Overview of NASD Rule 3012 & FINRA Rule 3130

Note: FINRA Rule1 3130 (Annual Certification of Compliance and Supervisory Processes) replaces NASD Rule 3013 and the corresponding provisions in Incorporated NYSE Rule 342.30 and related NYSE Rule Interpretations (effective December 15, 2008). See Regulatory Notice 08-57 and SR-FINRA-2008-030 for additional information.

 

Overview of NASD Rule 3012

 

Rule 3012 requires that all firms establish, maintain and enforce a supervisory control system, including written supervisory control procedures (SCPs). All procedures referred to in this guidance must be in writing. Your firm must have:

  • A designated principal(s) specifically responsible for defining, maintaining, testing and enforcing the SCPs.
  • Procedures for the annual testing and verification of supervisory procedures and SCPs, and for submission of an annual report to your firm's senior management.
  • Procedures to amend or create additional supervisory procedures where the testing and verification process identifies the need for such action.
  • Controls to ensure that supervisory procedures stay current with changes in your firm's business lines, business model, products and/or practices and with changes in the regulatory environment.
  • Specific procedures to monitor the customer account activities of any producing manager (as defined in the Definitions and Clarification Section below), including heightened supervisory procedures for any producing manager who is reviewed by a certain supervisor (as discussed below) and who produces 20 percent or more of the revenues supervised by that supervisor.
  • Special procedures to review, monitor and confirm customer account activities relating to transmittal of funds or securities to third parties, changes in address or changes in investment objectives. These procedures must include a means or method of customer confirmation, notification or follow-up that can be documented.

 

Overview of FINRA Rule 3130

 

FINRA Rule 3130 is intended to promote attention to member firms' compliance programs by requiring substantial and purposeful interaction between business managers and compliance officers throughout the firm. To that end, your firm must: 

  • Designate and identify to FINRA one or more Chief Compliance Officers (CCOs) through the FINRA Contact System on FINRA's Web site at www.finra.org/fcs. The designated CCOs must also be identified on Schedule A to Form BD.
  • Prepare an annual report detailing the processes your firm has in place to establish, maintain, review, test and modify written compliance policies and written supervisory procedures (WSPs) reasonably designed to achieve compliance with applicable rules and laws.
  • Have your Chief Executive Officer(s) (CEO(s)) certify annually that the firm has in place the processes detailed in the annual report; and that he or she has conducted one or more meetings with your CCOs in the preceding 12 months to discuss the firm's processes and other matters set forth in Rule 3130.
  • Submit the annual report to the firm's board of directors and audit committee (or equivalent bodies) at the earlier of their next scheduled meetings or within 45 days of the date of execution of the certification.

Please note: Rule 3130(c) provides the required text for your firm's annual compliance and supervision certification.

 

 

1 The current FINRA rulebook includes (1) FINRA Rules, (2) NASD Rules and (3) rules incorporated from NYSE (Incorporated NYSE Rules).While the NASD Rules generally apply to all FINRA member firms, the Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (Dual Members). The FINRA Rules apply to all FINRA member firms, unless such rules have a more limited application by their terms. For more information about the rulebook consolidation process, see Information Notice 03/12/08.