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Miscellaneous Rules and Provisions (Rules 435–440K)
Rule 435. Miscellaneous Prohibitions
No member or member organization shall:
(1) Reserved.(2) Reserved.(3) Reserved.(4) Reserved.(5) Circulation of rumors
Circulate in any manner rumors of a sensational character which might reasonably be expected to affect market conditions on the Exchange. Discussion of unsubstantiated information published by a widely circulated public media is not prohibited when its source and unsubstantiated nature are also disclosed. Report shall be promptly made to the Exchange of any circumstance which gives reason to believe that any rumor or unsubstantiated information might have been originated or circulated for the purpose of influencing prices in listed securities.(6) Reserved.(7) Reserved.Amendments.
April 21, 1966.
December 19, 1968.
March 26, 1970.
December 11, 1975; effective March 12, 1976.
Amended by SR-FINRA-2008-036 eff. Nov. 11, 2008.
Amended by SR-FINRA-2008-028 eff. Dec. 15, 2008.
Selected Notice: 08-57, 08-64.Rule 440. Books and Records
Every member not associated with a member organization and every member organization shall make and preserve books and records as the Exchange may prescribe and as prescribed by Rule 17a-3. The recordkeeping format, medium and retention period shall comply with Rule 17a-4 under the Securities Exchange Act of 1934.
Amendment.
June 17, 1976.
December 31, 1997.
• • • Supplementary Material: --------------
.10 Periodic Security Counts, Verifications, Comparisons, etc
Each member and member organization shall make the counts, examinations, verifications, accountings, comparisons and entries prescribed by Regulation 240.17a-13 of the Securities and Exchange Commission unless the member or member organization is specifically exempted under such Regulation or is otherwise exempted by the Securities and Exchange Commission as provided in such Regulation. More frequent counts, verifications, comparisons, etc. should be made where prudent business practice would so require. Each member and member organization subject to the above requirements shall also:(1) Receive position statements as frequently as good business practice requires, but no less than once per month with respect to securities held by clearing corporations, The Depository Trust Company, other organizations, or correspondents. Each such member or member organization shall at least once per month reconcile all such securities and money balances by comparison of the clearing corporations' or correspondents' position statements to the member or member organization's books and records and promptly report differences to the contra organization and such differences shall be promptly resolved by both. Where statements are sent more than once a month or where there is a higher volume, good business practice may require a more frequent exchange of statements and their reconciliation.(2) At a minimum of once per month account for all U.S. Government bearer instruments by physical examination and comparison with its books and records. More frequent counts should be made where prudent business practice would otherwise require. The counts should be made by persons other than those who are normally responsible for processing government securities.(3) At a maximum of seven business days after such security count, enter all unresolved difference into a difference account, for that count. The differences account shall identify the unverified securities and reflect the number of shares or principal amount long or the number of shares or principal amount short of each security difference and the date of the security count which disclosed the difference. Thereafter any adjustment of a difference position will be made by entry into such account. Differences remaining after adjustments or entries reflecting subsequent security counts shall always reflect the date of the original or earliest remaining difference. Unresolved security difference position valuations shall be made at least once a month as of the date of the computation of Net Capital and retained in the member or member organization's files for at least three years.Amendments.
Adopted November 19, 1970.
November 7, 1974.
June 17, 1976..20 Identification of Suspense Accounts and Assignment of Responsibility for General Ledger Accounts
All receipts and payments of money and all receipts and deliveries of securities shall be recorded promptly on each member organization's books of account. Any account used temporarily to record money charges or credits and/or receipts or deliveries of securities pending determination of their ultimate disposition shall be clearly identified as a suspense account, and a record maintained of all information known with respect to each item so recorded. Such suspense accounts include, but are not limited to, DK fails, unidentified fails, unallocable securities receipts vs payment, returned deliveries, and any other receivable or payable (both money and/or securities) "suspended" because of doubtful ownership, collectibility or deliverability. To the extent that suspense items can be distinguished by type, separate accounts may be used provided that the word "suspense" is made a prominent part of the account title.
A qualified employee shall be assigned responsibility for each general ledger bookkeeping account and account of like function used by a member organization and such employee shall control and oversee entries into each such account and shall determine at all times that the account is current and accurate. A competent supervisory employee shall, as frequently as is necessary considering the function of the account but, in any event, at least monthly, review each account to determine that it is current and accurate and that any items which become aged and/or uncertain as to resolution are promptly identified for research and possible transfer to suspense accounts. A written record shall be kept of the names of the employees assigned such primary and supervisory responsibility for each such account.
Adopted.
November 19, 1970.
Amendments.
August 2, 1971.
June 17, 1976.Rule 440A. Telephone Solicitation
(a) General Telephone Solicitation Requirements
No employee of a member organization shall initiate any telephone solicitation, as defined in paragraph (j)(2) of this rule, to:(1) Time of Day Restriction. Any residence of a person before the hour of 8:00 a.m. or after 9:00 p.m. (local time at the called party's location), unless(A) the member organization has an established business relationship with the called party pursuant to paragraph (j)(1)(A),(B) the member organization has received the called party's prior express invitation or permission, or(C) the called party is a broker or dealer;(2) Firm-Specific Do-Not-Call List. Any person that previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the member organization; or(3) National Do-Not-Call List. Any person who has registered his or her telephone number on the Federal Trade Commission's national do-not-call registry.(b) Procedures
Prior to engaging in telephone solicitation or telemarketing, a member organization must institute procedures to comply with paragraph (a). Such procedures must meet the following minimum standards:(1) Written policy. Member organizations must have a written policy available upon demand for maintaining a do-not-call list.(2) Training of personnel engaged in telemarketing. Personnel engaged in any aspect of telemarketing must be informed and trained in the existence and use of the do-not-call list, including the policies and procedures of the firm regarding communications with the public.(3) Recording, honoring of do-not-call requests. If a member organization making a call for telemarketing purposes receives a request from a person not to receive calls from that member organization, the member organization must record the request and place the person's name, if provided, and telephone number on the firm's do-not-call list at the time the request is made. Member organizations must honor a person's do-not-call request within a reasonable time from the date such request is made. This period may not exceed 30 days from the date of such request. If such requests are recorded or maintained by a party other than the member organization on whose behalf the telemarketing call is made, the member organization on whose behalf the telemarketing call is made will be liable for any failures to honor the do-not-call request.(4) Identification of sellers and telemarketers. An employee of a member organization making a call for telemarketing purposes must provide the called party with the name of the individual caller, the name of the member or member organization, an address or telephone number at which the member organization may be contacted, and that the purpose of the call is to solicit the purchase or sale of securities or a related service. The telephone number provided may not be a 900 number or any other number for which charges exceed local or long distance transmission charges.(5) Affiliated persons or entities. In the absence of a specific request by the person to the contrary, a person's do-not-call request shall apply to the member organization making the call, and will not apply to affiliated entities unless the consumer reasonably would expect them to be included given the identification of the caller and the product or service being advertised.(6) Maintenance of do-not-call lists. A member organization making calls for telemarketing purposes must maintain a record of a caller's request not to receive further telemarketing calls. A firm-specific do-not-call request must be honored for five years from the time the request is made.(c) National Do-Not-Call List Exceptions
Paragraph (a)(3) national do-not-call list restrictions shall not apply, if:(1) Established Business Relationship Exception. The member organization has an established business relationship with the recipient of the call. A person's request to be placed on the firm-specific do-not-call list terminates the established business relationship exception to that national do-not-call list provision for that member organization even if the person continues to do business with the member organization;(2) Prior Express Written Consent Exception. The member organization has obtained the person's prior express invitation or permission. Such permission must be evidenced by a signed, written agreement between the person and member organization which states that the person agrees to be contacted by the member organization and includes the telephone number to which the calls may be placed; or(3) Personal Relationship Exception. The employee of a member organization making the call has a personal relationship with the recipient of the call.(d) Safe Harbor Provision
The National Do-Not-Call List general telephone solicitation restrictions referenced in Paragraph (a)(3) shall not apply to an employee of a member organization making telephone solicitations, if the employee of a member organization demonstrates that the violation is the result of an error and that as part of the member or member organization's routine business practice, it meets the following standards:(1) Written procedures. The member organization has established and implemented written procedures to comply with the national do-not-call rules;(2) Training of personnel. The member organization has trained its personnel, and any entity assisting in its compliance, in procedures established pursuant to the national do-not-call rules;(3) Recording. The member organization has maintained and recorded a list of telephone numbers that it may not contact; and(4) Accessing the national do-not-call database. The member organization uses a process to prevent telephone solicitations to any telephone number on any list established pursuant to the do-not-call rules, employing a version of the national do-not-call registry obtained from the administrator of the registry no more than 31 days prior to the date any call is made, and maintains records documenting this process.(e) Pre-Recorded Messages(1) A member organization may not initiate any telephone call to any residence using an artificial or prerecorded voice to deliver a message, without the prior express consent of the called person, unless the call:(i) is not made for a commercial purpose;(ii) is made for a commercial purpose, but does not include or introduce an unsolicited advertisement or constitute a telephone solicitation; or(iii) is made to any person with whom the member organization has an established business relationship at the time the call is made.(2) All artificial or prerecorded telephone messages shall:(i) At the beginning of the message, state clearly the identity of the member organization that is responsible for initiating the call. The member organization responsible for initiating the call must state the name under which the member organization is registered to conduct business with the applicable State Corporation Commission (or comparable regulatory authority); and(ii) During or after the message, must state clearly the telephone number (other than that of the autodialer or prerecorded message player that placed the call) of such member organization. The telephone number provided may not be a 900 number or any other number for which charges exceed local or long distance transmission charges.(iii) For telemarketing messages to a residence, such telephone number, mentioned in paragraph (e)(2)(ii) above, must permit any individual to make a do-not-call request during regular business hours for the duration of the telemarketing campaign.(f) Wireless Communications(1) Member organizations are prohibited from using an automatic telephone dialing system or an artificial or prerecorded voice when initiating a telephone call to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call.(2) The requirements are applicable to member organizations telemarketing or making telephone solicitation calls to wireless telephone numbers.(g) Telephone Facsimile or Computer Advertisements
No member organization may use a telephone facsimile machine, computer or other device to send an unsolicited advertisement to a telephone facsimile machine, computer or other device.(1) For purposes of paragraph (g) of this rule, a facsimile advertisement is not "unsolicited" if:(i) The recipient has granted the member or member organization prior express invitation or permission to deliver the advertisement. Such express invitation or permission must be evidenced by a signed, written statement that includes the facsimile number to which any advertisements may be sent and clearly indicates the recipient's consent to receive such facsimile advertisements from the member or member organization; or(ii) The recipient has an established business relationship with the sending member organization and the member organization obtains the facsimile number directly from the recipient, from the recipient's own directory, advertisement, or site on the Internet, unless the recipient has noted on such materials that it does not accept unsolicited advertisements at the facsimile number in question, or from directories or other sources of information provided by third parties, provided that the member organization must take reasonable steps to verify that the recipient consented to have the number listed. If the established business relationship existed before July 9, 2005, and the member organization also possessed the facsimile number before July 9, 2005, the member organization may send the facsimile advertisements without demonstrating how the number was obtained.(iii) Facsimile advertisements must include specific notice and contact information on the facsimile allowing recipients to "opt-out" of future facsimile advertisements. Such notice must:(A) Be clear and conspicuous, on the first page of the advertisement;(B) State that the recipient may make a request to the member organization not to send any future facsimiles, and that failure to comply with the request within 30 days is unlawful; and(C) Include a telephone number, facsimile number, and cost-free mechanism to opt-out of facsimiles. Such mechanism must permit customers to make opt-out requests 24 hours a day, 7 days a week.(2) Member organizations must clearly mark, in a margin at the top or bottom of each page of the transmission, the date and time it is sent and an identification of the member organization sending the message and the telephone number of the sending machine or of the employee of the member organization directing the sending of the transmission.(h) Caller Identification Information(1) Any member organization that engages in telemarketing, as defined in paragraph (j)(2) of this rule, must transmit caller identification information. Such caller identification information must include either the Calling Party Number ("CPN") or the calling party's billing number, also known as the Charge Number ("ANI"), and, when available from the telephone carrier, the name of the member organization. The telephone number so provided must permit any person to make a do-not-call request during regular business hours. Whenever possible, CPN is the preferred number and should be transmitted.(2) Any member organization that engages in telemarketing, as defined in paragraph (j)(2) of this rule, is prohibited from blocking the transmission of caller identification information.(3) Provision of caller identification information does not obviate the requirement for a caller to verbally supply identification information during a call.(i) Outsourcing Telemarketing
If a member organization uses another entity to perform telemarketing services on its behalf, the member organization remains responsible for ensuring compliance with all provisions contained in this rule.(j) Definitions(1) Established Business Relationship(A) An established business relationship means a prior or existing relationship formed by a voluntary two-way communication between a member organization and a person, with or without an exchange of consideration, if:(i) the person has made a financial transaction or has a securities position, a money balance, or account activity with the member organization, or at a clearing firm that provides clearing services to such member organization, within the previous 18 months immediately preceding the date of the telephone call;(ii) the member organization is the broker-dealer of record for an account of the person within the previous 18 months immediately preceding the date of the telephone call; or(iii) the person has contacted the member organization to inquire about, or make an application regarding a product or service offered by the member organization within the previous three months immediately preceding the date of the telephone call, which relationship has not been previously terminated by either party.(B) A person's specific do-not-call request, as set forth in paragraph (a)(2) of this rule, terminates an established business relationship for purposes of telemarketing and telephone solicitation even if the person continues to do business with the member organization.(C) A person's established business relationship with a member organization does not extend to the member organization's affiliated entities unless the person would reasonably expect them to be included, given the nature and type of products or services offered by the affiliate and the identity of the affiliate. Similarly, a person's established business relationship with an affiliate of a member organization does not extend to the member or member organization unless the person would reasonably expect them to be included, given the nature and type of products or services offered, and the identity of, the member organization.(2) The terms "telemarketing" and "telephone solicitation" mean the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.(3) The term "telephone facsimile machine" means equipment which has the capacity to transcribe text or images (or both) from paper, into an electronic signal and to transmit that signal over a regular telephone line, or to transcribe text or images (or both) from an electronic signal received over a regular telephone line onto paper.(4) The term "personal relationship" means any family member, friend, or acquaintance of the person making the call.(5) The term "account activity" shall include, but not be limited to, purchases, sales, interest credits or debits, charges or credits, dividend payments, transfer activity, securities receipts or deliveries, and/or journal entries relating to securities or funds in the possession or control of the member.(6) The terms "automatic telephone dialing system" and "autodialer" mean equipment which has the capacity to store or produce telephone numbers to be called using a random or sequential number generator and to dial such numbers.(7) The term "broker-dealer of record" refers to the broker-dealer identified on a customer's account application or accounts held directly at a mutual fund or variable insurance product issuer.(8) The term "unsolicited advertisement" means any material advertising the commercial availability or quality of any products or services which is transmitted to any person without that person's prior express invitation or permission.Adopted.
June 7, 1995.
Amendment.
May 14, 1997.
October 7, 2005 (NYSE-2004-73).
May 10, 2007 (NYSE-2007-06).Rule 445. Anti-Money Laundering Compliance Program
SR-FINRA-2009-039 has been approved by the SEC. Effective January 1, 2010, this rule will no longer be applicable. Please consult the appropriate FINRA rule.
Each member organization and each member not associated with a member organization shall develop and implement a written anti-money laundering program reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act (31 U.S.C. 5311, et seq.), and the implementing regulations promulgated thereunder by the Department of Treasury. Each member organization's anti-money laundering program must be approved, in writing, by a member of senior management.
The anti-money laundering programs required by this Rule shall, at a minimum:
(1) Establish and implement policies and procedures that can be reasonably expected to detect and cause the reporting of transactions required under 31 U.S.C. 5318(g) and the implementing regulations thereunder;(2) Establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and the implementing regulations thereunder;(3) Provide for annual (i.e., on a calendar-year basis) independent testing for compliance to be conducted by member or member organization personnel or by a qualified outside party, unless the member or member organization does not conduct a public business (e.g., engages solely in proprietary trading, or conducts business only with other broker-dealers) in which case "independent testing" is required every two years (on a calendar-year basis);(4) Designate, and identify to the Exchange (by name, title, mailing address, e-mail address, telephone number, and facsimile number) a person or persons responsible for implementing and monitoring the day-to-day operations and internal controls of the program and provide prompt notification to the Exchange regarding any change in such designation(s). Such person or persons must:(A) be employed by each member or member organization for which they are designated pursuant to this paragraph, or(B) be employed by an entity that directly or indirectly controls, or is controlled by, or is under common control with the member or member organization (i.e., a parent, affiliate, or subsidiary of the member or member organization).(C) Except as provided by Supplementary Material paragraph .30, the prior written approval of the Exchange is required if an arrangement is structured pursuant to section (4)(B) of this rule. Further, each person designated pursuant to section (4)(B) must execute an attestation, acceptable to the Exchange, consenting to the supervision of each member or member organization for which they are designated and to the jurisdiction of the Exchange. In addition, the member or member organization must execute an agreement, acceptable to the Exchange, acknowledging their responsibility to supervise, as an employee for all regulatory purposes, each such person designated by them; and(5) Provide ongoing training for appropriate persons.
• • • Supplementary Material: --------------
.10 All members and member organizations should undertake more frequent testing than required by Rule 445(3) if circumstances warrant..20 Independent testing pursuant to Rule 445(3) must be conducted by a designated person with a working knowledge of applicable requirements under the Bank Secrecy Act and its implementing regulations. Independent testing may not be conducted by a person who performs the functions being tested, or by the designated AML compliance officer, or by a person who reports to either..30 If a person designated pursuant to an arrangement structured under section 4(B) is to be replaced by another person, and such arrangement has previously been approved by the Exchange pursuant to section 4(C), then Exchange approval of the designation change is not required if the previously approved arrangement is otherwise substantively unchanged. However, prompt notification to the Exchange of the designation change is still required under section (4), as is the execution of required documents pursuant to section 4(C).Adopted:
April 22, 2002.
Amended:
January 25, 2006 (NYSE-2005-36).
