References

FINRA 3110(b)(6)(c)a. Supervision.

  • Source: FINRA
  • Type: Regulation
  • Date: Jul. 31, 2015

FINRA 3110.10. Supervision of Supervisory Personnel.

  • Source: FINRA
  • Type: Regulation
  • Date: Jul. 31, 2015

Regulatory Notice 14-10. Consolidated Supervision Rules: SEC Approves New Supervision Rules.

  • Source: FINRA
  • Type: Guidance
  • Date: Mar. 19, 2014

Summary

FINRA provides a limited exception to the supervisory requirement.

Text

If a member determines, with respect to any of its supervisory personnel, that compliance with subparagraph (i) or (ii) above is not possible because of the member’s size or a supervisory personnel’s position within the firm, the member must document:

1. the factors the member used to reach such determination; and
2. how the supervisory arrangement with respect to such supervisory personnel otherwise complies with paragraph (a) of this Rule.

Text

A member’s determination that it is not possible to comply with paragraphs (b)(6)(C)(i) or (b)(6)(C)(ii) of Rule 3110 prohibiting supervisory personnel from supervising their own activities and from reporting to, or otherwise having compensation or continued employment determined by, a person or persons they are supervising generally will arise in instances where:

(a) the member is a sole proprietor in a single-person firm;
(b) a registered person is the member’s most senior executive officer (or similar position); or
(c) a registered person is one of several of the member’s most senior executive officers (or similar positions).

Text

. . . However, FINRA Rule 3110.10’s list of situations is non-exclusive, and a firm may still rely on the exception in other instances where it cannot comply because of its size or the supervisory personnel’s position within the firm, provided the firm complies with FINRA Rule 3110(b)(6)’s documentation requirements. A firm is not required to notify FINRA of its reliance on the exception.24 . . .

24. NASD Rule 3012 requires a firm relying on a similar exception to notify FINRA through an electronic process (or any other process prescribed by FINRA) within 30 days of the date on which the firm first relies on the exception, and annually thereafter. Firms provide this notification through the FINRA Contact System (FCS). Effective December 1, 2014, firms will no longer be required to provide this information, and FINRA intends to disable FCS’s notification feature. . . .

Notes

None