3160. Networking Arrangements Between Members and Financial Institutions
(a) Standards for Member Conduct
Except as otherwise provided in this Rule, a member that is a party to a networking arrangement under which the member conducts broker-dealer services on or off the premises of a financial institution is subject to the following requirements:
A member that conducts broker-dealer services on the premises of a financial institution shall:
(A) be clearly identified as the person providing broker-dealer services and shall distinguish its broker-dealer services from the services of the financial institution;
(B) conduct its broker-dealer services in an area that displays clearly the member's name; and
(C) to the extent practicable, maintain its broker-dealer services in a location physically separate from the routine retail deposit-taking activities of the financial institution.
(2) Networking Agreements
(A) Networking arrangements between a member and a financial institution shall be governed by a written agreement that sets forth the responsibilities of the parties and the compensation arrangements and include all broker-dealer obligations, as applicable, set forth in Rule 701 of SEC Regulation R. Independent of their contractual obligations, members shall comply with all broker-dealer obligations, as applicable, under Rule 701 of SEC Regulation R.
(B) The member shall ensure that the written agreement stipulates that supervisory personnel of the member and representatives of the SEC and FINRA will be permitted access to the financial institution's premises where the member conducts broker-dealer services, as applicable, in order to inspect the books and records and other relevant information maintained by the member with respect to its broker-dealer services.
(3) Customer Disclosure
(A) At or prior to the time that a customer account is opened by a member that is a party to a networking arrangement, the member shall disclose in writing to each customer that the broker-dealer services are being provided by the member and not by the financial institution, and that the securities products purchased or sold in a transaction are:
(i) not insured by the Federal Deposit Insurance Corporation ("FDIC");
(ii) not deposits or other obligations of the financial institution and are not guaranteed by the financial institution; and
(iii) subject to investment risks, including possible loss of the principal invested.
(B) The disclosures required by paragraph (a)(3)(A) of this Rule also shall be made orally by a member that is a party to a networking arrangement for any customer account opened on the premises of a financial institution.
(4) Communications with the Public
(A) All member confirmations and account statements shall indicate clearly that the broker-dealer services are being provided by the member.
(B) Retail communications, including material published, or designed for use, in radio or television broadcasts, Automated Teller Machine ("ATM") screens, billboards, signs, posters and brochures, that announce the location of a financial institution where broker-dealer services are provided by the member or promote the name or services of the financial institution or that are distributed by the member on the premises of a financial institution or at such other location where the financial institution is present or represented shall include the disclosures required by paragraph (a)(3) of this Rule. The following legend may be used to provide these disclosures in retail communications, provided that such disclosures are displayed in a conspicuous manner:
• Not FDIC Insured
• No Bank Guarantee
• May Lose Value
(C) As long as the omission of the disclosures required by paragraph (a)(4)(B) of this Rule would not cause the retail communications to be misleading in light of the context in which the material is presented, such disclosures are not required with respect to messages contained in:
(i) radio broadcasts of 30 seconds or less;
(ii) electronic signs, including billboard-type signs that are electronic, time and temperature signs and ticker tape signs, but excluding messages contained in such media as television, online services or ATMs; and
(iii) signs, such as banners and posters, when used only as location indicators.
(5) Notifications of Terminations
A member shall promptly notify the financial institution if any associated person of the member who is employed by the financial institution is terminated for cause by the member.
For purposes of this Rule, the following terms shall have the meanings specified below:
(1) "Financial institution" shall mean federal and state-chartered banks, savings and loan associations, savings banks, credit unions, and the service corporations of such institutions required by law.
(2) "Networking arrangement" shall mean a contractual or other written agreement between a member and a financial institution under which the member offers broker-dealer services on or off the premises of the financial institution.
(3) "Broker-dealer services" shall mean investment banking or securities business as defined in Article I of the FINRA By-Laws.
|Amended by SR-FINRA-2013-001 eff. Feb. 4, 2013.
Amended by SR-FINRA-2010-023 eff. June 14, 2010.
Amended by SR-FINRA-2009-047 eff. June 14, 2010.
Adopted by SR-NASD-95-63 eff. Feb. 15, 1998.
Selected Notices: 94-94, 96-3, 97-26, 97-89, 10-21.
- Regulatory Notice 15-22June 17, 2015
- Regulatory Notice 13-32October 09, 2013
- Regulatory Notice 10-21April 15, 2010