The Financial Industry Regulatory Authority (FINRA) has adopted comprehensive new consolidated rules regarding supervision of member firms' activities, which become effective on December 1. While the new FINRA rules incorporate and adopt many of the supervisory requirements under existing National Association of Securities Dealers (NASD) and New York Stock Exchange (NYSE) Rules, they also materially modify certain supervisory requirements and introduce a variety of new obligations. In particular, new FINRA Rule 3110 (titled Supervision and referred to in this advisory as the "New Consolidated Rule" or the "Rule") replaces NASD Rule 3010 and corresponding provisions of various NYSE-incorporated rules. The New Consolidated Rule imposes certain requirements with respect to firms' supervisory systems, written supervisory procedures, internal inspections, and transaction reviews and investigations. While many of the Rule's requirements track the requirements of the legacy NASD and NYSE rules that they are replacing, there are some notable differences and new requirements. Additionally, new FINRA Rules 3120 (Supervisory Control Systems), 3150 (Holding of Customer Mail) and 3170 (Tape Recording of Registered Persons of Certain Firms), which also go into effect on December 1, replace and/or modify additional related NASD and NYSE rules. Firms will need to review and update their supervisory practices, as well as their written supervisory procedures, to comply with the new rules.
This advisory is intended to identify and summarize the new requirements imposed by the new FINRA rules as compared to the NASD rules they are replacing, but is not intended to describe or identify all of the requirements of the new rules.
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