FINRA - New NMA Form and Process

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Gateway NMA Main Page

FINRA’s New NMA Form and Process

June 24, 2008

Welcome. The purpose of this presentation is to introduce you to FINRA’s new Form NMA and changes to the new membership application process, which will be implemented effective June 26, 2008.

FINRA’s New NMA Form and Process

Session Overview

I. Getting Started: Researching and Commencing the Process

II. Accessing the Firm Gateway and Form NMA

III. Completing and Submitting Form NMA

IV. The Application Review Process

V. Membership Interview

VI. Decision

In this presentation, we will be introducing the new Form NMA and new application process features by taking you through the life cycle of an application from the time of the initial filing through issuance of a decision. The six major process steps which we will discuss are presented here.

Which Form NMA Do I Use?

IMPORTANT

Applicants who received entitlements before June 26, 2008 and began filling out a Form NMA prior to June 26, 2008: Continue the application process with that form.

Applicants who received entitlements before June 26, 2008 but did not begin completing a Form NMA before June 26, 2008: Obtain new entitlements and use the new Form NMA and application filing process.

Applicants receiving entitlements on or after June 26, 2008 will use the new Form NMA and application filing process.

Presented on this page is detailed guidance concerning which Form NMA you will need to file depending on whether you obtained Form NMA entitlements and began filling out the older Form NMA in use prior to June 26, 2008. Please take a few moments to review. Note that if you will be submitting the older Form NMA, you will be required to submit the hardcopy documents to the District Office consistent with the process in place prior to June 26, 2008.

Getting Started: Researching and Commencing the Process

Resources and Tools

Regulatory Notice 08-14

§ New Membership Application Form NMA Participant Guide

§ PDF of revised Form NMA

§ List of Form NMA Attachments

How to Become a Member Web Page

§ Detailed Process Information

§ Frequently Asked Questions

What to Expect Tutorial

§ High-Level Introduction

Who to Contact with Questions

§ Gateway Call Center Staff

§ Centralized NMA Department

FINRA has provided a number of tools and resources to assist prospective applicants and to enhance the transparency of the NMA process and the requirements for membership.

We encourage you to take advantage of these tools as they are helpful aids in understanding the revised Form NMA and application process changes.

Note that the information covered in this presentation is available on the How to Become a Member Page, in the Participant’s Guide, and the Regulatory Notice.

You may also contact FINRA if you still have questions once you’ve reviewed these materials.

Slide 5

Regulatory Notice 08-14 describes the changes to the new Form NMA and application process. It also provides a number of helpful reference documents, which are listed here.

This Regulatory Notice can be accessed on the FINRA Web Page (www.finra.org) by clicking on the ‘Notices’ tab of that page.

Slide 6

The Form NMA Participant Guide provides: details on the structure of the NMA filing process and required documents; systems and technology-related information; and contact information if you need help. The Guide is available via Regulatory Notice 08-14, shown on the previous page.

Getting Started: Researching and Commencing the Process
PDF of Revised Form NMA

This is a screen shot of the .pdf of the Form NMA. This .pdf contains all the questions in the Form NMA, a subset of which will be required for the applicant when the Form NMA tailors the questions required based on the applicant’s proposed business.

Although the .pdf lets you see all the contents of the Form, it does not let you experience the technological capabilities of the Form NMA. The .pdf is for reference only. Form NMA can only be submitted electronically.

You can access the .pdf via Regulatory Notice 08-14.

Getting Started: Researching and Commencing the Process

The How to Become a Member page provides process details and guidance including information on the differences in the filing requirements prior to and on or after June 26, 2008. It may be accessed via the FINRA web site.

Slide 9

These Frequently Asked Questions (FAQs) were developed to address questions that would typically arise concerning the new Form NMA and changes to the application process.

These FAQs are accessible via the How to Become a Member page on the FINRA web site. Go to the ‘Helpful Tools for Membership Applicants’ section on that page.

Slide 10

We have also provided an online tutorial, The New Form NMA and Application Process, that provides an automated, high-level walkthrough of the New Form NMA and application process. It is approximately 10 minutes long and provides a general orientation. It may be accessed either by the link provided in the How to Become a Member Page (in the ‘Helpful Tools for Membership Applicants’ section) or from the Compliance Tools page, shown here.

Commencing the Process

Application Filing: Steps to Follow

§ Fund General Account

§ Submit Form BD, Entitlements, New Member Assessment Report, etc.

§ Access Firm Gateway

§ Complete and Submit Form BR, U4

§ Access Form NMA

Now that we’ve identified the tools and resources designed to assist you in the new member application process, we’ll now turn to the five major steps in the application filing process.

These steps are presented in chronological order. Effective June 26, 2008, all applicants using the new Form NMA must follow this sequence of steps, in the order in which they are presented. We will touch on each step in the pages that follow.

IMPORTANT REMINDER: Before commencing the application process, prospective applicants should contact FINRA’s Registration and Disclosure Department to request and reserve a proposed name.

Commencing the Process

Fund the General Account

Determine How Much to Fund the Account

Wire Initial Application and Registration Fees

§ Wiring instructions located in the Guide

§ Initial application and registration fee payments wired to general account

§ Fees must be wired before hardcopy forms (e.g. Form BD, Entitlements) are filed

§ Checks will no longer be accepted

The factors that determine how much to fund the applicant’s general account are unchanged. However, the process for funding the account has changed. The main change is that applicants will be funding this account with the application fee, not just the state and exam registration fees. Also, all application fees will be submitted by wire to the general account, instead of by check. Hardcopy checks will no longer be accepted. Account number and related information are provided in Section 3 of the Form NMA Guide.

Note: Wired funds are matched to the applicant’s Form BD and other hardcopy documents based on the ‘Reference’ included in the wire instructions. Be sure to enter the applicant’s name you reserved as the Reference.

Commencing the Process

Submit Hardcopy Forms

The following forms are required to be completed and submitted in hardcopy format after the general account is funded:

Form BD

Entitlement Forms

New Member Assessment Report

WEB CRD E-Mail Notification Form

Funding wire confirmation information

Submit to Registration and Disclosure Department in Rockville, MD.

These forms will no longer be submitted to the Regional Offices.

After you have wired the initial funding to the general account, you may now submit the hardcopy forms, listed here, to the Registration and Disclosure Department for processing. Address information is provided in both the Form NMA Guide and Regulatory Notice 08-14.

Timing: Applicants are encouraged to submit these hardcopy documents promptly following wiring of the initial funding.

Once the hardcopy forms have been processed, the Entitlements Department will provide the applicant with a URL and login with which to access the Firm Gateway.

Commencing the Process
Access the Firm Gateway

This is the Firm Gateway login page. The key change here is that new member application tools and information are now available on the Firm Gateway for applicants who have commenced the process.

Firm Gateway

This is the main page of the Firm Gateway, the user environment where you will obtain important information about the application process and access to required forms and documentation. It is also where you will prepare and submit all forms and documents for a new member application. You will be able to access Web CRD directly, without the need for a separate login. Also, the applicant’s account administrator will be able to enter users for the Form NMA via the User Administration tab.

Firm Gateway
Accessing Form NMA

The Form NMA may be accessed under the New Member Application tab by selecting ‘Membership Application’ then selecting the Form NMA link. This will take you to the Form Filing Cabinet, shown on the next page.

Firm Gateway
Accessing Form NMA

In the Form Filing Cabinet, you will click on ‘Begin a New Form’ to start a Form NMA. Note that you may begin only one new Form NMA at a time. The new Form NMA captures ‘Applicant Contact Information’ in the same manner that information is currently captured in the Form NMA in use prior to June 26, 2008.

Form NMA
Features and Navigation

This is the first page of the new Form NMA. This new form differs from the older version in three key respects: (1) It is structured differently – 8 sections instead of 14; (2) It is interactive (e.g. it pulls data from Form BD and CRD); and (3) It tailors itself depending on the business lines selected on Form BD. Be sure to complete Section I first to ensure proper tailoring. The other sections may be completed in any order.

Form NMA
Features and Navigation

The Form NMA retrieves information from Form BD, including the applicant’s CRD number and is tailored based on the lines of business selected on the applicant’s Form BD. Here, the four business lines selected on Form BD, are reflected in Q. 3a.

Note: If you decide to add or delete any business lines, you must first make the changes on the Form BD. These changes are processed overnight and reflected on Form NMA the next day. If your business line changes are not reflected in Form NMA, click on the ‘Refresh Form NMA’ button in the upper right of the screen and the changes should then be displayed.

Form NMA
Features and Navigation

Form NMA also allows the applicant to select other business lines not specifically enumerated in Form BD, including securities lending and M&A advisory services, among others. The Form NMA then tailors the required questions in Section II-Business Lines based on those selections. If the applicant’s proposed business includes activities other than those enumerated in questions 12A through 12Y of Form BD, be sure to select 12Z – Other - as an activity on Form BD. This will activate these ‘Other’ activities in the Form NMA so that you can complete the required pages for that activity.

Form NMA
Features and Navigation

Section II of the Form NMA consists of a series of pages in which we collect information relevant to each business line selected by the applicant. As you’ll recall from the earlier page, the applicant selected IDM as a business line. As a result, the detailed page for IDM was automatically populated into the Form NMA for completion. Note also that all the business lines selected are reflected in the left hand navigation panel under Section II. This is one example of the Form’s tailoring abilities. These detailed questions are another mechanism through which the new membership application requirements are made more transparent.

Form NMA
Features and Navigation

Section III, subsection C, Personnel – allows you to identify associated persons by entering the CRD number and retrieving that person from CRD. If you do not know the CRD number, click on the ‘Retrieve’ button, enter the person’s name, and the Form NMA will help locate that person’s CRD record. This section also contains a mandatory question (C.5), that asks whether the person will be employed part-time. Answering this question ‘yes’ will allow the Form NMA to provide required questions for part-time personnel. Also, capturing this information as data enables early identification of persons who are missing required registrations. This helps ensure these issues are resolved early in the application review process.

Form NMA
Features and Navigation

The Form NMA requires documents to be attached directly into the Form. This is consistent with the ‘Attach’ feature in use in the old Form NMA. Note that mandatory questions – including mandatory attachments – are identified with a red asterisk. The Form NMA will not permit you to ‘Submit’ if mandatory questions are left unanswered.

When you click on the ‘Attach’ link, you will be taken to the ‘Attachment’ window, presented on the next page.

Form NMA
Attachment Window

This is the ‘Attachment’ window. You will access and upload your documents through this page. Using the ‘Browse’ feature, you will select the documents to be attached and upload them. It is recommended that you gather all the applicant’s Form NMA attachments into a single folder on your drives before you begin to attach documents. This will provide increased efficiency to the process by allowing you to go to the same folder each time to locate a document to be uploaded.

Form NMA
Features and Navigation

Section IV – Net Capital and Sources of Funding, collects information on the applicant’s net capital. An important feature of Section VI is the requirement, consistent with current NMA reviews, that the applicant identify the various sources and levels of funding. Where we concluded that the visual aid effectively depicted our requirements, we presented that picture along with the description of the requirement.

Form NMA
Features and Navigation

In Section VI – Policies and Procedures, you are required to provide the applicant’s Written Supervisory Procedures (WSPs). Additionally, in other sections of the Form NMA you are requested to provide other policies and procedures. To the extent the applicant has incorporated its procedures into a single, comprehensive WSP document, you need not attach multiple copies of the same document in response to various questions. Instead, simply attach a statement to those other questions which states that “The [Name] procedures are encompassed in the applicant’s WSPs.”

Form NMA
Features and Navigation

The Form NMA has a ‘Review’ feature which performs a completeness check on the application to identify whether any required responses and/or attachments are missing. You can use the Review feature at any time to find out whether you inadvertently omitted something in the course of completing the Form NMA. Simply select the Review button, which is located both at the top and at the bottom of each page.

Form NMA
Review Page: Errors or Omissions

This page is presented once the Review feature has run. The red text tells you that information is missing and the section immediately below that specifically identifies those questions that still require a response. To address this problem, you would click on the ‘Edit’ button, which would return you to the Form NMA, where you would navigate to the question(s) to be corrected and make the required changes. Note that when there are errors and/or omissions, a ‘Submit’ button is not presented.

Form NMA
Ready to be Submitted

When you have corrected all the items identified in the Review page, you’ll select ‘Review’ again and this screen will display. Here, you can see that the ‘Submit’ button is now available, and you will click on that to submit your Form NMA.

Form NMA
Submit Page

Once the Form NMA is successfully submitted, you will get this confirmation page. Please print it for future reference. Note that unlike the process in place for applications filed using the Form NMA in effect prior to June 26, 2008, no hardcopy forms are required to be submitted with this confirmation.

Amending the Form NMA

Now that you have submitted your Form NMA successfully (assuming it is substantially complete and the analyst has commenced the review) you may need to amend the Form NMA in response to an information request or due to a change by the applicant. The information request will be conveyed to you electronically. Responses will be filed by amending the Form NMA. To amend Form NMA, access the Form Filing Cabinet via the Forms and Filings tab in the Firm Gateway. Click on the Amend button. This will take you to your Form NMA.

Amending the Form NMA

Information Request: Analyst has requested that Applicant amend its Written Supervisory procedures and also modify the number of markets requested to be consistent with the Business Plan.

Example: The analyst made an information request requiring the applicant to amend its WSPs and modify the number of markets indicated in the Form NMA to be consistent with the business plan. To submit the amended WSP, upload them into Section VI.G, using the ‘Attach’ feature. Navigate to the IDM page in Section II of Form NMA to amend the number of markets. Then, select ‘Review’. The ‘Submit’ button will be enabled if there are no missing items, at which point you select ‘Submit’ to file the amended Form NMA. . Both the initial filing and the amended filing will be accessible to you in the Form Filing list.

Changes to FINRA’s NMA Operations and Process

Centralization, Membership Interviews and Decision

Reviews of new Form NMA applications Will be Conducted by District 10 New York

Membership Interview Process Enhancements

§ Membership Interviews take place in the local District Office.

§ Focus on transition to membership

§ Introduction to District Office Staff, including Regulatory Coordinator

§ Documents must be submitted electronically in advance

Decisions Issued by Centralized NMA Group

Executed Membership Agreements are returned to Centralized NMA Group

Form NMA

Filing Tips and Reminders

Form NMA

- Form NMA must be accessed and updated at least every 90 days, otherwise it will be automatically deleted from the system.

- Mandatory attachments must be provided.

- Only one user can work in a Form NMA at any time.

- Who to contact with Questions:

- New Form NMA Requirements. Email both: Barbara Cody at barbara.cody@finra.org and Allison Reid at allison.reid@finra.org

- Technical and Access-Related Questions: Gateway Call Center at 301-869-6699

FINRA’s New NMA Form and Process

Questions