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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

What Does FINRA Rule 3270 Mean To You

Posted in Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, Money Laundering, Ponzi Schemes, Registered Representatives, Social Media

fraud.jpgThe outside business activities of registered persons have the potential for causing your firm significant liability, especially where those activities are unknown to the firm, involve firm customers and constitute a fraud.  FINRA 3270 only requires the registered person to provide notice to the firm before engaging in the activity, but should the firm do more.

The short answer is, absolutely.  First, the firm should either approve or disapprove of the proposed activity.  Standing silent is no longer an option.

Second, if approved, review that activity with the registered representative as part of the normal compliance review, as well as suprise reviews.  Part of this review process should also include an objective review of the registered person’s lifestyle; if they are living beyond their means, there may be a problem.

Third, monitor all correspondence (including electronic), as well as Internet use (including social media).  Many times bad brokers are sloppy covering their tracks.

Finally, do not be afraid to say no to a proposed activity.  Remember, your obligation is to the firm and its customers.  They should never be sacrificed to an outside business activity.

  • pbr90

    Most conspiracies are engineered for success, and escape, often with court assistance.
    Otherwise, why would frauds be so prevalent?