REGISTRATION AND DISCLOSURE

Background Checks

Background Checks on Registration Applicants

The SEC approved FINRA Rule 3110(e) (Responsibility of Member to Investigate Applicants for Registration) to replace NASD Rule 3010(e) (Qualifications Investigated) relating to background checks on registration. Rule 3110(e) is based in part on substantially similar provisions in NASD Rule 3010(e) and Incorporated NYSE Rule 345.11 (Investigation and Records), and includes new provisions relating to the verification of information in the Form U4 (Uniform Application for Securities Industry Registration or Transfer). The SEC also approved Rule 3110.15 (Temporary Program to Address Underreported Form U4 Information), which establishes a temporary program that will issue a refund to members of Late Disclosure Fees assessed for the late filing of responses to Form U4 Question 14M, subject to specified conditions. Rule 3110(e) became effective on July 1, 2015. Rule 3110.15 became retroactively effective on April 24, 2014, and automatically sunset on December 1, 2015.

FINRA Regulatory Notice 15-05 (March 2015):  SEC Approves Consolidated FINRA Rule Regarding Background Checks on Registration Applicants

BrokerCheck / CRD

Member Websites must include a Readily Apparent Reference and Hyperlink to BrokerCheck

The SEC approved amendments to FINRA Rule 2210 (Communications with the Public) to require each of a member firm’s websites to include a readily apparent reference and hyperlink to BrokerCheck on (1) the initial Web page that the firm intends to be viewed by retail investors, and (2) any other Web page that includes a professional profile of one or more registered persons who conduct business with retail investors. The rule amendments became effective June 6, 2016.

FINRA Regulatory Notice 15-50 (December 2015):  SEC Approves Rule Requiring Members' Websites to Include a Readily apparent Reference and Hyperlink to BrokerCheck

 

Changes to Reduce the Waiting Period for the Release of Information Reported on Form U5

The SEC approved a change to FINRA Rule 8312 (FINRA BrokerCheck Disclosure) to reduce the waiting period from 15 days to three business days for the release of certain information reported on the Form U5 (Uniform Termination Notice for Securities Industry Registration) through BrokerCheck. The effective date is December 12, 2015.

FINRA Regulatory Notice 15-49 (December 2015):  SEC Approves Changes to Reduce the Waiting Period for the Release of Information Reported on Form U5 through BrokerCheck

 

BrokerCheck Disclosure

The SEC approved two rule changes related to FINRA Rule 8312 (FINRA BrokerCheck Disclosure). First, the SEC approved amendments to permanently make publicly available in BrokerCheck information about former associated persons of a FINRA member firm who were registered on or after August 16, 1999, and who have been the subject of an investment-related civil action brought by a state or foreign financial regulatory authority that was dismissed pursuant to a settlement agreement. Second, the SEC approved amendments to include in BrokerCheck information about member firms and their associated persons of any registered national securities exchange that uses the CRD for registration purposes. Both rule changes became effective on June 23, 2014.

FINRA Regulatory Notice 14-08 (February 2014):  SEC Approves Changes to Expand the Categories of Civil Judicial Disclosure Permanently Included in BrokerCheck and to Include in BrokerCheck Information About Member Firms and Their Associated Persons of Any Registered National Securities Exchange That Uses the CRD System for Registration Purposes

 

Expungement of Information from CRD

FINRA Rules 12805 and 13805, which cover the expungement of customer dispute information under FINRA Rule 2080 (Obtaining an Order of Expungement of Customer Dispute Information from the CRD System), establish procedures that arbitrators must follow before recommending expungement of information related to arbitration cases from a broker's CRD record. The procedures are intended to ensure that arbitrators recommend expungement only when they find and document one of the narrow grounds specified in FINRA Rule 2080. In October 2013, FINRA published expanded expungement guidance to arbitrators and parties as a reminder of the criteria for recommending expungement of customer dispute information. The guidance provides arbitrators with best practice tools to use, in addition to the requirements outlined in FINRA Rules 12805, 13805, 2080 and 2081, when considering expungement requests. FINRA periodically updates this guidance, which was recently updated in 2015.

• Notice to Arbitrators and Parties on Expanded Expungement Guidance (Updated September 2015)

 

Prohibited Conditions Relating to Expungement of Customer Dispute Information

The SEC approved FINRA Rule 2081 (Prohibited Conditions Relating to Expungement of Customer Dispute Information) to prohibit member firms and associated persons from conditioning or seeking to condition settlement of a dispute with a customer on, or to otherwise compensate the customer for, the customer’s agreement to consent to, or not to oppose, the firm’s or associated person’s request to expunge such customer dispute information from the Central Registration Depository (CRD®). The rule became effective on July 30, 2014.

FINRA Regulatory Notice 14-31 (July 2014): SEC Approves FINRA Rule 2081 Regarding Prohibited Conditions Relating to Expungement of Customer Dispute Information

General

Web Delivery of the Continuing Education Regulatory Element Program

The SEC approved amendments to FINRA rules to provide a Web-based delivery method for completing the Regulatory Element of the Continuing Education (CE) requirements, and to establish the fee for it. The amendments became effective on October 1, 2015. 

FINRA Regulatory Notice 15-28 (August 2015):  SEC Approves Amendments Relating to Web-based Delivery of the Regulatory Element

As announced in Regulatory Notice 15-28, as part of the transition to CE Online, FINRA is phasing out test center delivery of the Regulatory Element of Continuing Education (CE). This change became effective on July 1, 2016. As of that date, the option to complete the Regulatory Element at a Pearson VUE or a Prometric testing center will no longer be available, and participants with an open Regulatory Element window must complete their session using the FINRA CE Online System® with the exception of participants who, pursuant to the Americans with Disabilities Act (ADA), may need accommodations in completing their CE session due to a disability.

•  FINRA Information Notice 5/16/16 (May 16, 2016):  Elimination of Continuing Education Delivery at Testing Centers

 

Qualifications Exams

Qualification and Registration of Associated Persons Relating to Algorithmic Trading

The SEC approved an amendment to NASD Rule 1032(f) that expands the scope of persons required to register as a Securities Trader. Specifically, beginning January 30, 2017, each associated person who is primarily responsible for the design, development or significant modification of an algorithmic trading strategy relating to equity, preferred or convertible debt securities, or who is responsible for the day-to-day supervision or direction of such activities, must pass the Series 57 exam and register as a Securities Trader.

FINRA Regulatory Notice 16-21 (June 2016):  SEC Approves Rule to Require Registration of Associated Persons Involved in the Design, Development or Significant Modification of Algorithmic Trading Strategies.

 

Securities Trader Registration and Qualification Examination

The SEC recently approved FINRA’s proposal to establish a registration category and qualification examination requirement for Securities Traders and Securities Trader Principals. Regulatory Notice 15-45 provides firms with information regarding the Securities Trader registration category and qualification examination (Series 57), Securities Trader Principal registration category, Series 57 examination fee and implementation of the new registration categories. In addition, the Notice provides firms with information regarding the Regulatory Element Continuing Education (CE) Program for Securities Traders. Candidates for the Series 57 examination will be able to schedule and take the examination beginning on January 4, 2016.

FINRA Regulatory Notice 15-45 (November 2015):  FINRA Announces Approval of and Implementation Date for Securities Trader and Securities Trader Principal Registration Categories and Related Qualification Examination, Fee and Continuing Education Requirements
Series 57 Test Outline

 

FINRA Revises Examination Programs

FINRA periodically reviews the content of qualification examinations to determine whether revisions are necessary or appropriate in view of changes—including changes to the laws, rules and regulations—pertaining to the subject matter covered by the examinations. Based on this review process, FINRA has revised the Registered Options Principal (Series 4) examination program. The changes are reflected in the Series 4 content outline on FINRA's website and will appear in Series 4 examinations administered on or after September 28, 2015.

FINRA Regulatory Notice 15-29 (August 2015):  FINRA Revises the Series 4 Examination Program