FINRA Registration Rules

Standards for Admission—NASD Rule 1010 Series

The NASD Rule 1010 Series was designed to create uniform standards for admission and access to FINRA for a member firm. These Rules also identify the requirements and review criteria for membership and registration.

The Rules describe milestones, or critical events, associated with the new membership application process. The Rule 1010 Series also addresses milestones associated with applications to remove or modify prior restrictions imposed, as well as applications relating to changes of ownership, control or business operations. As such, the Rule 1010 Series sets forth standards for admission that must be continually met throughout a firm's membership. Moreover, the Rules define the responsibilities of the parties involved in the membership application process, and, where appropriate, specify time frames that are attached to the milestones. (See also Membership Rules Reference .)

Anti-Money Laundering (AML) Requirements—The PATRIOT Act and Rule 3011

The PATRIOT Act requires financial institutions, including broker-dealers, to have developed and implemented AML compliance programs on or before April 24, 2002. Accordingly, FINRA has produced an AML rule, NASD Rule 3011 , which requires firms to develop and implement a written AML compliance program. The Rule also sets forth minimum standards for broker-dealers' AML compliance programs. The program must be approved in writing by a member of senior management and be reasonably designed to achieve and monitor the member's ongoing compliance with the requirements of the Bank Secrecy Act and the implementing regulations promulgated thereunder. See FINRA's AML Web page for more information.

Proof of Experience—Rule 1014(a)(10)(D)

NASD Rule 1014(a)(10)(D) requires one year of direct or two years of related experience for each person charged with supervision in the subject area they propose to supervise. In addition, each principal and registered representative of the firm must take and pass the requisite securities qualification examinations. Upon data entry of the Form U4 by Registration & Disclosure, each individual is given a 90-day window to pass all required examinations. Therefore, timely planning and preparation during the application process is necessary in order to meet FINRA's deadlines. Lastly, each Applicant must employ a minimum of two registered principals and one Financial and Operations Principal (although the Applicant can request FINRA to waive the two-principal requirement and employ only one principal, under exceptional circumstances, pursuant to the NASD Rule 9600 Series ).

Net Capital Requirements—SEC Rules 15c3-1 and 17a-11

Funding of the business is another important area to address: the firm must be able to meet the minimum net capital requirements of SEC Rules 15c3-1 and 17a-11 and have sufficient additional funds to meet its planned or future business needs. Clearing firms may impose additional financial requirements on member firms for which they provide services, so the Applicant should contact its clearing firm prior to submitting an application to ensure it can meet the clearing firm's initial and ongoing requirements.

Audit Trail Requirements—Rules 6950 through 6957

An additional item to consider is order audit trail reporting requirements, which are set forth in NASD Rules 6950-6957 . This set of rules, which govern what is known as the Order Audit Trail System^SM (OATS^SM ), requires FINRA member firms that handle orders to buy or sell NASDAQ-listed equities to develop a means for electronically capturing and reporting to OATS specific data elements related to the handling and execution of orders, including recording all times of these events in hours, minutes and seconds, and to synchronize their business clocks. Compliance with these Rules requires advance planning because special data lines may be required, and ordering these data lines requires 140 days' advance notice. See the OATS Web Page for more information.

Reporting Requirements for Clearing Firms—Rule 3150

NASD Rule 3150 requires clearing firms to electronically report certain data on behalf of the correspondent clients and all self-clearing firms to report this data on their own businesses. Under the Rule, each member clearing and self-clearing firm must report the prescribed data to FINRA through the INSITE program. Members may enter into an agreement with a third party, such as a service bureau, pursuant to which the third party agrees to fulfill the clearing or self-clearing firm's obligations under Rule 3150. Notwithstanding the existence of such an agreement, each member that is a clearing or self-clearing firm will be responsible for complying with the reporting requirements of Rule 3150. See Notice to Members 01-84 and INSITE FAQ for more information.