons
        A registered person of a member who volunteers for or is called into active duty in the Armed Forces of the United States shall be placed, after proper notification to FINRA, on inactive status and need not be re-registered by such member upon his or her return to active employment with the member. Such person shall remain eligible to receive transaction-related compensation, including continuing commissions. The employing member also may allow such person to enter into an arrangement with another registered person of the member to take over and service the person's accounts and to share transaction-related compensation based upon the business generated by such accounts. However, because such persons are inactive, they may not perform any of the functions and responsibilities performed by a registered person.
        A registered person who is placed on inactive status pursuant to this paragraph (a) shall not be included within the definition of “Personnel” for purposes of the dues or assessments as provided in Article VI of the FINRA By-Laws. In addition, a registered person who is placed on inactive status pursuant to this paragraph (a) shall not be required to complete either the Regulatory Element or Firm Element set forth in Rule 1240 during the pendency of such inactive status.
        The relief provided in this paragraph (a) shall be available to a registered person who is placed on inactive status pursuant to this paragraph (a) during the period that such person remains registered with the member with which he or she was registered at the beginning of active duty in the Armed Forces of the United States, regardless of whether the person returns to active employment with another member upon completion of his or her active duty in the Armed Forces of the United States.
        The relief described in this paragraph (a) shall be provided only to a person registered with a member and only while the person remains on active military duty. Further, the member with which such person is registered shall promptly notify FINRA in such manner as FINRA may specify of such person's return to active employment with the member.
        (b) Inactive Status of Sole Proprietorships
        A member that is a sole proprietor who temporarily closes his or her business by reason of volunteering for or being called into active duty in the Armed Forces of the United States, shall be placed, after proper notification to FINRA, on inactive status while the member remains on active military duty.
        A sole proprietor member placed on inactive status as set forth in this paragraph (b) shall not be required to pay dues or assessments during the pendency of such inactive status and shall not be required to pay an admission fee upon return to active participation in the investment banking or securities business.
        The relief described in this paragraph (b) shall be provided only to a sole proprietor member and only while the person remains on active military duty. Further, the sole proprietor shall promptly notify FINRA in such manner as FINRA may specify of his or her return to active participation in the investment banking or securities business.
        (c) Status of Formerly Registered Persons
        If a person who was formerly registered with a member volunteers for or is called into active duty in the Armed Forces of the United States at any time within two years after the date the person ceased to be registered with a member, FINRA shall defer the lapse of registration requirements set forth in Rule 1210.08 (i.e., toll the two-year expiration period for representative and principal qualification examinations) and the lapse of the SIE (i.e., toll the four-year expiration period for the SIE). FINRA shall defer the lapse of registration requirements and the SIE commencing on the date the person begins actively serving in the Armed Forces of the United States, provided that FINRA is properly notified of the person's period of active military service within 90 days following his or her completion of active service or upon his or her re-registration with a member, whichever occurs first. The deferral will terminate 90 days following the person's completion of active service in the Armed Forces of the United States. Accordingly, if such person does not re-register with a member within 90 days following his or her completion of active service in the Armed Forces of the United States, the amount of time in which the person must become re-registered with a member without being subject to a representative or principal qualification examination or the SIE shall consist of the standard two-year period for representative and principal qualification examinations or the standard four-year period for the SIE, whichever is applicable, as provided in Rule 1210.08 reduced by the period of time between the person's termination of registration and beginning of active service in the Armed Forces of the United States.
        If a person placed on inactive status while serving in the Armed Forces of the United States ceases to be registered with a member, FINRA shall defer the lapse of registration requirements set forth in Rule 1210.08 (i.e., toll the two-year expiration period for representative and principal qualification examinations) and the lapse of the SIE (i.e., toll the four-year expiration period for the SIE) during the pendency of his or her active service in the Armed Forces of the United States. FINRA shall defer the lapse of registration requirements based on existing information in the CRD system, provided that FINRA is properly notified of the person's period of active military service within two years following his or her completion of active service or upon his or her re-registration with a member, whichever occurs first. The deferral shall terminate 90 days following the person's completion of active service in the Armed Forces of the United States. Accordingly, if such person does not re-register with a member within 90 days following his or her completion of active service in the Armed Forces of the United States, the amount of time in which the person must become re-registered with a member without being subject to a representative or principal qualification examination or the SIE shall consist of the standard two-year period for representative and principal qualification examinations or the standard four-year period for the SIE, whichever is applicable, as provided in Rule 1210.08.

        .11 Impermissible Registrations. Members shall not register or maintain the registration of any person unless consistent with the requirements of Rule 1210.

        Adopted by SR-FINRA-2017-007 eff. Oct. 1, 2018.

        Selected Notice: 17-30.

      • 1220. Registration Categories

        (a) Definition of Principal and Principal Registration Categories
        (1) Definition of Principal
        A "principal" is any person associated with a member, including, but not limited to, sole proprietor, officer, partner, manager of office of supervisory jurisdiction, director or other person occupying a similar status or performing similar functions, who is actively engaged in the management of the member's investment banking or securities business, such as supervision, solicitation, conduct of business in securities or the training of persons associated with a member for any of these functions. Such persons shall include, among other persons, a member's chief executive officer and chief financial officer (or equivalent officers).
        A "principal" also includes any other person associated with a member who is performing functions or carrying out responsibilities that are required to be performed or carried out by a principal under the FINRA rules.
        The term "actively engaged in the management of the member's investment banking or securities business" includes the management of, and the implementation of corporate policies related to, such business. The term also includes managerial decision-making authority with respect to the member's investment banking or securities business and management-level responsibilities for supervising any aspect of such business, such as serving as a voting member of the member's executive, management or operations committees.
        (2) General Securities Principal
        (A) Requirement
        Each principal as defined in paragraph (a)(1) of this Rule shall be required to register with FINRA as a General Securities Principal, subject to the following exceptions:
        (i) if a principal's activities include the functions of a Compliance Officer, a Financial and Operations Principal (or an Introducing Broker-Dealer Financial and Operations Principal, as applicable), a Principal Financial Officer, a Principal Operations Officer, an Investment Banking Principal, a Research Principal, a Securities Trader Principal or a Registered Options Principal as specified in paragraphs (a)(3) through (a)(8) of this Rule, then such person shall appropriately register in one or more of those categories;
        (ii) if a principal's activities are limited solely to the functions of a Government Securities Principal, an Investment Company and Variable Contracts Products Principal, a Direct Participation Programs Principal or a Private Securities Offerings Principal as specified in paragraphs (a)(9), (a)(11), (a)(12) or (a)(13) of this Rule, then such person may appropriately register in one or more of those categories in lieu of registering as a General Securities Principal;
        (iii) if a principal's activities are limited solely to the functions of a General Securities Sales Supervisor as specified in paragraph (a)(10) of this Rule, then such person may appropriately register in that category in lieu of registering as a General Securities Principal, provided, however, that if such person is engaged in options sales activities, such person shall be required to register with FINRA as a Registered Options Principal as specified in paragraph (a)(8) of this Rule or as a General Securities Sales Supervisor as specified in paragraph (a)(10) of this Rule; and
        (iv) if a principal's activities are limited solely to the functions of a Supervisory Analyst as specified in paragraph (a)(14) of this Rule, then such person may appropriately register in that category in lieu of registering as a General Securities Principal, provided, however, that if such person is responsible for approving the content of a member's research report on equity securities, such person shall be required to register with FINRA as a Research Principal as specified in paragraph (a)(6) of this Rule or as a Supervisory Analyst as specified in paragraph (a)(14) of this Rule.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Corporate Securities Representative and a General Securities Principal on October 1, 2018 and each person who was registered with FINRA as a Corporate Securities Representative and a General Securities Principal within two years prior to October 1, 2018 shall be qualified to register as a General Securities Principal without passing any additional qualification examinations, provided that his or her supervisory responsibilities in the investment banking or securities business of a member are limited to corporate securities activities of the member.
        All other individuals registering as General Securities Principals after October 1, 2018 shall, prior to or concurrent with such registration, become registered pursuant to paragraph (b)(2) of this Rule as a General Securities Representative and either (i) pass the General Securities Principal qualification examination or (ii) register as a General Securities Sales Supervisor and pass the General Securities Principal Sales Supervisor Module qualification examination.
        (3) Compliance Officer
        (A) Requirement
        Subject to the exception in paragraph (a)(3)(C) of this Rule, each person designated as a Chief Compliance Officer on Schedule A of Form BD as specified in Rule 3130(a) shall be required to register with FINRA as a Compliance Officer.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a General Securities Representative and a General Securities Principal on October 1, 2018 and each person who was registered with FINRA as a General Securities Representative and a General Securities Principal within two years prior to October 1, 2018 shall be qualified to register as a Compliance Officer without passing any additional qualification examinations. In addition, subject to the lapse of registration provisions in Rule 1210.08, each person registered as a Compliance Official in the CRD system on October 1, 2018 and each person who was registered as a Compliance Official in the CRD system within two years prior to October 1, 2018 shall be qualified to register as a Compliance Officer without passing any additional qualification examinations.
        All other individuals registering as Compliance Officers after October 1, 2018, shall, prior to or concurrent with such registration: (i) become registered pursuant to paragraph (b)(2) of this Rule as a General Securities Representative and pass the General Securities Principal qualification examination; or (ii) pass the Compliance Official qualification examination.
        (C) Exception
        An individual designated as a Chief Compliance Officer on Schedule A of Form BD of a member that is engaged in limited investment banking or securities business may be registered in a principal category under Rule 1220(a) that corresponds to the limited scope of the member's business.
        (4) Financial and Operations Principal and Introducing Broker-Dealer Financial and Operations Principal
        (A) Requirement
        Each member that is operating pursuant to the provisions of SEA Rules 15c3-1(a)(1)(ii), (a)(2)(i) or (a)(8), shall designate a Financial and Operations Principal. Each member subject to the requirements of SEA Rule 15c3-1, other than a member operating pursuant to SEA Rules 15c3-1(a)(1)(ii), (a)(2)(i) or (a)(8), shall designate either a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal.
        A Financial and Operations Principal and an Introducing Broker-Dealer Financial and Operations Principal shall be responsible for performing the following duties:
        (i) final approval and responsibility for the accuracy of financial reports submitted to any duly established securities industry regulatory body;
        (ii) final preparation of such reports;
        (iii) supervision of individuals who assist in the preparation of such reports;
        (iv) 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;
        (v) supervision and performance of the member's responsibilities under all financial responsibility rules promulgated pursuant to the provisions of the Exchange Act;
        (vi) overall supervision of and responsibility for the individuals who are involved in the administration and maintenance of the member's back office operations; and
        (vii) any other matter involving the financial and operational management of the member.
        The requirements of paragraph(a)(4)(A) of this Rule shall not apply to a member that is exempt from the requirement to designate a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal.
        (B) Designation of Principal Financial Officer and Principal Operations Officer
        Each member shall designate a:
        (i) Principal Financial Officer with primary responsibility for financial filings and those books and records related to such filings; and
        (ii) Principal Operations Officer with primary responsibility for the day-to-day operations of the member's business, including overseeing the receipt and delivery of securities and funds, safeguarding customer and member assets, calculation and collection of margin from customers and processing dividend receivables and payables and reorganization redemptions and those books and records related to such activities.
        Each member that self-clears, or that clears for other members, shall be required to designate separate persons to function as Principal Financial Officer and Principal Operations Officer. Such persons may also carry out the other responsibilities of a Financial and Operations Principal and an Introducing Broker-Dealer Financial and Operations Principal as specified in paragraph (a)(4)(A) of this Rule. If such member is limited in size and resources, it may, pursuant to the Rule 9600 Series, request a waiver of the requirement to designate separate persons to function as Principal Financial Officer and Principal Operations Officer.
        Each member that is an introducing member may designate the same person to function as Financial and Operations Principal (or Introducing Broker-Dealer Financial and Operations Principal), Principal Financial Officer and Principal Operations Officer.
        Each person designated as a Principal Financial Officer or Principal Operations Officer, other than a person associated with a member that is exempt from the requirement to designate a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal, shall be required to register as a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal pursuant to paragraph (a)(4)(A) of this Rule.
        (C) Qualifications
        Each person seeking to register as a Financial and Operations Principal shall, prior to or concurrent with such registration, pass the Financial and Operations Principal qualification examination. Each person seeking to register as an Introducing Broker-Dealer Financial and Operations Principal shall, prior to or concurrent with such registration, pass the Financial and Operations Principal qualification examination or the Introducing Broker-Dealer Financial and Operations Principal qualification examination.
        (5) Investment Banking Principal
        (A) Requirement
        Each principal as defined in paragraph (a)(1) of this Rule who is responsible for supervising the investment banking activities specified in paragraph (b)(5) of this Rule shall be required to register with FINRA as an Investment Banking Principal.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as an Investment Banking Representative and a General Securities Principal on October 1, 2018 and each person who was registered with FINRA as an Investment Banking Representative and a General Securities Principal within two years prior to October 1, 2018 shall be qualified to register as an Investment Banking Principal without passing any additional qualification examinations.
        All other individuals registering as Investment Banking Principals after October 1, 2018 shall, prior to or concurrent with such registration, become registered pursuant to paragraph (b)(5) of this Rule as an Investment Banking Representative and pass the General Securities Principal qualification examination.
        (6) Research Principal
        (A) Requirement
        Each principal as defined in paragraph (a)(1) of this Rule who is responsible for approving the content of a member's research reports on equity securities, or who, with respect to equity research, is responsible for supervising the overall conduct of a Research Analyst registered pursuant to paragraph (b)(6) of this Rule or a Supervisory Analyst registered pursuant to paragraph (a)(14) of this Rule shall be required to register with FINRA as a Research Principal, subject to the following exceptions:
        (i) if a principal's activities are limited solely to approving the content of a member's research reports on equity securities, then such person may register as a Supervisory Analyst pursuant to paragraph (a)(14) of this Rule in lieu of registering as a Research Principal;
        (ii) if a principal's activities are limited solely to reviewing a member's research reports on equity securities only for compliance with the disclosure provisions of Rule 2241, then such person may register as a General Securities Principal pursuant to paragraph (a)(2) of this Rule in lieu of registering as a Research Principal; and
        (iii) if a principal's activities are limited solely to approving the content of a member's research reports on debt securities or the content of third-party research reports, then such person may register as a General Securities Principal pursuant to paragraph (a)(2) of this Rule or as a Supervisory Analyst pursuant to paragraph (a)(14) of this Rule in lieu of registering as a Research Principal.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Research Principal on October 1, 2018 and each person who was registered with FINRA as a Research Principal within two years prior to October 1, 2018 shall be qualified to register as a Research Principal without passing any additional qualification examinations.
        All other individuals registering as Research Principals after October 1, 2018 shall, prior to or concurrent with such registration: (i) become registered pursuant to paragraph (b)(6) of this Rule as a Research Analyst and pass the General Securities Principal qualification examination; or (ii) become registered pursuant to paragraph (a)(14) of this Rule as a Supervisory Analyst and pass the General Securities Principal qualification examination.
        (7) Securities Trader Principal
        (A) Requirement
        Each principal as defined in paragraph (a)(1) of this Rule who is responsible for supervising the securities trading activities specified in paragraph (b)(4) of this Rule shall be required to register with FINRA as a Securities Trader Principal.
        (B) Qualifications
        Each person seeking to register as a Securities Trader Principal shall, prior to or concurrent with such registration, become registered pursuant to paragraph (b)(4) of this Rule as a Securities Trader and pass the General Securities Principal qualification examination.
        (8) Registered Options Principal
        (A) Requirement
        Each member that is engaged in transactions in options with the public shall have at least one Registered Options Principal.
        In addition, each principal as defined in paragraph (a)(1) of this Rule who is responsible for supervising a member's options sales practices with the public, including a person designated pursuant to Rule 3110(a)(2), shall be required to register with FINRA as a Registered Options Principal, subject to the following exception. If a principal's options activities are limited solely to those activities that may be supervised by a General Securities Sales Supervisor as specified in Rule 2360, then such person may register as a General Securities Sales Supervisor pursuant to paragraph (a)(10) of this Rule in lieu of registering as a Registered Options Principal.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Registered Options Principal on October 1, 2018 and each person who was registered with FINRA as a Registered Options Principal within two years prior to October 1, 2018 shall be qualified to register as a Registered Options Principal without passing any additional qualification examinations.
        All other individuals registering as Registered Options Principals after October 1, 2018 shall, prior to or concurrent with such registration, become registered pursuant to paragraph (b)(2) of this Rule as a General Securities Representative and pass the Registered Options Principal qualification examination.
        (9) Government Securities Principal
        (A) Requirement
        Each principal as defined in paragraph (a)(1) of this Rule shall be required to register with FINRA as a Government Securities Principal if his or her activities include:
        (i) the management or supervision of the member's government securities business, including:
        a. underwriting, trading or sales of government securities;
        b. financial advisory or consultant services for issuers in connection with the issuance of government securities;
        c. research or investment advice, other than general economic information or advice, with respect to government securities in connection with the activities described in subparagraphs a. and b. above;
        d. 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 subparagraphs a. and b. above; or
        (ii) the supervision of:
        a. the processing and clearance activities with respect to government securities; or
        b. the maintenance of records involving any of the activities described in paragraph (a)(9)(A)(i) of this Rule.
        If a principal's functions include the activities specified in paragraph (a)(9)(A) of this Rule, then such person may register as a General Securities Principal pursuant to paragraph (a)(2) of this Rule in lieu of registering as a Government Securities Principal.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Government Securities Principal on October 1, 2018 and each person who was registered with FINRA as a Government Securities Principal within two years prior to October 1, 2018 shall be qualified to register as a Government Securities Principal without passing any additional qualification examinations.
        All other individuals registering as Government Securities Principals after October 1, 2018 shall, prior to or concurrent with such registration, become registered pursuant to paragraph (b)(2) of this Rule as a General Securities Representative.
        (10) General Securities Sales Supervisor
        (A) Principals Engaged in Limited Activities
        Each principal as defined in paragraph (a)(1) of this Rule may register with FINRA as a General Securities Sales Supervisor if his or her supervisory responsibilities in the investment banking or securities business of a member are limited to the securities sales activities of the member, including the approval of customer accounts, training of sales and sales supervisory personnel and the maintenance of records of original entry or ledger accounts of the member required to be maintained in branch offices by Exchange Act record-keeping rules.
        A person registered solely as a General Securities Sales Supervisor shall not be qualified to perform any 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 broker-dealer or customer funds or securities for purposes of SEA Rule 15c3-3; or
        (iv) supervision of overall compliance with financial responsibility rules for broker-dealers promulgated pursuant to the provisions of the Exchange Act.
        (B) Qualifications
        Each person seeking to register as a General Securities Sales Supervisor shall, prior to or concurrent with such registration become registered pursuant to paragraph (b)(2) of this Rule as a General Securities Representative and pass the General Securities Sales Supervisor qualification examinations
        (11) Investment Company and Variable Contracts Products Principal
        (A) Principals Engaged in Limited Activities
        Each principal as defined in paragraph (a)(1) of this Rule may register with FINRA as an Investment Company and Variable Contracts Products Principal if his or her activities in the investment banking or securities business of a member are limited to the activities specified in paragraph (b)(7) of this Rule.
        (B) Qualifications
        Each person seeking to register as an Investment Company and Variable Contracts Products Principal shall, prior to or concurrent with such registration: (i) become registered pursuant to paragraph (b)(2) of this Rule as a General Securities Representative and pass the Investment Company and Variable Contracts Products Principal qualification examination; or (ii) become registered pursuant to paragraph (b)(7) of this Rule as an Investment Company and Variable Contracts Products Representative and pass the Investment Company and Variable Contracts Products Principal qualification examination.
        (12) Direct Participation Programs Principal
        (A) Principals Engaged in Limited Activities
        Each principal as defined in paragraph (a)(1) of this Rule may register with FINRA as a Direct Participation Program Principal if his or her activities in the investment banking or securities business of a member are limited to the activities specified in paragraph (b)(8) of this Rule.
        (B) Qualifications
        Each person seeking to register as a Direct Participation Program Principal shall, prior to or concurrent with such registration: (i) become registered pursuant to paragraph (b)(2) of this Rule as a General Securities Representative and pass the Direct Participation Program Principal qualification examination; or (ii) become registered pursuant to paragraph (b)(8) of this Rule as a Direct Participation Programs Representative and pass the Direct Participation Program Principal qualification examination.
        (13) Private Securities Offerings Principal
        (A) Principals Engaged in Limited Activities
        Each principal as defined in paragraph (a)(1) of this Rule may register with FINRA as a Private Securities Offerings Principal if his or her activities in the investment banking or securities business of a member are limited to the activities specified in paragraph (b)(9) of this Rule.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Private Securities Offerings Representative and a General Securities Principal on October 1, 2018 and each person who was registered with FINRA as a Private Securities Offerings Representative and a General Securities Principal within two years prior to October 1, 2018 shall be qualified to register as a Private Securities Offerings Principal without passing any additional qualification examinations.
        All other individuals registering as Private Securities Offerings Principals after October 1, 2018 shall, prior to or concurrent with such registration, become registered pursuant to paragraph (b)(9) of this Rule as a Private Securities Offerings Representative and pass the General Securities Principal qualification examination.
        (14) Supervisory Analyst
        (A) Principals Engaged in Limited Activities
        Each principal as defined in paragraph (a)(1) of this Rule may register with FINRA as a Supervisory Analyst if his or her activities are limited to approving the following: (i) the content of a member's research reports on equity securities; (ii) the content of a member's research reports on debt securities; (iii) the content of third-party research reports; (iv) retail communications as described in Rule 2241(a)(11)(A); or (v) other research communications that do not meet the definition of "research report" under Rule 2241, provided that the Supervisory Analyst has technical expertise in the particular product area.
        The activities of a Supervisory Analyst engaged in equity research shall be supervised by a Research Principal registered pursuant to paragraph (a)(6) of this Rule.
        (B) Qualifications
        Each person seeking to register as a Supervisory Analyst shall, prior to or concurrent with such registration pass the Supervisory Analyst qualification examination.
        Upon written request pursuant to the Rule 9600 Series, FINRA shall grant a waiver from the securities analysis portion (Part II) of the Supervisory Analyst qualification examination upon verification that the applicant has passed Level I of the Chartered Financial Analyst ("CFA") Examination.
        (b) Definition of Representative and Representative Registration Categories
        (1) Definition of Representative
        A "representative" is any person associated with a member, including assistant officers other than principals, who is engaged in the member's investment banking or securities business, such as supervision, solicitation, conduct of business in securities or the training of persons associated with a member for any of these functions.
        (2) General Securities Representative
        (A) Requirement
        Each representative as defined in paragraph (b)(1) of this Rule shall be required to register with FINRA as a General Securities Representative, subject to the following exceptions:
        (i) if a representative's activities include the functions of an Operations Professional, a Securities Trader, an Investment Banking Representative or a Research Analyst as specified in paragraphs (b)(3) through (b)(6) of this Rule, then such person shall appropriately register in one or more of those categories; and
        (ii) if a representative's activities are limited solely to the functions of an Investment Company and Variable Contracts Products Representative, a Direct Participation Programs Representative or a Private Securities Offerings Representative as specified in paragraphs (b)(7) through (b)(9) of this Rule, then such person may appropriately register in one or more of those categories in lieu of registering as a General Securities Representative.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a General Securities Representative on October 1, 2018 and each person who was registered with FINRA as a General Securities Representative within two years prior to October 1, 2018 shall be qualified to register as a General Securities Representative without passing any additional qualification examinations.
        All other individuals registering as General Securities Representatives after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the General Securities Representative qualification examination.
        (3) Operations Professional
        (A) Requirement
        (i) Covered Persons
        Each of the following persons shall be required to register with FINRA as an Operations Professional:
        a. senior management with direct responsibility over the covered functions specified in paragraph (b)(3)(A)(ii) of this Rule;
        b. any person designated by senior management specified in paragraph (b)(3)(A)(i)a. of this Rule as a supervisor, manager or other person responsible for approving or authorizing work, including work of other persons, in direct furtherance of each of the covered functions specified in paragraph (b)(3)(A)(ii) of this Rule, as applicable, provided that there is sufficient designation of such persons by senior management to address each of the applicable covered functions; and
        c. persons with the authority or discretion materially to commit a member's capital in direct furtherance of the covered functions specified in paragraph (b)(3)(A)(ii) of this Rule or to commit a member to any material contract or agreement (written or oral) in direct furtherance of the covered functions specified in paragraph (b)(3)(A)(ii) of this Rule.
        (ii) Covered Functions
        For purposes of paragraph (b)(3) of this Rule, the following are the covered functions:
        a. client on-boarding (customer account data and document maintenance);
        b. collection, maintenance, re-investment (i.e., sweeps) and disbursement of funds;
        c. receipt and delivery of securities and funds, account transfers;
        d. bank, custody, depository and firm account management and reconciliation;
        e. settlement, fail control, buy ins, segregation, possession and control;
        f. trade confirmation and account statements;
        g. margin;
        h. stock loan or securities lending;
        i. prime brokerage (services to other broker-dealers and financial institutions);
        j. approval of pricing models used for valuations;
        k. financial control, including general ledger and treasury;
        l. contributing to the process of preparing and filing financial regulatory reports;
        m. defining and approving business requirements for sales and trading systems and any other systems related to the covered functions, and validation that these systems meet such business requirements;
        n. defining and approving business security requirements and policies for information technology, including, but not limited to, systems and data, in connection with the covered functions;
        o. defining and approving information entitlement policies in connection with the covered functions; and
        p. posting entries to a member's books and records in connection with the covered functions to ensure integrity and compliance with the federal securities laws and regulations and FINRA rules.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as an Investment Company Products and Variable Contracts Representative, a General Securities Representative, a United Kingdom Securities Representative, a Canada Securities Representative, an Operations Professional, a Registered Options Principal, a General Securities Sales Supervisor, a Supervisory Analyst, a General Securities Principal, an Investment Company Products and Variable Products Principal, a Financial and Operations Principal, an Introducing Broker-Dealer Financial and Operations Principal, a Municipal Fund Securities Limited Principal or a Municipal Securities Principal on October 1, 2018 and each person who was registered with FINRA in such registration categories within two years prior to October 1, 2018 shall be qualified to register as an Operations Professional without passing any additional qualification examinations.
        Each person who registers with FINRA as an Investment Company Products and Variable Contracts Representative, a General Securities Representative, a Registered Options Principal, a General Securities Sales Supervisor, a Supervisory Analyst, a General Securities Principal, an Investment Company Products and Variable Products Principal, a Financial and Operations Principal, an Introducing Broker-Dealer Financial and Operations Principal, a Municipal Fund Securities Limited Principal or a Municipal Securities Principal after October 1, 2018 shall also be qualified to register as an Operations Professional without passing any additional qualification examinations.
        All other individuals registering as Operations Professionals after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the Operations Professional qualification examination.
        FINRA may accept as an alternative to the qualification examination requirement in paragraph (b)(3)(B) of this Rule any domestic or foreign qualification if it determines that acceptance of such alternative qualification is consistent with the purposes of paragraph (b)(3) of this Rule, the protection of investors, and the public interest.
        A person registering as an Operations Professional shall be allowed a period of 120 days beginning on the date such person requests Operations Professional registration to pass any applicable qualification examination, during which time such person may function as an Operations Professional.
        (4) Securities Trader
        (A) Requirement
        Each representative as defined in paragraph (b)(1) of this Rule shall be required to register with FINRA as a Securities Trader if, with respect to transactions in equity, preferred or convertible debt securities effected otherwise than on a securities exchange, such person is engaged in proprietary trading, the execution of transactions on an agency basis, or the direct supervision of such activities, other than any person associated with a member whose trading activities are conducted principally on behalf of an investment company that is registered with the SEC pursuant to the Investment Company Act and that controls, is controlled by or is under common control, with the member.
        In addition, each person associated with a member who is: (i) primarily responsible for the design, development or significant modification of an algorithmic trading strategy relating to equity, preferred or convertible debt securities; or (ii) responsible for the day-to-day supervision or direction of such activities shall be required to register with FINRA as a Securities Trader.
        For purposes of paragraph (b)(4) of this Rule, an “algorithmic trading strategy” is an automated system that generates or routes orders (or order-related messages) but shall not include an automated system that solely routes orders received in their entirety to a market center.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Securities Trader on October 1, 2018 and each person who was registered with FINRA as a Securities Trader within two years prior to October 1, 2018 shall be qualified to register as a Securities Trader without passing any additional qualification examinations.
        All other individuals registering as Securities Traders after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the Securities Trader qualification examination.
        (5) Investment Banking Representative
        (A) Requirement
        Each representative as defined in paragraph (b)(1) of this Rule shall be required to register with FINRA as an Investment Banking Representative if his or her activities in the investment banking or securities business of a member involve:
        (i) advising on or facilitating debt or equity securities offerings through a private placement or a public offering, including but not limited to origination, underwriting, marketing, structuring, syndication, and pricing of such securities and managing the allocation and stabilization activities of such offerings, or
        (ii) advising on or facilitating mergers and acquisitions, tender offers, financial restructurings, asset sales, divestitures or other corporate reorganizations or business combination transactions, including but not limited to rendering a fairness, solvency or similar opinion.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as an Investment Banking Representative on October 1, 2018 and each person who was registered with FINRA as an Investment Banking Representative within two years prior to October 1, 2018 shall be qualified to register as an Investment Banking Representative without passing any additional qualification examinations.
        All other individuals registering as Investment Banking Representatives after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the Investment Banking Representative qualification examination.
        (C) Exceptions
        (i) Associated Persons Participating in New Employee Training Program
        An associated person who participates in a new employee training program conducted by a member shall not be required to register as an Investment Banking Representative for a period of up to six months from the time the associated person first engages within the program in activities described in paragraph (b)(5) of this Rule, but in no event more than two years after commencing participation in the training program. This exception is conditioned upon the member maintaining records that:
        a. evidence the existence and details of the training program, including but not limited to its scope, length, eligible participants and administrator; and
        b. identify those participants whose activities otherwise would require registration as an Investment Banking Representative and the date on which each participant commenced such activities.
        (ii) Associated Persons Engaged in Limited Activities
        An associated person shall not be required to register as an Investment Banking Representative if his or her activities in the investment banking or securities business of a member are limited solely to:
        a. advising on or facilitating the placement of direct participation program securities as defined in paragraph (b)(8)(A) of this Rule;
        b. effecting private securities offerings as specified in paragraph (b)(9) of this Rule; or c. retail or institutional sales and trading activities.
        c. retail or institutional sales and trading activities.
        (6) Research Analyst
        (A) Requirement
        Each person associated with a member who is to function as a research analyst shall be required to register with FINRA as a Research Analyst.
        For purposes of paragraph (b)(6) of this Rule, “research analyst” shall mean an associated person whose primary job function is to provide investment research and who is primarily responsible for the preparation of the substance of an equity research report or whose name appears on an equity research report, and “research report” shall have the same meaning as in Rule 2241.
        The requirements of paragraph (b)(6) of this Rule shall not apply to an associated person who:
        (i) is an employee of a non-member foreign affiliate of a member ("foreign research analyst");
        (ii) resides outside the United States; and
        (iii) contributes, partially or entirely, to the preparation of globally branded or foreign affiliate research reports but does not contribute to the preparation of a member's research, including a mixed-team report, that is not globally branded.
        Provided that the following conditions are satisfied:
        a. a member that publishes or otherwise distributes globally branded research reports partially or entirely prepared by a foreign research analyst must subject such research to pre-use review and approval by a Research Principal registered pursuant to paragraph (a)(6) of this Rule or a Supervisory Analyst registered pursuant to paragraph (a)(14) of this Rule. In addition, the member must ensure that such research reports comply with Rule 2241, as applicable;
        b. in publishing or otherwise distributing globally branded research reports partially or entirely prepared by a foreign research analyst, a member must prominently disclose:
        1. each affiliate contributing to the research report;
        2. the names of the foreign research analysts employed by each contributing affiliate;
        3. that such research analysts are not registered as Research Analysts with FINRA; and
        4. that such research analysts may not be associated persons of the member and therefore may not be subject to Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account;
        c. the disclosures required by paragraph (b)(6)(A)(iii)b. of this Rule shall be presented on the front page of the research report or the front page shall refer to the page on which the disclosures can be found. In electronic research reports, a member may hyperlink to the disclosures. References and disclosures shall be clear, comprehensive and prominent;
        d. members shall establish and maintain records that identify those individuals who have availed themselves of this exemption, the basis for such exemption, and evidence of compliance with the conditions of the exemption. Failure to establish and maintain such records shall create an inference of a violation of paragraph (b)(6) of this Rule. Members shall also establish and maintain records that evidence compliance with the applicable content, disclosure and supervision provisions of Rule 2241. Members shall maintain these records in accordance with the supervisory requirements of Rule 3110, and in addition to such requirement, the failure to establish and maintain such records shall create an inference of a violation of the applicable content, disclosure and supervision provisions of Rule 2241;
        e. nothing in paragraph (b)(6) of this Rule shall affect the obligation of any person or broker-dealer, including a foreign broker-dealer, to comply with the applicable provisions of the federal securities laws, rules and regulations and any self-regulatory organization rules;
        f. the fact that a foreign research analyst avails himself or herself of the exemption in paragraph (b)(6) of this Rule shall not be probative of whether that individual is an associated person of the member for other purposes, including whether the foreign research analyst is subject to the Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account;
        g. a member that distributes non-member foreign affiliate research reports that are clearly and prominently labeled as such must comply with the third-party research report requirements in Rule 2241; and
        h. for purposes of the exemption in paragraph (b)(6) of this Rule, the terms "affiliate," "globally branded research report" and "mixed-team research report" shall have the following meanings:
        1. "affiliate" shall mean a person that directly or indirectly controls, is controlled by, or is under common control with, a member;
        2. "globally branded research report" refers to the use of a single marketing identity that encompasses the member and one or more of its affiliates; and
        3. "mixed-team research report" refers to any member research report that is not globally branded and includes a contribution by a research analyst who is not an associated person of the member.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Research Analyst on October 1, 2018 and each person who was registered with FINRA as a Research Analyst within two years prior to October 1, 2018 shall be qualified to register as a Research Analyst without passing any additional qualification examinations.
        All other individuals registering as Research Analysts after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the Research Analyst qualification examinations.
        Upon written request pursuant to the Rule 9600 Series, FINRA shall grant a waiver from the analytical portion of the Research Analyst qualification examinations (Series 86) upon verification that the applicant has passed:
        (i) Levels I and II of the CFA Examination; or
        (ii) if the applicant functions as a research analyst who prepares only technical research reports as defined in paragraph (b)(6) of this Rule, Levels I and II of the Chartered Market Technician ("CMT") Examination; and
        (iii) has either functioned as a research analyst continuously since having passed the Level II CFA or CMT Examination or applied for registration as a Research Analyst within two years of having passed the Level II CFA or CMT Examination.
        For purposes of paragraph (b)(6) of this Rule, a "technical research report" shall mean a research report, as that term is defined in Rule 2241, that is based solely on stock price movement and trading volume and not on the subject company's financial information, business prospects, contact with subject company's management, or the valuation of a subject company's securities.
        An applicant who has been granted an exemption pursuant to paragraph (b)(6)(B) of this Rule still must pass the regulatory portion of the Research Analyst qualification examinations (Series 87) before that applicant can be registered as a Research Analyst.
        (7) Investment Company and Variable Contracts Products Representative
        A. Representatives Engaged in Limited Activities
        Each representative as defined in paragraph (b)(1) of this Rule may register with FINRA as an Investment Company and Variable Contracts Products Representative if his or her activities in the investment banking or securities business of a member are limited to the solicitation, purchase or sale of:
        (i) redeemable securities of companies registered pursuant to the Investment Company Act;
        (ii) securities of closed-end companies registered pursuant to the Investment Company Act during the period of original distribution only;
        (iii) variable contracts and insurance premium funding programs and other contracts issued by an insurance company except contracts that are exempt securities pursuant to Section 3(a)(8) of the Securities Act; or
        (iv) municipal fund securities as defined under MSRB Rule D-12.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as an Investment Company and Variable Contracts Products Representative on October 1, 2018 and each person who was registered with FINRA as an Investment Company and Variable Contracts Products Representative within two years prior to October 1, 2018 shall be qualified to register as an Investment Company and Variable Contracts Products Representative without passing any additional qualification examinations.
        All other individuals registering as Investment Company and Variable Contracts Products Representatives after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the Investment Company and Variable Contracts Products Representative qualification examination.
        (8) Direct Participation Programs Representative
        A. Representatives Engaged in Limited Activities
        Each representative as defined in paragraph (b)(1) of this Rule may register with FINRA as a Direct Participation Programs Representative if his or her activities in the investment banking or securities business of a member are limited to the solicitation, purchase or sale of equity interests in or the debt of direct participation programs as defined in paragraph (b)(8)(A) of this Rule.
        "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. 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.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Direct Participation Programs Representative on October 1, 2018 and each person who was registered with FINRA as a Direct Participation Programs Representative within two years prior to October 1, 2018 shall be qualified to register as a Direct Participation Programs Representative without passing any additional qualification examinations.
        All other individuals registering as Direct Participation Programs Representatives after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the Direct Participation Programs Representative qualification examination.
        (9) Private Securities Offerings Representative
        (A) Representatives Engaged in Limited Activities
        Each representative as defined in paragraph (b)(1) of this Rule may register with FINRA as a Private Securities Offerings Representative if his or her activities in the investment banking or securities business of a member are limited to effecting sales as part of a primary offering of securities not involving a public offering, pursuant to Sections 3(b), 4(2) or 4(6) of the Securities Act and the Securities Act rules and regulations, provided, however, that such person shall not effect sales of municipal or government securities, or equity interests in or the debt of direct participation programs as defined in paragraph (b)(8)(A) of this Rule.
        (B) Qualifications
        Subject to the lapse of registration provisions in Rule 1210.08, each person registered with FINRA as a Private Securities Offerings Representative on October 1, 2018 and each person who was registered with FINRA as a Private Securities Offerings Representative within two years prior to October 1, 2018 shall be qualified to register as a Private Securities Offerings Representative without passing any additional qualification examinations.
        All other individuals registering as Private Securities Offerings Representatives after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the Private Securities Offerings Representative qualification examination. However, FINRA shall, upon such evidence as it determines to be appropriate, deem any person who while employed by a bank, engaged in effecting sales of private securities offerings as described in paragraph (b)(9) of this Rule, during the period from May 12, 1999 to November 12, 1999, as qualified to register as a Private Securities Offerings Representative without the need to pass the SIE and the Private Securities Offerings Representative qualification examination.

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

        .01 Foreign Registrations. Persons who are in good standing as a representative with the Financial Conduct Authority in the United Kingdom or with a Canadian stock exchange or securities regulator shall be exempt from the requirement to pass the SIE.

        .02 Additional Qualification Requirements for Persons Engaged in Security Futures Activities. Each person who is registered with FINRA as a General Securities Representative, United Kingdom Securities Representative, Canada Securities Representative, Options Representative, Registered Options Principal or General Securities Sales Supervisor shall be eligible to engage in security futures activities as a representative or principal, as applicable, provided that such individual completes a Firm Element program as set forth in Rule 1240 that addresses security futures products before such person engages in security futures activities.

        .03 Members With One Registered Options Principal. A member that has one Registered Options Principal shall promptly notify FINRA in the event such person is terminated, resigns, becomes incapacitated or is otherwise unable to perform the duties of a Registered Options Principal.

        Following receipt of such notification, FINRA shall require the member to agree, in writing, to refrain from engaging in any options-related activities that would necessitate the prior or subsequent approval of a Registered Options Principal until such time as a new Registered Options Principal has been qualified.

        Members failing to qualify a new Registered Options Principal within two weeks following the loss of their sole Registered Options Principal, or by the earliest available date for administration of the Registered Options Principal examination, whichever is longer, shall be required to cease doing an options business; provided, however, they may effect closing transactions in options to reduce or eliminate existing open options positions in their own account as well as the accounts of their customers.

        .04 Scope of General Securities Sales Supervisor Registration Category. The General Securities Sales Supervisor category is an alternate category of registration designed to lessen the qualification burdens on principals of general securities firms who supervise sales. Without this category of limited registration, such principals would be required to separately qualify pursuant to the rules of FINRA, the MSRB, the NYSE and the options exchanges. While persons may continue to separately qualify with all relevant self-regulatory organizations, the General Securities Sales Supervisor examinations permit qualification as a supervisor of sales of all securities through one registration category. Persons registered as General Securities Sales Supervisors may also qualify in any other category of principal registration. Persons who are already qualified in one or more categories of principal registration may supervise sales activities of all securities by also qualifying as General Securities Sales Supervisors.

        Any person required to be registered as a principal who supervises sales activities in corporate, municipal and option securities, investment company products, variable contracts, direct participation program securities as defined in paragraph (b)(8)(A) of this Rule, and security futures (subject to the requirements of Supplementary Material .02 of this Rule) may be registered solely as a General Securities Sales Supervisor. In addition to branch office managers, other persons such as regional and national sales managers may also be registered solely as General Securities Sales Supervisors as long as they supervise only sales activities.

        .05 Scope of Operations Professional Requirement. Any person whose activities are limited to performing a function ancillary to a covered function specified in paragraph (b)(3)(A)(ii) of this Rule, or whose function is to serve a role that can be viewed as supportive of or advisory to the performance of a covered function specified in paragraph (b)(3)(A)(ii) of this Rule (e.g., internal audit, legal or compliance personnel who review but do not have primary responsibility for any covered function), or who engages solely in clerical or ministerial activities in a covered function specified in paragraph (b)(3)(A)(ii) of this Rule shall not be required to register as an Operations Professional. For the purpose of paragraph (b)(3)(A)(i)c. of this Rule, the determination as to what constitutes “materially” or “material” is based on a member's pre-established spending guidelines and risk management policies.

        An employee of a foreign broker-dealer whose activities, relating to a transaction in foreign securities on behalf of a customer of a member, are limited to facilitating the clearance and settlement of the transaction shall not be required to register as an Operations Professional where:

        (a) the member sending the order for a transaction in foreign securities on behalf of the customer to the foreign broker-dealer is not a direct participant of the applicable foreign clearing system; and
        (b) in executing such order in the foreign market, the foreign broker-dealer accepts the member's customer's instructions to settle the transaction in foreign securities on a DVP/RVP basis through the foreign clearing system and settle directly with a custodian for the customer.

        .06 Eliminated Registration Categories. Subject to the lapse of registration provisions in Rule 1210.08, each person who is registered with FINRA as an Order Processing Assistant Representative, a United Kingdom Securities Representative, a Canada Securities Representative, an Options Representative, a Corporate Securities Representative or a Government Securities Representative on October 1, 2018 and each person who was registered with FINRA in such categories within two years prior to October 1, 2018 shall be eligible to maintain such registrations with FINRA. However, if persons registered in such categories subsequently terminate such registration(s) with FINRA and the registration remains terminated for two or more years, they shall not be eligible to re-register in such categories. In addition, each person who is registered with FINRA as a Foreign Associate on October 1, 2018 shall be eligible to maintain such registration with FINRA. However, if persons registered as Foreign Associates subsequently terminate such registrations with FINRA, they shall not be eligible to re-register as Foreign Associates.

        (a) Persons registered as Order Processing Assistant Representatives shall be subject to the following conditions:
        (1) Order Processing Assistant Representatives may not solicit transactions or new accounts on behalf of a member, render investment advice, make recommendations to customers regarding the appropriateness of securities transactions, effect transactions in securities markets on behalf of a member or accept customer orders for municipal securities and direct participation program securities as defined in paragraph (b)(8)(A) of this Rule;
        (2) members may only compensate Order Processing Assistant Representatives on an hourly wage or salaried basis and may not in any way, directly or indirectly, relate their compensation to the number or size of transactions effected for customers, provided that Order Processing Assistant Representatives are not prohibited from receiving bonuses or other compensation based on a member's profit sharing plan or similar arrangement;
        (3) the activities of Order Processing Assistant Representatives may only be conducted at a business location of a member that is under the direct supervision of an appropriately registered principal of the member; and
        (4) an Order Processing Assistant Representative shall not be precluded from registering as a General Securities Representative or in another registration category appropriate to his or her functions; however, upon registration in such other category, such person's registration as an Order Processing Assistant Representative shall be terminated.
        (4) an Order Processing Assistant Representative shall not be precluded from registering as a General Securities Representative or in another registration category appropriate to his or her functions; however, upon registration in such other category, such person's registration as an Order Processing Assistant Representative shall be terminated.
        (b) Persons registered as Foreign Associates shall be subject to the following conditions:
        (1) They shall not be citizens, nationals, or residents of the United States or any of its territories or possessions;
        (2) They shall not engage in any securities activities with or for any citizen, national or resident of the United States; and
        (3) They shall conduct all of their securities activities in areas outside the jurisdiction of the United States.
        Amended by SR-FINRA-2018-031 eff. Oct. 1, 2018.
        Amended by SR-FINRA-2017-007 eff. Oct. 1, 2018.
        Amended by SR-FINRA-2011-060 eff. Oct. 17, 2011.
        Amended by SR-FINRA-2011-040 eff. Oct. 17, 2011.
        Adopted by SR-FINRA-2011-013 eff. Oct. 17, 2011.

        Selected Notices: 11-33, 17-30.

      • 1230. Associated Persons Exempt from Registration

        The following persons associated with a member are not required to be registered with FINRA:
        (a) persons associated with a member whose functions are solely and exclusively clerical or ministerial; and
        (b) persons associated with a member whose functions are related solely and exclusively to:
        (1) effecting transactions on the floor of a national securities exchange and who are appropriately registered with such exchange;
        (2) transactions in municipal securities;
        (3) transactions in commodities; or
        (4) transactions in security futures, provided that any such person is registered with a registered futures association.

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

        .01 Registration Requirements for Associated Persons Who Accept Customer Orders. The function of accepting customer orders is not considered a clerical or ministerial function. Each person associated with a member who accepts customer orders under any circumstances shall be registered in an appropriate registration category pursuant to Rule 1220. An associated person shall not be considered to be accepting a customer order where occasionally, when an appropriately registered person is unavailable, the associated person transcribes order details submitted by a customer and the registered person contacts the customer to confirm the order details before entering the order.

        Adopted by SR-FINRA-2017-007 eff. Oct 1, 2018.

        Selected Notice: 17-30.

      • 1240. Continuing Education Requirements

        This Rule prescribes requirements regarding the continuing education of specified persons subsequent to their initial registration with FINRA. The requirements shall consist of a Regulatory Element and a Firm Element as set forth below.
        (a) Regulatory Element
        (1) Requirements
        All covered persons shall comply with the requirement to complete the Regulatory Element.
        Each covered person shall complete the Regulatory Element on the occurrence of their second registration anniversary date and every three years thereafter, or as otherwise prescribed by FINRA. On each occasion, the Regulatory Element must be completed within 120 days after the person's registration anniversary date. A person's initial registration date, also known as the "base date," shall establish the cycle of anniversary dates for purposes of this Rule. The content of the Regulatory Element shall be appropriate to either the registered representative or principal status of persons subject to the Rule. The content of the Regulatory Element for a person designated as eligible for a waiver pursuant to Rule 1210.09 shall be determined based on the person's most recent registration status, and the Regulatory Element shall be completed based on the same cycle had the person remained registered.
        (2) Failure to Complete
        Unless otherwise determined by FINRA, any covered persons who have not completed the Regulatory Element within the prescribed time frames will have their registrations deemed inactive until such time as the requirements of the program have been satisfied. Any person whose registration has been deemed inactive under this Rule shall cease all activities as a registered person and is prohibited from performing any duties and functioning in any capacity requiring registration. Further, such person may not accept or solicit business or receive any compensation for the purchase or sale of securities. However, such person may receive trail or residual commissions resulting from transactions completed before the inactive status, unless the member with which such person is associated has a policy prohibiting such trail or residual commissions. A registration that is inactive for a period of two years will be administratively terminated. A person whose registration is so terminated may reactivate the registration only by reapplying for registration and meeting the qualification requirements of the applicable provisions of Rules 1210 and 1220. FINRA may, upon application and a showing of good cause, allow for additional time for a covered person to satisfy the program requirements. If a person designated as eligible for a waiver pursuant to Rule 1210.09 fails to complete the Regulatory Element within the prescribed time frames, the person shall no longer be eligible for such a waiver.
        (3) Disciplinary Actions
        Unless otherwise determined by FINRA, a covered person, other than a person designated as eligible for a waiver pursuant to Rule 1210.09, will be required to retake the Regulatory Element and satisfy all of its requirements in the event such person:
        (A) is subject to any statutory disqualification as defined in Section 3(a)(39) of the Exchange Act;
        (B) is subject to suspension or to 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; or
        (C) is ordered as a sanction in a disciplinary action to retake the Regulatory Element by any securities governmental agency or self-regulatory organization.
        The retaking of the Regulatory Element shall commence with participation within 120 days of the covered person becoming subject to the statutory disqualification, in the case of (A) above, or the disciplinary action becoming final, in the case of (B) and (C) above. The date of the disciplinary action shall be treated as such person's new base date with FINRA.
        (4) Reassociation in a Registered Capacity
        Any covered person who has terminated association with a member and who has, within two years of the date of termination, become reassociated in a registered capacity with a member shall participate in the Regulatory Element at such intervals that may apply (second anniversary and every three years thereafter) based on the initial registration anniversary date rather than based on the date of reassociation in a registered capacity.
        (5) Definition of Covered Person
        For purposes of this Rule, the term "covered person" means any person, other than a Foreign Associate, registered with FINRA pursuant to Rule 1210, including any person who is permissively registered pursuant to Rule 1210.02, and any person who is designated as eligible for a waiver pursuant to Rule 1210.09.
        (6) Delivery of the Regulatory Element
        The continuing education Regulatory Element program will be administered through Web-based delivery or such other technological manner and format as specified by FINRA.
        (7) Regulatory Element Contact Person
        Each member shall designate and identify to FINRA (by name and e-mail address) an individual or individuals responsible for receiving e-mail notifications provided via the Central Registration Depository regarding when a covered person is approaching the end of his or her Regulatory Element time frame and when a covered person is deemed inactive due to failure to complete the requirements of the Regulatory Element program. Each member shall identify, review, and, if necessary, update the information regarding its Regulatory Element contact person(s) in the manner prescribed by Rule 4517.
        (b) Firm Element
        (1) Persons Subject to the Firm Element
        The requirements of this subparagraph shall apply to any person registered with a member who has direct contact with customers in the conduct of the member's securities sales, trading and investment banking activities, any person registered as an operations professional pursuant to Rule 1220(b)(3) or a research analyst pursuant to Rule 1220(b)(6), and to the immediate supervisors of such persons (collectively, "covered registered persons"). "Customer" shall mean any natural person and any organization, other than another broker or dealer, executing securities transactions with or through or receiving investment banking services from a member.
        (2) Standards for the Firm Element
        (A) Each member must maintain a continuing and current education program for its covered registered persons to enhance their securities knowledge, skill, and professionalism. At a minimum, each member shall at least annually evaluate and prioritize its training needs and develop a written training plan. The plan must take into consideration the member's size, organizational structure, and scope of business activities, as well as regulatory developments and the performance of covered registered persons in the Regulatory Element. If a member's analysis establishes the need for supervisory training for persons with supervisory responsibilities, such training must be included in the member's training plan.
        (B) Minimum Standards for Training Programs — Programs used to implement a member's training plan must be appropriate for the business of the member and, at a minimum must cover training in ethics and professional responsibility and the following matters concerning securities products, services, and strategies offered by the member:
        (i) General investment features and associated risk factors;
        (ii) Suitability and sales practice considerations; and
        (iii) Applicable regulatory requirements.
        (C) Administration of Continuing Education Program — A member must administer its continuing education programs in accordance with its annual evaluation and written plan and must maintain records documenting the content of the programs and completion of the programs by covered registered persons.
        (3) Participation in the Firm Element
        Covered registered persons included in a member's plan must take all appropriate and reasonable steps to participate in continuing education programs as required by the member.
        (4) Specific Training Requirements
        FINRA may require a member, individually or as part of a larger group, to provide specific training to its covered registered persons in such areas as FINRA deems appropriate. Such a requirement may stipulate the class of covered registered persons for which it is applicable, the time period in which the requirement must be satisfied and, where appropriate, the actual training content.
        Amended by SR-FINRA-2017-007 eff. Oct. 1, 2018.
        Amended by SR-FINRA-2015-050 eff. Dec. 24, 2015.
        Amended by SR-FINRA-2015-015 eff. Oct. 1, 2015.
        Amended by SR-FINRA-2015-004 eff. Feb. 12, 2015.
        Amended by SR-FINRA-2011-013 eff. Oct. 17, 2011.
        Amended by SR-NASD-2007-034 eff. Dec. 31, 2007.
        Amended by SR-NASD-2004-098 eff. April 4, 2005.
        Amended by SR-NASD-2003-183 eff. April 16, 2004.
        Amended by SR-NASD-2002-154 eff. July 29, 2003.
        Amended by SR-NASD-2000-64 eff. March 11, 2001.
        Amended by SR-NASD-98-03 eff. July 1, 1998.
        Amended by SR-NASD-95-22 eff. July 1, 1995.
        Adopted by SR-NASD-94-72 eff. July 1, 1995.

        Selected Notices: 94-59, 95-13, 95-35, 96-27, 98-23, 01-14, 03-44, 04-22, 05-20, 07-42, 11-33, 15-28, 17-30.