FINRA published a set of answers to frequently asked questions ("FAQ") that provide guidance on issues concerning the new employee trading rule, FINRA Rule 3210. The new Rule, which replaces existing NASD Rule 3050, will become effective on April 3, 2017, and governs accounts that are opened or established by associated persons of a broker-dealer at firms other than those at which they are employed.

The FAQ includes the following guidance:

  1. The Rule does not impose any specific requirements regarding information or data that an employer member must review or monitor regarding an employee account.
  2. Firms may use electronic means to transmit required transactional data.
  3. The Rule does not require the executing firm to obtain any documentation from the employer member.
  4. Executing firms are not required to transmit duplicate copies of confirmations and statements, or the transactional data, to an employer member if that member does not make a written request.
  5. Upon written request by an employer member, an executing firm is required to transmit duplicate copies of confirmations and statements, or the transactional data, regardless of whether the associated person who establishes the account fulfills the obligation to provide written notification to the executing member of their association with the employer member.
  6. If an executing firm receives a written request from an employer member to transmit duplicate copies of confirmations and statements, or the transactional data, for accounts or transactions not subject to Rule 3210 (see Supplementary Material .03 for a list of such accounts), the executing firm is not required to provide that information.
  7. An employer member is expected to have policies and procedures in place to make and document determinations concerning accounts subject to Supplementary Material .02. Supplementary Material .02 is not intended to prescribe specific practices or methodologies that members must use to comply with the Rule.
  8. If both spouses in a marriage are the associated persons of separate employer members, and each spouse establishes a separate account or accounts subject to 3210 requirements, then the presumption of beneficial interest will apply to each spouse with respect to the account or accounts of the other spouse.

Commentary / Steven Lofchie

Note that Question No. 8 refers to "spouses." Firms should consider whether they want to adopt a different standard; e.g., concerning significant others sharing a household.

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.