Continuing Membership Guide

 

Section I – General Information and Documentation

 

General Information and Documentation for Applications to Expand Business Operations and Remove or Modify Restrictions

 

The documents and information listed below are not intended to present a comprehensive list of all conceivable categories of information that may be relevant to an application, nor should they be interpreted to limit FINRA staff's discretion to request whatever information staff determines is relevant to an application in order to verify Applicant’s ability to continue to meet the 14 standards contained in Rule 1014.

 

A. Form BD and Description of Proposed Business Activities

  1. Pro forma copy of amendment to the firm's Form BD Registration Statement reflecting the proposed activities (to the extent one is required to be filed in connection with the application).
  2. Detailed description of all material aspects of the proposed business activities.

B. Supervisory Personnel

  1. Name and CRD number of the supervisors responsible for the proposed business activity ("Supervising Person").
  2. Detailed description of each Supervisory Person's prior work experience as it relates (directly or indirectly) to the proposed business activities, including:

    a.  Where such experience was obtained;
    b.  Duration;
    c.  Positions held and responsibilities; and
    d.  Names of the individual's supervisors.
    (Note: Be prepared to document experience in the proposed business line(s), including providing professional references.)
  3. Organizational chart of the firm identifying Supervisory Persons, the name, CRD number, and/or Social Security number of each person to be supervised (if known);
  4. Detailed description of all responsibilities held or to be held by each Supervisory Person, including:

    a.  Full-time or part-time status;
    b.  Any outside business activities (including hours per week devoted or to be devoted to such activities); and
    c.  An explanation of how any part-time Supervisory Persons will be able to effectively discharge their supervisory functions to ensure that the firm meets the standards in NASD Rule 1014.
  5. For each Supervisory Person, provide a copy of any decision 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 these persons.
  6. For each Supervisory Person, provide documentation of any of the following actions, unless already provided to CRD:

    a.  regulatory action or investigation;
    b.  investment-related civil action for damages or an injunction that is pending, adjudicated, or settled;
    c.  investment-related customer complaint or arbitration involving sales practice violations, including theft, misappropriation, conversion, or breach of fiduciary duty, that is pending, settled, or has resulted in an award or judgment; and
    d.  criminal action (other than a minor traffic violation) that is pending, adjudicated, or that has resulted in a guilty or no contest plea.
  7. A description of any remedial action, such as special training, continuing education requirements, or heightened supervision, imposed on any associated person of the firm by a state or federal authority or self-regulatory organization.
  8. For each Supervisory Person, provide 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, a self-regulatory organization rule, or an industry standard of conduct.

C. Supervisory and Compliance Procedures

  1. A description of the supervisory system to be employed by the firm.
  2. A copy of the firm's written supervisory procedures (WSPs), internal operating procedures, if any, compliance procedures, internal inspections plan, written approval process, and qualifications investigations which should comply with NASD Rule 3010 as they relate to each proposed activity. The firm's WSPs should identify:

    a.  Who the responsible supervisor is for each proposed business line;
    b.  What actions the supervisor will take to ensure compliance with regulatory requirements;
    c.  When (i.e., how frequently) such actions will be taken; and
    d.  How the supervisor will evidence that the required supervisory steps were taken.
  3. Complete all applicable sections of the Written Supervisory Procedures Checklist (XLS 144 KB) and return this form with the firm's response.

D. Net Capital and Source of Funds

  1. If the firm's minimum net capital will increase as a result of the proposed change in activities or operations, provide a current trial balance and net capital computation with copies of documentary supports.
  2. State whether any additional funds were (or will be) infused into the firm to satisfy the minimum required net capital under SEC Rule 15c3-1 (the "Net Capital Rule"). All required capital must be in place and sufficiently documented by the time staff completes its review of the application.
  3. Provide a detailed description of the source of such funds (where and with whom the funds originated) and how they came to be infused into the firm. Provide copies of all documents evidencing the movement of such funds from their original source into the firm's account(s), including, but not limited to, bank statements (pre- and post-withdrawal), bank deposit receipts, checks (front and back), and/or wire advices, reflecting such capitalization. The information provided must provide Staff with a clear picture of the movement of funds from their origin to the Applicant.

E. Additional Information for Applications to Remove or Modify Restrictions

  1. A statement of facts showing that the circumstances that gave rise to the restriction(s) have changed.
  2. A statement specifically explaining why the restriction(s) should be modified or removed in light of the standards in Rule 1014 and the articulated rationale for the imposition of the restriction(s).
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    Section II – Specific Documents for Selected Expansions