Regulatory Notice 09-19

Amendments to FINRA Rule 9520 Series to Establish Procedures Applicable to Firms and Associated Persons Subject to Certain Statutory Disqualifications; Effective Date: June 15, 2009

Executive Summary

The FINRA Rule 9520 Series sets forth eligibility proceedings under which FINRA may allow a person subject to a statutory disqualification to enter or remain in the securities industry. In connection with the consolidation of the member firm regulatory functions of NASD and NYSE Regulation, Inc. and the formation of FINRA, FINRA adopted a revised definition of disqualification to conform to the definition of statutory disqualification under Section 3(a)(39) of the Securities Exchange Act of 1934 (Exchange Act or SEA). Consequently, FINRA's revised definition of disqualification incorporates three additional categories of statutory disqualification, including willful violations of the federal securities or commodities laws, grounds for statutory disqualification that were enacted by the Sarbanes-Oxley Act, and associations with certain other persons subject to statutory disqualification. FINRA will be required to approve a firm's continued membership, or, in the case of individuals, association or continued association with a member firm, in certain instances.

 

As further detailed in this Notice, the SEC recently approved amendments to FINRA's rules to address the circumstances under which persons must obtain FINRA approval to enter or remain in the securities industry, notwithstanding the existence of one of these additional categories of disqualification. FINRA is reviewing its records to identify persons that meet any of the additional conditions that require the filing of an application with FINRA to obtain such approval and will notify firms if FINRA identifies any such persons. However, firms also are required to review their records and communicate with their associated persons as needed to determine whether they must file an application with FINRA.

 

The FINRA Rule 9520 Series, as amended, is set forth in Attachment A of this Notice. In addition, two charts summarizing the circumstances under which persons must file an application to seek FINRA's approval as a result of the expanded definition of disqualification are set forth in Attachment B.

 

Questions concerning this Notice should be directed to:

 

  • Lorraine Lee, Statutory Disqualification Administrator, Department of Member Regulation, at (202) 728-8442.
  • M. Catherine Cottam, Assistant Chief Counsel, Department of Registration and Disclosure, at (240) 386-5115.
  • Stan Macel, Assistant General Counsel, Office of General Counsel, at (202) 728-8056.