Obligations to Your Firm

 

Manage Your Career

Obligations to Your Firm

As a registered representative, whether you are an employee or an “independent contractor” (for regulatory purposes there is no distinction between the two terms), you are obligated to follow all applicable securities laws and regulations.

In addition, you are expected to know, understand and comply with your firm’s compliance procedures. Also, you must comply with FINRA Rule 3110(a)(7) which requires your participation at a meeting (often referred to as an “annual compliance meeting”) at least annually to formally discuss regulatory and compliance matters relevant to your activities at the firm.

Below are descriptions of some rules that govern your activities, conduct and obligations to your firm.

Form Updates

You are responsible for ensuring that all updates to your Form U4 are accurate, timely and provided to your firm. The FINRA By-Laws also require firms to file a Form U5 within 30 days of your termination from the firm and to provide you with a copy of the filing. In addition, if the firm learns of any facts or circumstances that make the previously filed U5 inaccurate or incomplete, the firm is required to amend the filing at that time and provide you with a copy.

Outside Business Activities

During your association with a firm you may not be an employee, independent contractor, sole proprietor, officer, director or partner of another person as a result of any business activity outside the scope of the relationship with your firm, unless you have provided prior written notice to your firm pursuant to FINRA Rule 3270. Accordingly, you should discuss with your supervisor any offer to work part-time or off-hours with any other business concern or receipt of any form of compensation from a source other than your firm. Your firm must evaluate your proposed outside business activities to determine whether to impose conditions, limit or even prohibit your proposed activity because such activity may interfere with your role at the firm or be perceived by customers as part of the firm’s business.

Books and Records

As a registered representative, your work-related documents, such as correspondence with customers, new account forms and copies of customer statements and customer complaints must be reviewed and retained by your firm in specific ways according to FINRA Rule 4510 and other rules (e.g. FINRA rules 4511, 4512, 4513, 4514, and 4515). Regardless of the name on the incoming envelope, these documents are also the property of the firm.

Professional Designations

FINRA Rule 2210 prohibits brokerage firms and brokers registered with FINRA from referencing legitimate degrees or designations in a misleading manner or referencing non-existent or self-conferred degrees/designations. FINRA’s page on Understanding Professional Designations will help you learn more about professional designations generally while FINRA’s Senior Designations page will help you learn more about designations relating to elderly investors.

Personal Securities Accounts and Investments Away From Your Firm

FINRA Rule 3210 requires a registered representative to receive prior written consent from the member firm with which they are registered (the employing member) before opening any account, in which securities transactions can be effected and in which the registered person has a beneficial interest, at any other member firm (the executing member) or other financial institution. The registered representative must also notify in writing the executing member, or other financial institution, of their association with the employing member. In turn, the executing member is required, upon written request by the employing member, to transmit duplicate copies of confirmations and statements to the registered representative’s employer for their account(s) including any account they have a beneficial interest in. A registered representative is presumed to have a beneficial interest in any account that is held by:

  1. the spouse of the registered representative;
  2. a child of the registered representative or of the registered representative’s spouse;
  3. any other related individuals over whose account the registered representative has control; or
  4. any other individual over whose account the registered representative has control and to whose financial support the registered representative materially contributes (FINRA Rule 3210.02).

Securities Transactions Away From Your Firm

You may conduct a securities business as an agent only while under the direct supervision of your firm. You cannot participate in any private securities transactions (e.g. securities transactions away from your firm) unless you get prior written approval to do so pursuant to FINRA Rule 3280. Accordingly, you should discuss with your supervisor any potential securities transactions you wish to execute away from the broker-dealer with which you are currently registered.

Initial Public Offerings

FINRA Rule 5130 generally prohibits you from buying a new issue (initial public offering or IPO of an equity security) or selling a new issue to other broker-dealers and its employees, portfolio managers, finders and fiduciaries.

Conflicts of Interest

FINRA Rule 2010 requires you to observe high standards of commercial honor and just and equitable principles of trade. As such, you should avoid any conflicts of interest in transactions with your customers and should disclose any potential conflicts of interest to your supervisor as soon as you are aware of such conflict. For instance, if you own shares of a thinly traded stock in your personal account, a potential conflict surfaces when you recommend purchases of those shares to your customers because such a recommendation is likely to drive up the price of that stock and provide you with a personal benefit.

Gifts and Gratuities

FINRA Rule 3220 prohibits giving anything of value over $100 per individual per year to any person, as a gift or gratuity, where such payment is in relation to the business of the recipient’s employer. In addition, with limited exceptions, you are prohibited from accepting money or gifts from certain outside parties like those connected to issuers of mutual funds, variable insurance products and limited partnerships. Accordingly, you should discuss with your supervisor all such payments or gratuities in any amount in advance to determine whether you should make or receive them. Your firm is also required to record any such gifts or gratuities.

Advertising Requirements

All communications you distribute to the public are subject to some form of regulatory review by FINRA or another regulator depending on how they are used and their content. All communications, including public speaking activities and business- related interactive electronic or social media communications, must comply with FINRA Rule 2210 and the applicable SEC advertising rules. FINRA Rule 2210 requires that most communications be approved by a qualified principal prior to use. In addition, all communications are subject to record keeping requirements and certain communications may require filing with FINRA’s Advertising Regulation Department. The rule’s general content standards require that all communications be based upon the principles of fair dealing and good faith, be fair and balanced, and provide a sound basis for evaluating the facts. Communications must not mislead by omitting material information and must not include false, exaggerated, promissory or misleading claims. It is important that you follow your firm’s procedures to ensure you are in compliance with the rule’s approval, recordkeeping, filing requirements and content standards.

FINRA Rule 2210 also requires each of a firm’s websites to include a readily apparent reference and hyperlink to BrokerCheck on the initial web page that the firm intends to be viewed by retail investors and any other Web page that includes a professional profile of one or more registered persons who conduct business with retail investors. FINRA views websites operated by registered representatives that promote their firm’s business to be websites of the firm. For additional information on the requirement visit the Complying with BrokerCheck Link Requirements page.

For information and guidance regarding the FINRA advertising rules, see the Advertising Regulation page.