Anti-money Laundering

Anti-money laundering is a continuously evolving issue that places additional due diligence and reporting responsibilities on firms, supervisors, and registered representatives.

Section 352 of the USA PATRIOT ACT amended the BSA to require financial institutions to establish an AML program, report suspicious activity, verify the identity of customers and apply due diligence in all matters especially to accounts involving foreign persons.

Broker-dealers can meet this requirement by maintaining an AML compliance program that complies with SRO rule requirements. NASD Rule 3011 and NYSE Rule 445 require their member organizations to establish risk-based AML compliance programs.

FINRA Requesting Feedback on Proposed Amendments to OTC Trade Reporting Requirements for Equity Securities

Regulatory Notice 07-46

Comment Period Expires November 12, 2007
FINRA is soliciting feedback from member firms and other interested parties on two proposals relating to OTC trade reporting requirements applicable to listed and unlisted equity securities.

• Trade Reporting Structure Proposal: FINRA is proposing to simplify and update the current market maker-based trade reporting structure and is seeking comment on alternative structures.

• Linking Proposal: FINRA is proposing to require firms to provide information sufficient to link tape and non-tape reports that are submitted to FINRA for the same overall transaction.

To view the full Notice click here.

FINRA Introduces “Batch Submission” for Advertising Regulation Electronic Files (AREF)

Effective October 29, 2007
FINRA announces the availability of “Batch Submission”. Firms that file a very large volume of communications (typically around 500 per year or more) may wish to consider using the new Batch Submission process.

Effective October 29, 2007, firms will be required to provide further regulatory data about each AREF submission. This new data will help the Department prioritize firm submissions. Also on October 29, 2007, AREF will be enhanced to enable firms to provide additional information like rankings back up data and cover letters at the time they initially upload communications for review.


To view Regulatory Filing Applications click here.
To view more on advertising regulation information click here.
To view more information on “Batch Submissions” click here.
To learn more about regulatory data requirements click here.
If you have entitlement to use AREF and would like to view pending changes to the system click here.

Short Sale Delivery Requirements - NASD Rule 3210 Amended

Regulatory Notice 07-45

Effective October 15, 2007
NASD Rule 3210 has been amended to conform with amendments to SEC’s Regulation SHO Delivery Requirements.

Firms are required to close out within 35 consecutive settlement days any previously "grandfathered" fail-to-deliver positions in a non-reporting threshold security that is on the Rule 3210 threshold list on that date.

Any new fails in a non-reporting threshold security after October 15, 2007 will be subject to Rule 3210's 13 consecutive settlement day close-out requirements. There is, however, one exception; as of October 15, 2007, firms will have 35, rather than 13, consecutive settlement days to close out fails to deliver resulting from sales of non-reporting threshold securities pursuant to SEC Rule 144.

To view the full Notice click here.

FBI Reduces Fingerprinting Fee Resulting in Decrease in FINRA Fingerprint Processing Fees

Effective October 1, 2007
The FINRA fee for processing each set of fingerprints submitted by a member firm will decrease from $35.00 to $30.25.

The Securities Exchange Act of 1934 requires all member firms to submit fingerprints to be processed for all associated persons. Pursuant to section 4(b)(4) of Schedule A to the FINRA By-Laws, FINRA charges a fee for processing each set of fingerprints submitted by firms, part of which FINRA collects on behalf of the Federal Bureau of Investigation (FBI).

The FBI announced that it will decrease its fee from $22.00 to 17.25, resulting in a $4.75 fee reduction in the total FINRA processing fee for each set of fingerprints processed on or after October 1, 2007.

October 2007 is named “FINRA Mediation Settlement Month”

FINRA has named October 2007 “Mediation Settlement Month”. During Settlement Month members mediating cases will receive significantly reduced rates.

Mediation is a voluntary, non-binding dispute resolution process in which a trained, impartial individual helps parties negotiate and reach a settlement acceptable to all parties to the dispute. Once the parties reach an agreement through mediation, they sign a mutually agreeable settlement agreement. In contrast, when a dispute is submitted to arbitration, the decision of the arbitrator or arbitration panel is binding on all parties regardless of whether the parties agree with the decision.

FINRA has 73 hearing locations in all 50 states, Puerto Rico and London. For a complete list, see the FINRA Dispute Resolution map of regional offices and mediation hearing locations.

SEC Approves NASD Rule 1160 – Contact Information Requirements

Regulatory Notice 07-42

Effective December 31, 2007
This new rule amends Rule 1120 (Continuing Education Requirements – Regulatory Element), Rule 1150 (Executive Representative), Interpretive Material (IM)-3011-2 (Review of Anti-Money Laundering Compliance Person Information), and Rule 3520 (Emergency Contact Information) to eliminate the requirement that members review and update, at the end of each calendar quarter, the contact information required by these rules.

This new rule requires firms to update designated contact information immediately upon any material change, verify such information annually and comply promptly with any request for such information.

NASD Rule 1160 has several advantages over current FINRA requirements applicable to firm contact information. Rule 1160 eliminates any unnecessary burden that firms may incur in conducting quarterly reviews of the contact information. At the same time, Rule 1160 helps to ensure that the contact information required by FINRA is kept current and provided to FINRA promptly upon request.

To view the full Notice click here.