Requirement

for

Opening New Account

Account Documentation

Reasonable Effort to Obtain

Record of Written Complaints

Required Minimum Investment

Account Documentation

Essential Facts Obtained

for

Each Customer

• Customer Name & Residence
• Whether of Legal Age
• Signature of registered Rep, member,officer,/manager
• If customer is Corp./legal entity, the names of persons authorized to transact business

• Tax I.D. or S.S. #
• Customer Occupation & Employer Name & Address
• Permission from employing firm if person associate w/another FINRA firm
• Discretionary Acc. Data
• Documentation of Trading Authority

Rule 3110 d

Written Complaints

• Separate file of all written complaints of customer w/ explaination of action taken by member
• Separate file of all written complaints and clear references to file containing correspondence related to them

Generally funds require min. of $250/ $500 for lump sum

Min. for systematic investment plans as low as $50/installment

• Cash - distributions can be received in cash
• Reinvestment - distributions used to purchase shares in same fund/another fund w/in same family. Reinvest @ NAV & taxable if in regular nonretirement accounts

• Designed to id source, volume, & movement of currency transported in & out U.S.
•  Dept. of Treasury requires financial institutions to maintian records of transactions & report suspicious transactions
• Funds>$3000 brokers/dealers must obtain info. on transmitter and recipient
• Funds>$10,000/multiple transactions = >$10,000 - financial institution must verify id of person conducting transaction and file Currency Transaction Report (CTR)

Anti-Money Laundering

Compliance Program

• Each member must develope program approved by senior management.
• Under Customer ID program firms must implement min. procedures to id customer opening account, maintain customer id, and consult gov. provided list of terrorists

Regulation S-P Privacy

of

Consumer Financial Information

Requires brokers/dealers to establish safeguards to protect customer records & information except

• institution can provide certain info. to consumer
• Consumer hasn't elected to opt out of disclosure

• Joint Tenants with Right of Survivorship
• Tenants in Common
• Trust Accounts
• Custodial Accounts Under the Uniform Gifts to Minors Act

Joint Tenants

with

Right of Survivorship

Either party may trade in the account under their own signature

Sole ownership passes to surviving tenant upon proof of death

Typically utilized by married couples

Tenants

in

Common

• Ownership proportions established and need not be equal. Tenant signatures required for trading activity.
• If one dies the interest doesn't automatically pass to other
• Each has undivided interest in property

 FINRA RULES

• Rule 2330 - Customer's Securities/Funds
• Rule 2370 - Borrowing From/Lending to Customers
• Rule 2420 - Dealing with Non-Members
• Rule 3050 - Transactions for/by Associated Persons
• Rule 3060 - Influencing Employees of Other Members
• Rule 3370 - Prompt Receipt & Delivery of Securities

Rule 2330

Customers' Securities/Funds

Prohibition of Guarantees

Violation of SEC rule to make promise of profit or guarantee against a loss

Sharing in Accounts; Extent Permissible

No member/person associated with member shall share in profit/losses of account w/out prior written authorization. Exempt from direct share limitations set forth is immediate family

Rule 2420

Dealing with Non-Members

• Sharing Commissions w/Non-members

No member may deal with any non member broker/deal except @ same prices, for same commissions/fees and same terms & conditions accorded to general public

Non-Member/Dealer

 Defined

broker/dealer who uses means of interstate commerce to effect any transaction in,/ to induce sale, of any security who isn't a member of any securities association registered with SEC.

Excluded from category are broker/dealers dealing exclusively in commercial paper/bills and banker's acceptances.

Rule 3050

Transactions

For/By

Associated Persons

Obligation of Associated person concerning account with investment advisor/other financial institution

Person associated w/member who opens securities account must notify employer member in writing prior to execution of transaction intention to open account/ place order

Exemption for Transactions in Investment Company Shares & UITs

Provision doesn't apply to UITs, Variable Contracts,/redeemable securities registered under Investment Co. act of 1940.

Commission authorizes protection of investors against larceny & embezzlement. Bond sufficient to cover reasonable minimum.

Rule 3060

Influencing Employees

of

Other Members

A broker/dealer may not pay compensation to employees of other broker dealers. Rules require:

• Gifts valued <$100/person/yr.
• Recipient's employing firm must gives prior approval of gift
• Employing firm must obtain record of gift, details name of giver & recipient as well as nature of gift

Exception -service is performed under employment contract

Procedural Rules

Code of Arbitration

• Rule 10101 - Matters Eligible for Submission
• Rule 10100 - Failure to Act Under Provisions of Code of Arbitration Procedure
• Rule 10102 - National Arbitration Committee
• Rule 10104 - Composition and Appointment of Panels
• Rule 10300 - Uniform Code of Arbitration
• Rule 10302 - Simplified Arbitration
• Administrative Provisions
• Procedural Rules

Rule 10101

Matters Eligible for Submission

Code of Arbitration instructs following disputes be submitted to arbitration:

• B/twn/among members
• B/twn/among members & associated persons
• B/twn/among members, associated persons, & public customers

*Public customers can't be submitted to arbitration w/out signing agreement to settle dispute through binding arbitration.

*6 yr statute of limitations

Rule 10100

Failure to Act Under Provisions of Code of Arbitration Procedure

Violation for any member/associated persons to do following:

• Fail to submit to dispute
• Fail to comply w/ injuctive order
• Fail to appear/produce documents in which they are in possession/control
• Fail to honor award/settlement agreement
• Fail to comply w/a written & executed settlement agreement

Rule 10102

National Arbitration Committe

Composition

and

Appointment of Panels

• Arbitrators appointed from existing pool of arbitrators of the Association.
• Authority to recommend appropriate rules, regulations, procedures
• Meets once a yr.
• Consists of odd #s possibly 3/5 members

Rule 10300

Uniform Code

 of

 Arbitration

Any dispute b/twn customer & member arbitrated under this code. Claims involving member in following categories is ineligible unless customer agrees in writing to arbitrate claim after it has risen.

• Member whose membership terminated/revoked
• Member expelled from FINRA
• Member who's otherwise defunct

• For disputes $25,000/less
• 1 Arbitrator renders decision on case based on review of written submissions by both parties
• 10 business days to submit documentation
• Documentation filed w/in 5 days of receipt

Administrative Provisions

Awards under Arbitration Rule 10330

Awards final & binding w/out opportunity of appeal. Award required to be paid w/in 30 days/member firm/registered rep subject to suspension.

• Rule 8110 - Availability of Manual to Customers
• Rule 8210 - Reports & Inspection of Books for Purpose of investigating Complaints
• Rule 9000- Code of Procedure *
• Rule 8300 Sanctions -Santions for violations of rules, monetary sanctions, & cost of proceedings
• Rule 8310 - Sanctions for Violating Rules

Rule 9000

Code of Procedure

Concerning violation & complaints Board of Govenors & District Bus. Conduct Committee can impose following penalities

• Censure
• Fine
• Suspension of FINRA membership
• Suspension/barring indiv. from associating w/member firm
• Expulsion from FINRA membership/revocation of FINRA registration

 Securities Exchange Act of 1934

Section 10 - Manipulative & Deceptive Devices

Used of manipulative/deceptive tactics prohibited statute of limitations is

• 3yrs from alleged violation
• W/in 1yr. of discovery

Rule 10b-10

 Confirmation of Transaction

Broker/dealer required to disclose in writing to customer @/b4 completion of transaction called Trade Confirmation. Discloses

• Date, time,identity,# of shares
• whether broker/dealer acting as agent of customer/agent for another/ principal 4 own account
• nature & amount of any compensation, fee,/commission

securities that can be purchased on margin. List includes any stock listed on a national exchange/NASDAQ. New issues including shares of open-end mutual funds ineligible for margin purchases

• Prompt Payment for Securities Purchased - Customers purchasing on margin must pay 4 securities w/in 7 bus. days
• Extension of Time - Waive Regulation T calls in amount <$1000/apply to FINRA to grant extension/firm must liquidate (sell) securities & freeze account
• Frozen Accounts-if payment not received on time customer account frozen for 90 days during which credit can't be extended. Customer may purchase securities on  cash basis.
• Arranging for Loans by Others Prohibited-New issues ineligible for margin purchases w/in 30 days of distribute date; also applies to mutual funds; only cash/fully paid securities can b used as collateral for Margin accounts

• obtain immediate written approval on all orders
• make certain all orders are suitable & not excessive
• secure written power of attorney from customer