The FINRA Consolidated Rulebook: The Conduct Rules

Publisher: Matthew Bender

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ISBN: 9781422475683
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Soon after the merger of NASD and the regulatory operations of NYSE in July 2007, FINRA embarked upon the daunting task of combining the legacy NASD and NYSE rulebooks into a single set of unified rules. The new, consolidated FINRA rules attempt to eliminate duplicative or obsolete rules, harmonize conflicting ones, streamline the rule text, and group rules into a more logical organizational framework. More ambitiously, FINRA is also exploring the feasibility of incorporating a "principles-based" approach for certain areas of regulation, as well as a "tiered" strategy for certain rules, according to firm size, business model, and type of customer (i.e., retail or institutional). Consequently, some rules will be incorporated nearly verbatim into the Consolidated FINRA Rulebook, others will be revised significantly, and some will be deleted in their entirety.

To facilitate the transition to the new rules, FINRA created three conversion charts that map NASD and Incorporated NYSE rules to the new FINRA rules that will replace them, and vice versa. However, the FINRA conversion chart does not give any indication of the scope of the revisions to the existing rule language or the rule's subject matter coverage.

To fill this gap, Matthew Bender has created a pamphlet that focuses on the Conduct Rules, and includes policy discussion to support the shift to a principles-based approach, and a chart that maps the substantive relationship between the transitional and consolidated rules. Instead of a numbing procession of rule numbers, scrolling across roughly 20 pages in the FINRA charts, our chart presents a more concise - and incisive - overview of the rules consolidation process. In addition to tracking the "conversion" of NASD and NYSE rules into FINRA rules (the first three columns), the chart provides a succinct summary of the notable changes to the former rules that have been effected by the consolidation process (the fourth column), along with expert commentary by Melvyn G. Moseley, Jr., partner, Warner Norcross & Judd, LLP.

Table of Contents

·MEMBER APPLICATION AND ASSOCIATED PERSON
REGISTRATION

·MEMBER APPLICATION

·Rule 1122 Filing of Misleading Information as to Membership or Registration

·DUTIES AND CONFLICTS

·Rule 2010 Standards of Commercial Honor and Principles of Trade

·Rule 2020 Use of Manipulative, Deceptive or Other Fraudulent Devices

·Rule 2070 Transactions Involving FINRA Employees

·Rule 2080 Obtaining an Order of Expungement of Customer Dispute
Information from the Central Registration Depository (CRD)
System

·TRANSACTIONS WITH CUSTOMERS

·Rule 2114 Recommendations to Customers in OTC Equity Securities

·Rule 2140 Interfering With the Transfer of Customer Accounts in the Context
of Employment Disputes

·COMMUNICATIONS AND DISCLOSURES

·Rule 2265 Extended Hours Trading Risk Disclosure

·Rule 2266 SIPC Information

·Rule 2267 Investor Education and Protection

·SPECIAL PRODUCTS

·Rule 2310 Direct Participation Programs

·Rule 2320 Variable Contracts of an Insurance Company

·Rule 2342 “Breakpoint” Sales

·Rule 2351 General Provisions Applicable to Trading in Index Warrants,
Currency Index Warrants and Currency Warrants

·Rule 2352 Account Approval

·Rule 2353 Suitability

·Rule 2354 Discretionary Accounts

·Rule 2355 Supervision of Accounts

·Rule 2356 Customer Complaints

·Rule 2357 Communications with the Public and Customers Concerning Index Warrants, Currency Index Warrants and Currency Warrants

·Rule 2358 Maintenance of Records

·Rule 2359 Position and Exercise Limits; Liquidations

·Rule 2360 Options

·Rule 2370 Security Futures

·SUPERVISION AND RESPONSIBILITIES RELATING TO
ASSOCIATED PERSONS
SUPERVISORY RESPONSIBILITIES

·Rule 3130 Annual Certification of Compliance and Supervisory Processes

·RESPONSIBILITIES RELATING TO ASSOCIATED PERSONS

·Rule 3220 Influencing or Rewarding Employees of Others

·Rule 3250 Designation of Accounts

·FINANCIAL AND OPERATIONAL RULES

·MARGIN

·Rule 4240 Margin Requirements for Credit Default Swaps

·Rule 4250 Supplementary Material

·BOOKS, RECORDS AND REPORTS

·Rule 4560 Short-Interest Reporting

·SECURITIES OFFERING AND TRADING STANDARDS AND
PRACTICES

·SECURITIES OFFERINGS, UNDERWRITING AND
COMPENSATION

·Rule 5110 Corporate Financing Rule—Underwriting Terms and Arrangements

·Rule 5122 Private Placements of Securities Issued by Members

·Rule 5130 Restrictions on the Purchase and Sale of Initial Equity Public Offerings

·Rule 5150 Fairness Opinions

·Rule 5190 Notification Requirements for Offering Participants

·QUOTATION AND TRADING OBLIGATIONS AND PRACTICES

·Rule 5240 Anti-Intimidation/Coordination

·Rule 5280 Trading Ahead of Research Reports

·APPENDIX A Rules 0110 through 0170 Text—FINRA General Standards
Rules

·APPENDIX B Text of Rule 2114—Recommendations to Customers in OTC
Equity Securities

·APPENDIX C Text of Rule 2310—Direct Participation Programs

·APPENDIX D Text of Rule 2360—Options

·APPENDIX E Text of Rule 2370—Security Futures

·APPENDIX F Rule 3130 Supplementary Material

·APPENDIX G NASD, NYSE, FINRA Rule Conversion Chart