FINRA Qualification and Registration Requirements Frequently Asked Questions

The FINRA qualification and registration requirements are set forth in FINRA Rules 1210 through 1240.1 These rules, among other things: (1) require the registration of individuals as representatives or principals; (2) allow for the permissive registration of associated persons of firms; (3) establish a waiver program for individuals working for a financial services industry affiliate of a member firm; (4) require firms to designate a Principal Financial Officer and a Principal Operations Officer; and (5) set forth requirements for registered persons who are to function as principals prior to passing an appropriate principal qualification examination. The following frequently asked questions (FAQ) provide guidance on the FINRA qualification and registration requirements.

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Section 1: Former, Current and Future Registrants

1.1 Our firm is considering whether, on or after October 1, 2018, to reregister as representatives several individuals whose registrations were last terminated prior to October 1, 2018. How do the October 2018 changes to FINRA’s qualification and registration requirements impact these former registrations?

With the exception of individuals who were registered solely as Foreign Associates, individuals whose registrations as representatives were terminated between October 1, 2016, and September 30, 2018, will not be subject to any additional qualification requirements with respect to those registrations, provided they reregister as a representative within two years from the date of their last registration.2

In addition, with the exception of individuals who were registered solely as Order Processing Assistant Representatives or Foreign Associates, individuals whose registrations as representatives were terminated between October 1, 2014, and September 30, 2016, will be considered to have passed the SIE examination, provided they reregister as a representative within four years from the date of their last registration.3 To reregister as a representative, such individuals would be required to pass the appropriate representative-level examination for their particular registered role, or obtain a waiver of the representative-level examination; they will not be required to pass the SIE examination.

Finally, individuals whose registrations as representatives were terminated prior to October 1, 2014 will be required to pass both the SIE examination and the appropriate representative-level examination for their particular registered role, or obtain a waiver of the examinations.

1.2 I have been registered with a FINRA member as a General Securities Representative since June 2012. I plan to leave the firm at some point after October 1, 2018 and get a job outside the financial services industry. How do the FINRA qualification and registration requirements affect my registration if I eventually wish to return to work for a FINRA member as a General Securities Representative?

Your registration as a General Securities Representative will lapse two years from the date of termination on your Form U5 (Uniform Termination Notice for Securities Industry Registration). However, because you were registered as a General Securities Representative prior to October 1, 2018, and you maintained that registration after October 1, 2018, you are considered to have passed the SIE examination. Moreover, your SIE examination will remain valid for four years from the date of termination on your Form U5.

Therefore, if you return to a FINRA member within two years from the date of termination on your Form U5, you can reregister as a General Securities Representative without having to pass any additional qualification examinations. If you return to a FINRA member between two and four years from the date of termination on your Form U5, you can reregister as a General Securities Representative by passing the General Securities Representative examination (Series 7) or by obtaining a waiver of that examination (i.e., you will not have to pass the SIE examination). Finally, if you return to a FINRA member four or more years after the date of termination on your Form U5, you can reregister as a General Securities Representative by passing both the SIE examination and the General Securities Representative examination (Series 7), or by obtaining a waiver of those examinations.

Section 2: Permissive Registrations

2.1 An individual registered as a Research Principal and working in our research department will be fully transferring to our parent company, a broker-dealer in Germany, at some point after October 1, 2018. Can we permissively maintain the individual’s registration as a Research Principal while the individual is working for our parent company?

Yes. As was the case prior to October 1, 2018, a firm may permissively register or maintain the registration(s) of individuals engaged in the investment banking or securities business of a foreign securities affiliate or foreign securities subsidiary of the firm. However, individuals who are permissively registered are considered associated persons, as well as registered persons, and subject to all FINRA rules, to the extent relevant to their activities.

In addition, where an individual solely maintains a permissive registration with a firm, the firm is required to assign a registered supervisor to the permissively-registered individual who will be responsible for periodically contacting the individual’s day-to-day supervisor to verify that the individual is not acting outside the scope of his or her assigned functions. If the permissively-registered individual is registered as a representative, the assigned registered supervisor must be a representative or principal functioning in a registered capacity. If the permissively-registered individual is registered as a principal, the assigned registered supervisor must be a principal functioning in a registered capacity. However, the assigned registered supervisor is not required to be registered in the same representative or principal registration category as the permissively-registered individual. For instance, in your case, a General Securities Sales Supervisor who works for your firm in a registered capacity is eligible to function as the individual’s assigned registered supervisor.

2.2 Same as Question 2.1, but the individual is registered as a Corporate Securities Representative and working in our sales department. Can we permissively maintain the individual’s registration as a Corporate Securities Representative while the individual is working for our parent company?

Yes. As noted in Answer 2.1, a firm may permissively register or maintain the registration(s) of individuals engaged in the investment banking or securities business of a foreign securities affiliate or foreign securities subsidiary of the firm. This includes any of the registration categories eliminated on October 1, 2018, such as the Corporate Securities Representative registration category.

2.3 Our firm is a limited business broker-dealer. Our securities activities are limited solely to transactions involving mutual funds and variable contracts. In addition to our Financial and Operations Principal (FINOP), our registered personnel currently include Investment Company and Variable Contracts Products Principals and Investment Company and Variable Contracts Products Representatives. We are considering hiring an individual in February 2019 to work in our technology group on a sales-related platform. The individual is currently functioning as a Registered Options Principal for another member. Can we permissively register him as a Registered Options Principal upon hiring him?

Yes. Beginning on October 1, 2018, a member may permissively register or maintain the registration(s) of any associated person (i.e., any individual who is functioning in an associated person capacity for the member). However, you should be aware that because this individual will be permissively registered as a Registered Options Principal, your firm must assign a principal functioning in a registered capacity to supervise his activities consistent with FINRA Rule 1210.02. The assigned principal will be responsible for periodically contacting the individual's day-to-day supervisor to verify that the individual is not acting outside the scope of his or her assigned functions. Moreover, the assigned supervisor of an individual who solely has a permissive registration(s) does not have to be registered in the same representative or principal registration category as the permissively-registered individual. Thus, in your case, the FINOP or an Investment Company and Variable Contracts Products Principal will be eligible to be the individual’s assigned supervisor for purposes of FINRA Rule 1210.02.

2.4 Our firm is considering employing an individual who was formerly registered as a Registered Options Principal and a General Securities Principal with another member. His registrations were terminated on July 1, 2017. If we reregister him to function as a General Securities Principal on January 10, 2019, can we also permissively reregister him as a Registered Options Principal? If so, is he required to pass any examination or obtain a waiver of any examination upon reregistering? Do these answers change if we instead hire him to work in our compliance department?

As noted in Answer 2.3, beginning on October 1, 2018, a member may permissively register or maintain the registration(s) of any associated person (i.e., any individual who is functioning in an associated person capacity for the member). In your case, you may permissively maintain his registration as a Registered Options Principal because he will be registered to function as a General Securities Principal. Alternatively, you may permissively maintain both of his registrations if you instead hire him to work in your compliance department.

In addition, because he was last registered as a principal within two years of reregistering as a principal, he is eligible to reregister as a General Securities Principal and a Registered Options Principal without having to pass any examination or having to obtain a waiver of any examination.

2.5A Can our firm permissively register or maintain the registration as representative or principal of an individual who is solely working for our non-broker-dealer parent company (i.e., the individual is not performing any functions for our firm)?

No. A member may only permissively register or maintain the registration(s) of the following: (1) individuals who are functioning in an associated person capacity for the member (e.g., an individual functioning in a registered capacity for the member, or an employee functioning in an administrative capacity for the member); and (2) individuals engaged in the investment banking or securities business of a foreign securities affiliate or foreign securities subsidiary of the member.

2.5B Can our firm permissively register or maintain the registration as representative or principal of an individual who is performing a function that is in direct furtherance of our firm’s investment banking and securities business, but who is working for, or employed by, our non-broker-dealer parent company or other affiliate?

Yes. A member may permissively register or maintain the registration(s) of individuals who are performing a function that is in direct furtherance of the member’s investment banking and securities business, but who are working for, or employed by, the member’s affiliate. For example, a member may permissively register an individual who performs support functions, such as administration, legal, compliance, audit, risk management, back-office operations, human resources, or similar responsibilities, for the member, even if the individual is working for, or employed by, the member’s parent company.

2.6 In January 2019, our firm plans to permissively register several individuals who are currently working in a non-branch location. The individuals will solely have permissive registrations (i.e., they will not be engaged in any activities that require them to be registered). If we permissively register them, will it change the status of the non-branch location to an Office of Supervisory Jurisdiction (OSJ) or a branch office?

No. The status of a location as an OSJ or a branch office depends on whether the location meets the definition of an OSJ or a branch office in FINRA Rule 3110(f). The status of a location is not impacted by whether the individuals at that location are permissively registered.

2.7 Our firm has a permissively registered individual whose sole function is to work in one of our branch offices on technology-related projects. For purposes of compliance with FINRA Rule 1210.02, we intend to assign a registered supervisor to her who will be working from another location. Will that location be considered an OSJ?

No. FINRA Rule 3110(f)(1)(G) provides that an OSJ includes any office of a member that has responsibility for supervising the activities of associated persons at one or more other branch offices of the member. Further, FINRA Rule 3110(f)(2)(B) provides that any location that is responsible for supervising the activities of persons associated with the member at one or more non-branch locations of the member is considered to be a branch office. The supervisory activities specified in FINRA Rules 3110(f)(1)(G) and 3110(f)(2)(B) do not cover the responsibilities of an assigned registered supervisor under FINRA Rule 1210.02. For purposes of FINRA Rule 1210.02, the assigned registered supervisor is only responsible for periodically contacting the permissively-registered individual’s day-to-day supervisor to verify that the individual is not acting outside the scope of his or her assigned functions.

2.8 We have several individuals working at our firm who only maintain permissive registrations (i.e., they do not function in any capacity that requires them to register). Are we required to keep a record of their permissive-only registration status? Are we required to file this information through the CRD system?

You are not required to retain a record of their permissive-only registration status. However, for internal recordkeeping purposes, you may want to consider creating a record of their permissive-only registration status. In addition, FINRA is considering future enhancements to the CRD system to enable firms to identify whether a registered person is maintaining only a permissive registration.

2.9 For purposes of compliance with FINRA Rule 1210.02, how often is the assigned registered supervisor required to contact the permissively-registered individual’s day-to-day supervisor? Can it be every six months?

FINRA Rule 1210.02 requires a registered supervisor to periodically contact a permissively-registered individual’s day-to-day supervisor to verify that the individual is not acting outside the scope of his or her assigned functions. Firms should implement a reasonable process for complying with the rule taking into account the particular day-to-day functions of the permissively-registered individual (e.g., does the individual have any contact with customers in an unregistered capacity?). It may be reasonable for such review to occur every six months, depending on the nature of the individual’s functions.

2.10 Our firm plans to permissively maintain the General Securities Principal registration of one of our sales representatives who is registered as a General Securities Representative. Currently, his immediate supervisor is another General Securities Representative. The immediate supervisor reports to a branch manager who is registered as a General Securities Principal. If we permissively maintain the sales representative’s registration as a General Securities Principal, does his immediate supervisor need to be a principal? Do we need make any changes to our supervisory practices, systems, policies or procedures to address his permissive registration?

Where an individual is functioning as a representative and maintaining a permissive principal registration, the individual’s immediate supervisor may be an appropriately qualified representative. However, if the individual was not functioning as a representative and your firm intended to permissively maintain both of his registrations (representative and principal), your firm would need to assign a principal functioning in a registered capacity to him for purposes of compliance with FINRA Rule 1210.02 (i.e., to periodically contact his day-to-day supervisor to verify that he is not acting outside the scope of his assigned functions).

With respect to the supervision of individuals who are functioning in a registered capacity and who are also permissively maintaining another registration, members are required to have adequate supervisory systems and procedures reasonably designed to ensure that such individuals do not act outside the scope of their assigned functions. However, members are not required to make any specific changes to their existing supervisory practices, systems, policies or procedures to address such permissive registration. For instance, in your case, the General Securities Representative who is the immediate supervisor of the sales representative would undertake this responsibility as part of his or her supervision of the sales representative’s overall activities.

2.11 Our firm requires branch auditors who work in our compliance department to pass the General Securities Representative (Series 7) and General Securities Principal (Series 24) examinations. These individuals are not functioning in a representative or principal capacity under FINRA rules. Rather, the qualification requirement is based on an internal proficiency requirement imposed by our firm. Moreover, these individuals currently maintain permissive-only registrations with our firm. Can we continue to maintain their registrations in a permissive-only status? If so, can we assign their manager, who is currently a permissively-registered principal in the compliance department, as their designated registered supervisor for purposes of compliance with FINRA Rule 1210.02? If so, would he still be considered a permissively-registered individual? Alternatively, can we assign a principal who is functioning in a registered capacity in another department as the branch auditors’ designated registered supervisor?

You may continue to maintain the branch auditors’ registrations in a permissive-only status. In addition, you may assign their manager as their designated registered supervisor for purposes of FINRA Rule 1210.02. However, if you do so, the manager would be deemed to be working in a registered capacity for your firm (i.e., the manager would no longer be considered to be maintaining a permissive-only registration with your firm). This would be the same for any other permissively-registered individual who is designated as such. In addition, for purposes of compliance with FINRA Rule 3110(a)(5) (which requires the assignment of each registered person to an appropriately registered supervisor), you would need to assign another principal who is functioning in a registered capacity to supervise the manager’s performance of his Rule 1210.02 function, which is to ensure that the branch auditors are not acting outside the scope of their assigned functions. The principal assigned to the manager could be the manager’s direct supervisor or a dotted-line supervisor in the same department or in a different department.

Instead of assigning the manager as the designated registered supervisor of the branch auditors for purposes of FINRA Rule 1210.02, you could assign a principal who is functioning in a registered capacity in another department as their designated registered supervisor. In such a case, the branch auditors’ manager could continue to maintain a permissively-only registration, and the designated registered supervisor would need to periodically contact the manager to verify that the branch auditors are not acting outside the scope of their assigned functions. In addition, the branch auditors’ manager would himself need to be assigned to a principal for purposes of compliance with FINRA Rule 1210.02 (i.e., to ensure that the manager is not acting outside the scope of his assigned functions).

Section 3: Financial Services Affiliate Waiver Program

 

Note: The Financial Services Affiliate Waiver Program (FSAWP) stopped accepting new participants on March 15, 2022. Please see the FSAWP page for more information.

Updated August 7, 2023

3.1 For the past five years, our firm has permissively maintained the General Securities Representative registrations of several individuals who are working entirely for our foreign broker-dealer affiliate. If we file a Form U5 (Uniform Termination Notice for Securities Industry Registration) for each of these individuals after October 1, 2018 to terminate their registrations, could we designate them as eligible for the financial services affiliate waiver program while they continue to work for our affiliate? If so, can we permissively reregister them as General Securities Representatives in six years if they continue to work for our affiliate and would they be granted a waiver of their qualification examinations upon reregistering?

To be eligible for designation under the waiver program, an individual must have been registered as a representative or principal for a total of five years within the most recent 10-year period prior to his or her initial designation under the waiver program. In addition, the individual must have been registered as a representative or principal for at least one year prior to his or her initial designation under the waiver program with the member that is designating him or her. Further, the individual must be designated as eligible under the program concurrently with the filing of his or her Form U5, and the individual must intend to work for a financial services industry affiliate of a member following the Form U5 filing. The individuals above meet the eligibility requirements for designation under the waiver program.

In addition, a firm may permissively register or maintain the registration(s) of individuals engaged in the investment banking or securities business of a foreign securities affiliate or foreign securities subsidiary of the firm. Therefore, the individuals above are also eligible to be permissively reregistered as General Securities Representatives after leaving the waiver program, so long as they continue to work for your firm’s foreign broker-dealer affiliate.

For the individuals to obtain a waiver of their qualification examinations upon reregistering, the following conditions must also be satisfied: (1) while under the program, the individuals must have complied with the Regulatory Element of Continuing Education; (2) while under the program, the individuals cannot have had any pending or adverse regulatory matters, or terminations, that are reportable on the Form U4 (Uniform Application for Securities Industry Registration or Transfer), and they cannot have been subject to a statutory disqualification; and (3) all waiver requests under the program must be made within seven years of their initial designations.

3.2 An individual who has been registered with our firm as an Investment Company and Variable Contracts Products Representative for the past 10 years will be fully transferring to our banking affiliate in California in January 2020. He is planning to travel for a year before joining our affiliate. Can we terminate his registration in January 2019 and designate him as eligible for the financial services affiliate waiver program?

No. As stated in Regulatory Notice 17-30, to be eligible for the waiver program, FINRA requires individuals to start working for a member’s financial services affiliate promptly and in no event later than 30 calendar days after the member has terminated the individual’s registration.

3.3 An individual who has been registered as a General Securities Representative in our firm’s sales department for the past 15 years will be directly transferring to another member’s insurance affiliate in Switzerland in March 2020. Can we designate him as eligible for the financial services affiliate waiver program when we terminate his registration?

No. For designation purposes, a member may designate an individual as eligible under the program only if the individual intends to work for that member’s financial services affiliate following the filing of the individual’s Form U5. This would be the case for the initial designation and any subsequent designation(s) during the seven-year period. However, an individual is not precluded from moving from the financial services affiliate of one member to the financial services affiliate of another member while in the program, provided such transfer is done not later than 30 calendar days.

3.4 I have been operating as a one-person firm for the past 15 years and hold multiple principal- and representative-level registrations. I plan to withdraw my firm’s registration as a broker-dealer and terminate my principal and representative registrations and go to work for an insurance company that I also own. In five years, I plan to return to the securities industry and work for another member. Can I designate myself as eligible for the financial services affiliate waiver program? If so, can another member request a waiver of my qualifications upon my return to the industry?

Yes, you are eligible to designate yourself under these circumstances. Further, another member may request a waiver of your qualification requirements upon your return to the industry, provided that all of the other conditions of the program have been satisfied (e.g., you have completed the required Regulatory Element of Continuing Education while working for your insurance affiliate).

3.5 Our firm’s parent company is a publicly-traded company subject to periodic SEC reporting. Is our parent company considered to be an entity regulated by the SEC for purposes of the financial services affiliate waiver program?

No. FINRA Rule 1210.09 defines a “financial services industry affiliate of a member” as a legal entity that controls, is controlled by or is under common control with a member firm and is regulated by the SEC, CFTC, state securities authorities, federal or state banking authorities, state insurance authorities, or substantially equivalent foreign regulatory authorities. A publicly-traded company subject to periodic SEC reporting is not considered an entity regulated by the SEC for purposes of FINRA Rule 1210.09.

Section 4: Principal Financial Officer and Principal Operations Officer

4.1 Our firm is an introducing broker-dealer. We have designated an individual as our Financial and Operations Principal (FINOP) to carry out the financial and operational responsibilities specified in FINRA Rule 1220(a)(4)(A). The individual has passed the FINOP examination (Series 27) and is registered in the Central Registration Depository (CRD®) system with the designations FN (for FINOP) and OS (for Operations Professional). Can we also designate him as our Principal Financial Officer and Principal Operations Officer to carry out the financial and operational responsibilities specified in FINRA Rule 1220(a)(4)(B)?

Yes. While the responsibilities of a designated FINOP or Introducing Broker-Dealer Financial and Operations Principal (Introducing FINOP) are more specific in nature (e.g., the designated FINOP is required to supervise individuals who assist in the preparation of financial reports) than those of a Principal Financial Officer or Principal Operations Officer, nothing in FINRA Rule 1220(a)(4) would prohibit the designated FINOP or Introducing FINOP from also carrying out the responsibilities of a designated Principal Financial Officer and Principal Operations Officer.

4.2 Same as Question 4.1, but our designated FINOP is also the designated FINOP of several other introducing firms. Can we still designate him as our Principal Financial Officer and Principal Operations Officer?

Yes. An individual who is the designated FINOP or Introducing FINOP of multiple firms may also be the designated Principal Financial Officer and Principal Operations Officer of one or more of those firms.4

4.3 Our firm is designating as Principal Financial Officer and Principal Operations Officer an individual who is not currently listed on Schedule A of our Form BD (Uniform Application for Broker-Dealer Registration). Are we required to amend Schedule A to list his name and designated titles?

Yes. Schedule A requires firms to list the name and the title or status of an individual with similar status or functions to, among others, a Chief Financial Officer or a Chief Operations Officer. Individuals designated as Principal Financial Officers and Principal Operations Officers have similar status or functions to individuals designated as Chief Financial Officers and Chief Operations Officers and, thus, they should be listed on Schedule A.

4.4 Is an individual deemed to be a “control person” for purposes of Schedule A solely based on having the title of Principal Financial Officer or Principal Operations Officer and performing the responsibilities specified under FINRA Rule 1220(a)(4)(B)?

No. For purposes of Schedule A, a “control person” is a person that has “control” as defined under the “Explanation of Terms” in the Form BD. An individual will not be deemed to be a “control person” solely based on having the title of Principal Financial Officer or Principal Operations Officer and performing the responsibilities specified under FINRA Rule 1220(a)(4)(B).

4.5 Our firm is an introducing broker-dealer. We are designating our Chief Executive Officer and President as our Principal Financial Officer and Principal Operations Officer. His name is currently listed on Schedule A of our Form BD along with his current titles. Are we required to amend Schedule A to add the titles of Principal Financial Officer and Principal Operations Officer to her existing titles under the “Title or Status” column?

No. If the name(s) of your designated Principal Financial Officer and designated Principal Operations Officer is already listed on Schedule A of Form BD, you are not required to amend Schedule A to add the titles of Principal Financial Officer and Principal Operations Officer to his or her existing titles under the “Title or Status” column. The same would be true if a firm were to designate its Chief Financial Officer as its Principal Financial Officer and its Chief Operations Officer as its Principal Operations Officer, both of whom were already listed on Schedule A of Form BD. However, in such cases, firms should consider maintaining an internal record with the names of the individual(s) designated as Principal Financial Officer and Principal Operations Officer.

4.6 Our firm is an introducing broker-dealer. We do not perform all of the operations functions specified in FINRA Rule 1220(a)(4)(B)(ii), such as the calculation and collection of margin from customers. Is our designated Principal Operations Officer nonetheless required to have primary responsibility for such functions?

No. FINRA Rule 1220(a)(4)(B)(ii) requires firms to designate a Principal Operations Officer with primary responsibility for the day-to-day operations of the business. The operational responsibilities of a Principal Operations Officer specified in FINRA Rule 1220(a)(4)(B)(ii) are illustrative of the type of responsibilities that are operational in nature. The rule does not require firms to perform functions that they are not otherwise required to perform in the regular course of their business.

4.7 What are some examples of operations functions in a limited business broker-dealer, such as a broker-dealer engaged exclusively in subscription-basis mutual fund transactions, direct participation programs, mergers and acquisitions activities or private placement activities?

The following are some examples of operations functions at a limited business broker-dealer: (1) client on-boarding and ensuring that all related account opening and account maintenance documentation is complete and accurate; (2) order processing; (3) implementation of the business continuity plan; (4) ensuring that required records, such as written agreements entered into by the broker-dealer relating to its business, are complete and accurate and preserved for the applicable retention period; and (5) ensuring appropriate processing of investor funds, including the appropriate escrow of funds or the prompt transmittal of funds as required.

4.8 Our firm self-clears. However, the scope of our business and resources is limited. What are the criteria and procedures for requesting a waiver of the requirement to designate separate individuals to function as Principal Financial Officer and Principal Operations Officer?

Firms that self-clear or provide clearing services to other broker-dealers must designate separate individuals to function as Principal Financial Officer and Principal Operations Officer (i.e., the same individual may not function in both capacities). A self-clearing or clearing firm that is limited in size and resources may, pursuant to FINRA Rule 9610, request a waiver of this requirement by filing a written application with FINRA’s Member Supervision department. The criteria that FINRA staff would evaluate in determining whether to grant a waiver would include:

  • Type, size and complexity of business (e.g., number of business lines, amount of revenue, source of revenue and number of personnel, number and type of customers and volume of activity);
  • Type of clearance, settlement and custody activities (e.g., whether the firm settles transactions on an RVP/DVP basis or whether the firm provides custody for customers in one or more products);
  • Technology used to operate the firm (e.g., whether automation might lessen the need for split roles);
  • Regulatory history (e.g., whether separation of duties or additional supervisory resources might have reduced the likelihood of problems); and
  • Size of financial and operations units and whether the person assuming the dual roles will have sufficient capacity to carry out both roles.

Self-clearing or clearing firms that are seeking a waiver should submit their waiver requests in writing, along with any supporting documentation, to their FINRA Regulatory Coordinator.

If the staff grants a firm’s waiver request, the firm may designate the same individual as its designated Principal Financial Officer and Principal Operations Officer. If the staff denies a firm’s waiver request, the firm may appeal the staff’s decision pursuant to FINRA Rule 9630.

4.9 Our firm is an introducing firm. Prior to September 17, 2001, we were granted an exemption from the requirement to designate an individual as a FINOP or an Introducing FINOP. Are we still required to designate a Principal Financial Officer and a Principal Operations Officer to carry out the specified financial and operational responsibilities set forth in FINRA Rule 1220(a)(4)(B)? If so, can the same individual perform both functions? Also, does the individual need to be qualified and registered as a FINOP or an Introducing FINOP?

Firms that were granted an exemption prior to September 17, 2001 from the requirement to designate an individual as a FINOP or an Introducing FINOP are still required to designate a Principal Financial Officer and a Principal Operations Officer to carry out the financial and operational responsibilities specified in FINRA Rule 1220(a)(4)(B). However, if a firm does not self-clear or provide clearing services to other broker-dealers, the same individual may be designated as its Principal Financial Officer and Principal Operations Officer. Further, individuals designated as Principal Financial Officers and Principal Operations Officers of exempt firms are not required to be qualified and registered as FINOPs or Introducing FINOPs.5 It should be noted that individuals designated as Principal Financial Officers and Principal Operations Officers of exempt firms would be required to be qualified and registered as principals, such as General Securities Principals, given the scope of their responsibilities.

4.10 Can our firm’s designated Principal Operations Officer delegate all or some of her day-to-day duties to an operations manager at our firm who is registered as a General Securities Principal and an Operations Professional?

Yes. A Principal Financial Officer or a Principal Operations Officer is permitted to delegate all or some of his or her day-to-day duties to other principals at the firm with the understanding that ultimate responsibility for the function rests with the Principal Financial Officer and the Principal Operations Officer.

Section 5: Registered Persons Functioning as Principals for a Limited Period

5.1 Are all registered representatives who wish to register as principals subject to an experience requirement?

No. The experience requirement in FINRA Rule 1210.04 is narrow in scope. The rule only imposes an experience requirement (18 months of experience within the preceding five-year period) on those registered representatives who are designated by their firms to function in a principal capacity for a fixed 120-day period before having passed an appropriate principal qualification examination. Moreover, the experience requirement does not apply to a principal who is designated to function in another principal category for a fixed 120-day period before having passed an appropriate principal examination (e.g., a General Securities Principal who is designated to function as a General Securities Sales Supervisor for a 120-day period before having to pass the Series 9 and 10 examinations).

5.2 Our firm is an introducing broker-dealer. Can we designate a General Securities Representative or a General Securities Principal to function as our designated Principal Financial Officer and Principal Operations Officer for up to 120 days prior to the individual having to pass the Financial and Operations Principal (FINOP) examination (Series 27) or the Introducing Broker-Dealer Financial and Operations Principal (Introducing FINOP) examination (Series 28)?

Yes, provided that the designated individual satisfies the requirements of FINRA Rule 1210.04. For instance, if you are designating a General Securities Representative, he or she must satisfy the experience requirement (18 months of experience within the preceding five-year period) prior to his or her designation. Further, under no circumstances may the individual, whether a General Securities Representative or General Securities Principal, function as a Principal Financial Officer and Principal Operations Officer beyond the initial 120-day period without having passed the Series 27 or Series 28 examination.

1. These rules are effective October 1, 2018.

2. Foreign Associates would not be eligible to reregister in the same category within two years of terminating their registrations because the two-year lapse of registration provision is only applicable to those FINRA registration categories that have an associated qualification examination.

3. Order Processing Assistant Representatives would not be considered to have passed the SIE examination because of the limited scope of the Order Processing Assistant Representative (Series 11) examination. Foreign Associates would not be considered to have passed the SIE examination because they are not subject to a qualification examination.

4. For additional guidance regarding the obligations of FINOPs and Introducing FINOPs who work part-time, work off-site or hold multiple registrations, please see Notice to Members 06-23 (May 2006).

5. See Securities Exchange Act Release No. 83863 (August 16, 2018).