FINRA Clarifies Obligations and Supervisory Responsibilities for Functions Outsourced to Third-Party Service Providers


The Financial Industry Regulatory Authority is requesting comment on a proposed new rule clarifying the scope of a member firm's obligations and supervisory responsibilities for functions or activities outsourced to a third-party service provider. According to FINRA, new Rule 3190 (Use of Third-Party Service Providers) addresses continued requests from its member firms for FINRA to identify specific functions that a clearing or carrying member firm may outsource to a third-party service provider and the appropriateness of any member firm outsourcing activities to a third-party service provider that is not registered as a broker-dealer.

Proposed Rule 3190 makes clear that outsourcing functions of a broker-dealer to a third-party service provider does not relieve the member firm of its obligation to comply with applicable securities laws and regulations. Moreover, a member firm cannot delegate its responsibilities for, or control over, any outsourced functions.

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