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FINRA Adopts Self-Reporting Requirement

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  • Baker, John
    FINRA has adopted new Rule 4530, requiring members to report regulatory violations to FINRA. Regulatory Notice 11-06 (Feb. 2011). Adopted as part of FINRA s
    Message 1 of 1 , Feb 15, 2011
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      FINRA has adopted new Rule 4530, requiring members to report regulatory violations to FINRA. Regulatory Notice 11-06 (Feb. 2011). Adopted as part of FINRA's rulebook consolidation process, the new rule replaces NASD Rule 3070 and New York Stock Exchange Rule 351, but makes a number of changes to those rules' requirements. Most significantly, Rule 4530(b) includes a self-reporting requirement for regulatory violations:

      <<(b) Each member shall promptly report to FINRA, but in any event not later than 30 calendar days, after the member has concluded or reasonably should have concluded that an associated person of the member or the member itself has violated any securities-, insurance-, commodities-, financial- or investment-related laws, rules, regulations or standards of conduct of any domestic or foreign regulatory body or self-regulatory organization.>>


      NYSE Rule 351(a)(1) presently includes a requirement that members self-report securities regulatory violations, though it does not have the breadth of the new rule provision. The requirement to self-report is new to other FINRA members. It applies to all FINRA members, including fund distributors. In general, Rule 4530(b) requires a member to report only conduct that has widespread or potential widespread impact to the member, its customers or the markets, or conduct that arises from a material failure of the member's systems, policies or practices involving numerous customers, multiple errors or significant dollar amounts.

      The rule change takes effect on July 1, 2011, and applies to matters that become subject to reporting or filing on or after that date. Firms will need to revise their procedures to ensure that they comply with the new reporting requirements and to specify the persons within the firm who are responsible for deciding whether reports are required in any given case.

      Regulatory Notice 11-06 is available online at

      http://www.finra.org/Industry/Regulation/Notices/2011/P122889



      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1250 Connecticut Avenue, NW, Suite 500
      Washington, DC 20036
      202.419.8413
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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