Broker-Dealer Name Guidelines
Staff in FINRA’s Regulatory Review and Disclosure Department must review and approve all names proposed for firms applying for FINRA membership and for current FINRA member firms seeking a name change. Therefore, all prospective FINRA member firms and those current FINRA member firms that want to change their names are strongly encouraged to reserve their proposed names prior to filing a new membership application or amendment to Form BD (Uniform Application for Broker-Dealer Registration), as appropriate. A firm may reserve a name by submitting to FINRA a completed Broker-Dealer Firm Name Reservation Request Form.
After a firm name reservation request is submitted to FINRA, staff reviews the proposed name for compliance with federal law and FINRA’s By-Laws and rules. Below is an overview of these requirements and other factors that firms may wish to consider before submitting a proposed name to FINRA.
Pursuant to 18 U.S.C. §709, a firm in the brokerage business may not use the words “national,” “Federal,” “United States,” “reserve,” or “Deposit Insurance” as part of its name, except as allowed under the laws of the United States. If a firm wishes to use one of these words in its name, it must include with its Form BD an opinion of counsel that explains why the prohibited word is allowed to be used.1 Staff at the Securities and Exchange Commission (SEC) will review the opinion of counsel to determine whether the firm may use the word in its name.
FINRA staff will reject a firm name that includes any of the prohibited words noted above unless the firm has obtained approval to use the word and provided evidence of such approval to FINRA.
Article IV, Section 2 of FINRA’s By-Laws prohibits the approval of a firm for membership with a name that is identical to the name of a current member firm or with a name that is so similar to that of an existing member firm that it may cause investors to be confused or misled. The By-Law also applies to any current FINRA member firm that wishes to change its name.
While identifying identical names is straightforward, determining whether a proposed name is so similar to the name of a current member firm that it may confuse or mislead investors can be more challenging. When evaluating a proposed name, FINRA staff will look for similarities in appearance, sound, connotation, and commercial impression between the proposed name and the names of current FINRA member firms (including those names that have been reserved by a current or prospective FINRA member firm). Some of the factors that staff will consider when evaluating the similarities between firm names include:
- First words. Names that begin with the same or a similar word and are followed by a descriptive or generic financial services designation (e.g., securities, brokerage services, capital markets, financial services) are likely to cause confusion, because an investor generally will focus on the first word and not the financial services designation. For example, Broadway Securities and Broadway Brokerage Services probably would be considered confusing because an investor will focus on the term Broadway rather than the financial services designation. Likewise, Victor Capital Markets and Vector Financial Services likely would be considered confusing due to the first word similarity in the names.
- Number of similar or identical words. As the number of similar or identical words between names increases, so does the possibility for confusion. For example, investors are likely to be confused by the names First South Shore Capital and New South Shore Capital due to the number of common words in both names.
- Familiarity. The use of well-known financial industry names or initials increases the likelihood of confusion. For example, a name that contains the words Merrill, Schwab, or HSBC is likely to create confusion with the respective well-known current FINRA member firm.
- Distinctiveness. The use of distinct surnames or words increases the potential for confusion. For example, the name McSweeney Capital Markets is likely to be confused with McSweeney Securities due to the distinctiveness of the surname McSweeney.
There are two circumstances under which staff will consider approving a proposed name that generally would be considered similar to the name of a current member firm because the likelihood of investor confusion is minimal. The first circumstance involves affiliated firms. Staff will consider approving a prospective firm’s name even though it is similar (but not identical) to the name of a current FINRA member firm if the prospective member is an affiliate of the current member firm. In this situation, concerns about investor confusion are mitigated due to the relationship that exists between the affiliated firms.
The second circumstance pertains to firms that conduct a limited securities business and do not have traditional retail customers. Generally, these firms conduct private placements to entities such as corporations, hedge funds, insurance companies and pension funds, as well as individuals who meet the definition of “accredited investor” under the federal securities laws. Since these firms generally have a pre-existing relationship with their sophisticated clientele and do not engage in transactions with traditional retail customers, it is unlikely that investors will be confused by a similarity in firm names.2 Nevertheless, FINRA’s approval of a proposed name for a firm under this circumstance is conditional and FINRA may reconsider its decision if either the applicant firm or the member firm expands its business, or if FINRA is notified that there has been investor confusion between the two firms.
It is important to note that differences in the physical location of a firm’s office or in the services or products a firm offers will not constitute a sufficient basis for FINRA to allow a firm to use a name that is similar to the name of an existing member firm. Although a prospective member firm (or a current member firm seeking a name change) may provide different products or services than a current member firm, investor confusion may still result as both firms may market their services or products in the same manner. Additionally, technology, particularly the Internet, and the ease and frequency with which people can travel minimizes the effects of geographic boundaries.
FINRA Rule 2010
Even if a proposed firm name complies with the provisions set forth in the FINRA By-Laws, staff may still deny the name under FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) if the name otherwise would be confusing or misleading to investors. For example, a firm’s request for the name “Warren Buffett Securities” (if requested by a firm that has no affiliation with Mr. Buffett) would be confusing or misleading to investors because they may believe that the firm is owned by or otherwise associated with Warren Buffett.
Additional Considerations for Firms
In addition to the above information, firms also may want to consider the following prior to submitting a name reservation request to FINRA:
- Even if a proposed firm name does not contain one of the prohibited terms enumerated in 18 U.S.C. §709, the SEC may nevertheless scrutinize the name to determine whether it is materially misleading under the federal securities laws.3
- A proposed name already may be registered with a locality or state in which the firm plans to operate or with the United States Patent and Trademark Office.
- Approval of a name by a state, regional, or other agency or jurisdiction will not factor into staff’s evaluation of a proposed name.
- Costs that a firm has incurred with respect to a proposed name (e.g., printing, registration, signage) will not factor into staff’s evaluation of a proposed name.
If you have questions or need further information about the firm name reservation process, please contact FINRA’s Regulatory Review and Disclosure Department at (301) 590-6500.
- Special Instructions for Completing or Amending Form BD, Uniform Application for Registration as a Broker-Dealer, With the U.S. Securities and Exchange Commission, Release No. 34-24372 (April 17, 1987), 52 FR 16833 (May 6, 1987).
- FINRA staff carefully scrutinizes requests involving this circumstance to ensure that a firm is engaged in a limited securities business and that the proposed name will not cause retail investor confusion. Therefore, a firm should provide not only a representation that it will not transact business with retail customers, but also, at a minimum, information about its operations such as the types of business it will conduct, the kinds of clients it will work with and how it will obtain these clients (e.g., pre-existing relationships, referrals), and whether it will engage in general solicitation or general advertising in the offering or selling of securities. A firm should also address any anticipated confusion that may result from use of the proposed name and the steps it will take to mitigate such potential confusion.
- SEC Division of Trading and Markets, Guide to Broker-Dealer Registration (April 2008).