Broker Conduct

Protecting Investors from Misconduct

FINRA has adopted new rules to address brokers with a significant history of misconduct and the broker-dealers that employ them. The new rules:

  • allow a Hearing Officer to impose conditions or restrictions on the activities of a Respondent member firm or Respondent associated person, and require the member firm employing a Respondent associated person to adopt heightened supervisory procedures for such an associated person, when a disciplinary matter is appealed to the National Adjudicatory Council (NAC) or called for NAC review;
  • require member firms to adopt heightened supervisory procedures for statutorily disqualified associated persons during the period a statutory disqualification eligibility request is under review by FINRA;
  • require disclosure through FINRA BrokerCheck® of the status of a member firm as a “taping firm” under FINRA Rule 3170 (Tape Recording of Registered Persons by Certain Firms); and
  • require a member firm to submit a written request to FINRA’s Department of Member Regulation, through the Membership Application Group, seeking a materiality consultation and approval of a continuing membership application, if required, when a natural person seeking to become an owner, control person, principal or registered person of the member firm has, in the prior five years, one or more “final criminal matters” or two or more “specified risk events.”

The amendments to the FINRA Rule 9200 Series (Disciplinary Proceedings), the FINRA Rule 9300 Series (Review of Disciplinary Proceeding by National Adjudicatory Council and FINRA Board; Application for SEC Review), and FINRA Rule 9556 (Failure to Comply with Temporary and Permanent Cease and Desist Orders, or Orders that Impose Conditions or Restrictions) became effective April 15, 2021.

The amendments to FINRA Rule 8312 (FINRA BrokerCheck Disclosure) became effective May 1, 2021.

The amendments to the FINRA Rule 9520 Series (Eligibility Proceedings) and Funding Portal Rule 900 (Code of Procedure) became effective June 1, 2021.

The amendments to the FINRA Rule 1000 Series (Member Application and Associated Person Registration), the Capital Acquisition Broker Rule 100 Series (Member Application and Associated Person Registration) became effective September 1, 2021.

FINRA Regulatory Notice 21-09 (March 10, 2021): FINRA Adopts Rules to Address Brokers with a Significant History of Misconduct

Central Registration Depository (CRD)

Changes and New Functionality in the Central Registration Depository (CRD®) System

FINRA introduced enhancements and presentation changes in the CRD system that relate to the implementation of FINRA’s restructured qualification examination program and the adoption of consolidated FINRA registration rules. For details on the implementation of these and other updates to CRD, please visit the Central Registration Depository main page.

Licensing and Continuing Education

(NEW) Continuing Education Program Transformation

FINRA has adopted important changes to its continuing education (CE) and registration rules to train registered persons more effectively while accommodating registered persons, particularly women and underrepresented minorities, whose personal circumstances take them away from the industry for a time. The changes to Rules 1210 and 1240: (1) provide eligible individuals who terminate any of their representative or principal registration categories the option of maintaining their qualification for any terminated registration categories by completing annual CE through a new program, the Maintaining Qualifications Program (MQP); (2) require registered persons to complete CE Regulatory Element annually for each representative or principal registration category that they hold; and (3) expressly allow firms to consider other required training toward satisfying an individual’s annual CE Firm Element and extend the Firm Element requirement to all registered persons.

The changes relating to the MQP (paragraph (c) of Rule 1240) and the Financial Services Affiliate Waiver Program (FSAWP) (Rule 1210.09) will become effective March 15, 2022.

All other changes, including the changes relating to the Regulatory Element, Firm Element and the two-year qualification period, will become effective January 1, 2023.

FINRA Regulatory Notice 21-41 (November 17, 2021): FINRA Amends Rules 1210 and 1240 to Enhance the Continuing Education Program for Securities Industry Professionals