FINRA issued frequently asked questions ("FAQs") on the individual qualification and registration requirements in FINRA Rules 1210 through 1240. The rules, which come into effect on October 1, 2018, will, among other things:

  • allow for the permissive registration of personnel associated with a broker-dealer, or with a foreign securities affiliate of a broker-dealer;
  • institute a qualification waiver program for individuals working for a financial services affiliate of a broker-dealer;
  • require broker-dealers to designate a Principal Financial Officer and a Principal Operations Officer; and
  • permit certain broker-dealer personnel to act as principals for a limited period before passing the relevant principal qualification examination.

The FAQs consist of five sections: (i) former, current and future registrants, (ii) permissive registrations, (iii) a financial services affiliate waiver program, (iv) principal financial offer and principal operations officer requirements, and (v) registered personnel functioning as principals for a limited period.

Commentary / Mark Highman

The FAQs provide useful guidance on FINRA's new individual registration and qualification rules that go into effect on October 1, 2018. In certain respects, the new rules are more liberal than current requirements. Thus, for example, the new rules expand the ability of a broker-dealer to maintain "permissive" registrations of personnel whose job functions do not require registration (e.g., a broker-dealer's technology or administrative personnel, or registered representatives who register as principals even though they do not function in a supervisory capacity). Similarly, the new rules continue to permit a broker-dealer to maintain permissive registrations for individuals who work for a foreign securities affiliate. In addition, FINRA is instituting a Financial Services Affiliate Waiver program, which will permit eligible personnel who leave a broker-dealer to work for a broader category of "financial services industry affiliates" to apply for a waiver of qualification requirements upon re-joining a broker-dealer within seven years.

On the other hand, the new rules impose certain additional requirements, including the requirement to designate a Principal Financial Officer responsible for financial filings and records, and a Principal Operations Officer responsible for day-to-day operations of the firm's business. Many of the new requirements (and exemptions) are subject to specific (and often quite technical) conditions, and the FAQs provide a road map on how these conditions apply to specific factual scenarios. Firms would do well to review the FAQs before the October 1 effective date to check that their understanding of the new requirements aligns with FINRA's guidance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.