Investment and Securities Account Restrictions Under FINRA's Code of Conduct
The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s mission is to protect America’s investors by making sure the securities industry operates fairly and honestly.
Along with their responsibilities to the securities industry, FINRA employees have responsibilities to all of FINRA’s other constituents, and to each other—and, therefore, must conduct themselves in a manner that commands the respect and confidence of everyone.
To this end, we have adopted the FINRA Code of Conduct, which outlines our ethical commitments and expectations, and provides guidance on what employees must do to meet them.
Among other things, FINRA’s Code of Conduct imposes restrictions on employees’ investments and requires financial disclosures that are uniquely related to our role as a securities regulator:
- FINRA employees cannot purchase or maintain any debt or equity interest in any broker-dealer or securities exchange operating in the U.S. (including any regulatory client of FINRA).
- FINRA employees cannot hold a debt or equity interest (i.e., bonds, notes or stock) in broker-dealers, or companies that have broker-dealer affiliates that contribute 10 percent or more of the company’s revenue net of interest expense, or paid regulatory fees to FINRA in the most recent calendar year that ranks them in the top 20 of all broker-dealers, even if its affiliates together contribute less than 10 percent of its revenue. For purposes of this subsection, the term "broker-dealer activities" includes the operation of a FINRA member firm.
FINRA maintains a list of these impermissible investments (known as the Prohibited Company List) to aid employees in complying with these restrictions. Unless a newly hired employee requests and qualifies for a waiver (see below) prior to the individual’s start date, liquidation of impermissible investments is required prior to starting employment with FINRA.
- FINRA employees also cannot hold, purchase, write or sell options or other derivative securities for which value is determined from a debt or equity interest in any company included on the Prohibited Company List. Absent a waiver requested prior to the individual’s start date, liquidation of any such impermissible investments is required prior to starting employment with FINRA.
- FINRA employees cannot participate in an Initial Public Offering (IPO) prior to the commencement of trading of that security in the public market. However, purchases of the security may be made once trading has begun in the public market.
- The Code’s investment restrictions apply not only to employees’ securities and accounts, but to investments and accounts in which employees control trading or are deemed under FINRA’s Code to have a financial interest (e.g., managed accounts, trust accounts, investment club accounts and the accounts of spouses, domestic partners and/or minor children who live with the employee).
- FINRA employees are required to disclose all securities and securities accounts that they maintain, and those in which they control trading or are deemed under FINRA’s Code to have a financial interest (e.g., managed accounts, trust accounts, investment club accounts and the accounts of spouses, domestic partners and/ or minor children who live with the employee). All of those accounts are subject to the Code’s investment and securities account restrictions. Employees are also required to disclose any securities-based crowdfunding portal with which they are registered.
- FINRA employees are required to authorize their broker-dealers to send duplicate account statements directly to FINRA. This applies to any account that is required to be disclosed to FINRA.
- FINRA employees also must maintain all reportable securities accounts at firms that currently provide an electronic feed (e-feed) of transaction and position data to FINRA. New hires who have securities accounts at a non-e-feed firm have three months to move their account(s) to a firm that provides an e-feed. A list of securities firms that currently provide an e-feed is available upon request.
All FINRA employees are subject to the 30-Day Trading Restriction policy. This policy prohibits the execution of opposite transactions within 30 days, and places restrictions on options trading. Unless a policy exclusion applies, this restriction applies to all accounts that require disclosure to FINRA, including accounts owned by a spouse or domestic partner. Additional information about the 30-Day Trading Restriction is available upon request.
If you believe that complying with these restrictions would raise concerns for an investment you have, please feel free to discuss your concerns during the interview process.
If you feel that your concerns have not been resolved, please advise your contact in the Human Resources Department that you need to speak with a member of the Code of Conduct staff. If you have questions about FINRA’s restrictions on employees’ investments you may also email [email protected] or call (202) 728-8262.
In certain limited situations, employees may receive a waiver of a particular provision of the Code of Conduct. For example, a new hire who would incur undue hardship if required to liquidate an impermissible investment upon joining FINRA may be allowed more time to dispose of the security, or allowed to hold the security for a specified period, if appropriate.
If such “hardship” issues apply to you, be sure to discuss them during the interview and negotiation process; this allows for the availability and terms of a possible waiver to be resolved before you accept FINRA employment.