FINRA Reminds Members and Associated Persons, Wherever Located, of Their Obligation to Comply With Rule 8210

Summary

FINRA is issuing this Notice to remind members and associated persons that, no matter where they are located, they are required to provide information and testimony in response to a request from FINRA staff pursuant to FINRA Rule 8210.

Questions concerning this Notice should be directed to:

• Victoria Crane, Vice President and Associate General Counsel, Office of General Counsel (OGC), by email or (202) 728-8104; or
• Thomas Kimbrell, Associate General Counsel, OGC, by email or (202) 728-6926.

Background & Discussion

FINRA Rule 8210 (Provision of Information and Testimony and Inspection and Copying of Books) authorizes FINRA staff and adjudicators to request information from members and their associated persons for the purpose of an investigation, complaint, examination or proceeding authorized by FINRA’s By-Laws or rules. Specifically, Rule 8210(a)(1) gives FINRA staff and adjudicators the right to require a member, associated person or other person subject to FINRA’s jurisdiction “to provide information orally, in writing, or electronically (if the requested information is, or is required to be, maintained in electronic form), and to testify at a location specified by FINRA staff.”¹ In addition, Rule 8210(a)(2) gives FINRA staff and adjudicators the right to “inspect and copy the books, records, and accounts of such member or person . . . that is in such member’s or person’s possession, custody or control.” Rule 8210 applies to FINRA members, their associated persons and other persons subject to FINRA’s jurisdiction, regardless of where they, or their books and records, are located.²

Because FINRA lacks subpoena power, compliance with Rule 8210 is essential for FINRA to fulfill its self-regulatory mission.³ Because of the importance of Rule 8210, FINRA may seek to expel a firm from membership, or bar an associated person or other person subject to FINRA’s jurisdiction from associating with a member, if they fail to respond, or do not respond truthfully or completely, to a request made pursuant to Rule 8210.⁴

A number of FINRA members have operations, personnel or copies of books and records located outside of the United States.⁵ Some jurisdictions outside of the United States have laws that may potentially conflict with the requirements of Rule 8210 and prohibit persons from responding to information requests from overseas regulators.⁶ Rule 8210 does not, however, provide any exception to complying with its requirements based on foreign law. In addition, FINRA Rule 3110 (Supervision) requires all members to establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules—including Rule 8210.⁷ Accordingly, members with operations, personnel or copies of books and records located outside of the United States must ensure that their supervisory systems and procedures are reasonably designed to achieve compliance with Rule 8210. When undertaking this assessment, members should recognize that compliance with Rule 8210 may require:

• that a member provide information orally, in writing or electronically, and produce the books, records and accounts in its possession, custody or control,⁸ including both records that the member is required to keep under FINRA rules, the Securities Exchange Act of 1934 (Exchange Act), or applicable Exchange Act rules and other books, records or accounts that the broker-dealer makes or keeps relating to its operation as a broker-dealer or a person’s association with the member;⁹
• that an associated person of a member or other person subject to FINRA’s jurisdiction provide information orally, in writing or electronically, and produce the books, records and accounts in their possession, custody or control;
• that a member, associated person of a member or other person subject to FINRA’s jurisdiction produce records relating to a FINRA investigation of outside business activities, private securities transactions or possible violations of just and equitable principles of trade, as well as other FINRA rules, Municipal Securities Rulemaking Board (MSRB) rules and the federal securities laws;¹⁰
• that a member, associated person of a member or other person subject to FINRA’s jurisdiction produce books, records or accounts that are in the possession of another person or entity, such as a professional service provider, where the member, associated person or other person subject to FINRA’s jurisdiction controls or has a right to demand them;¹¹
• that a member, associated person or other person subject to FINRA’s jurisdiction appear for testimony under oath at a location specified by FINRA staff, such as a FINRA office in the United States;¹² and
• that a member, associated person or other person subject to FINRA’s jurisdiction comply with a request to inspect and copy the original books, records and accounts of the member, associated person or other person subject to FINRA’s jurisdiction.¹³

Members that operate or maintain personnel in jurisdictions that have laws that could potentially conflict with the requirements of Rule 8210 should anticipate that FINRA’s examination program will continue to review the member and their associated persons’ ability to comply with Rule 8210. If necessary, FINRA staff will initiate an enforcement action for failing to comply with Rule 8210 that may result in expulsion from membership or a bar from associating with a member firm.

Endnotes