FINRA Rules Quick Reference: Supervision and Financial Rules
This is Part 3 of FRC's FINRA Rules Quick Reference, continuing directly from Part 2's coverage of supervision fundamentals. This piece covers the remainder of the Supervision series, including anti-money laundering, outside business activities, and borrowing rules, before moving into the Financial and Operational Rules governing capital, margin, and recordkeeping.
Rules 3220 Through 4530, Explained One Rule at a Time
FRC's SIE Exam Preparation course covers the foundational supervision and financial-responsibility material every entry-level candidate is tested on. The Series 7 Exam Preparation course goes further into the margin, recordkeeping, and reporting rules a fully licensed registered representative needs to understand.
FINRA Rule 3220: Influencing or Rewarding Employees of Others
Rule 3220 limits the value of gifts and gratuities a member firm or its associated persons can give to employees of another firm or organization in relation to that firm's business. It exists to prevent gift-giving from becoming a disguised form of improper influence over someone else's business decisions.
FINRA Rule 3230: Telemarketing
Rule 3230 requires member firms to maintain do-not-call lists, limits the hours during which telephone solicitations can be made, and prohibits deceptive or abusive telemarketing practices. It extends general consumer telemarketing protections directly into FINRA's own enforceable rulebook.
FINRA Rule 3240: Borrowing From or Lending to Customers
Rule 3240 lets a member firm evaluate the appropriateness of lending arrangements between its registered persons and customers, addressing the conflicts of interest that can arise between the registered person and the customer, and between the registered person and the firm itself. It does not ban such arrangements outright but requires the firm to actively assess and approve them.
FINRA Rule 3241: Registered Person Being Named a Customer's Beneficiary or Holding a Position of Trust for a Customer
Rule 3241 restricts a registered person from being named a beneficiary, executor, trustee, or holder of a power of attorney for a customer, unless the customer is an immediate family member or the firm has given prior written approval. It creates a uniform national standard addressing the conflicts of interest that arise when a broker-dealer's own registered person is placed in a position of trust over a customer's estate, working alongside Rule 2165's temporary-hold authority and Rule 4512's trusted-contact-person requirement as part of a broader elder-investor protection framework.
FINRA Rule 3250: Designation of Accounts
Rule 3250 sets standards for how accounts can be designated or titled, including restrictions on using a number, symbol, or fictitious name in place of the customer's actual name unless the firm maintains a signed statement confirming ownership. It ensures a firm can always trace an account back to its actual beneficial owner.
FINRA Rule 3260: Discretionary Accounts
Rule 3260 governs discretionary accounts, where a registered person can make investment decisions for a customer without contacting them for each transaction, requiring prior written authorization from the customer and specific approval and review procedures by the firm. It addresses the elevated supervisory risk created when a customer hands over direct trading control.
FINRA Rule 3270: Outside Business Activities of Registered Persons
Rule 3270 requires a registered person to provide written notice to their firm before engaging in any outside business activity for compensation, letting the firm assess whether that activity creates a conflict of interest or otherwise reflects on the firm. It is the rule that keeps a firm aware of what its registered persons are doing outside their direct securities role.
FINRA Rule 3280: Private Securities Transactions of an Associated Person
Rule 3280 requires an associated person to provide written notice to their firm before participating in any private securities transaction outside the regular course of their employment, commonly known as "selling away." Depending on whether compensation is involved, the firm may need to approve the transaction and record it on its own books as though the firm itself executed it.
FINRA Rule 3310: Anti-Money Laundering Compliance Program
Rule 3310 requires every member firm to develop and implement a written anti-money laundering program reasonably designed to achieve compliance with the Bank Secrecy Act, including a designated AML compliance officer, ongoing employee training, and independent testing of the program. It is the rule that turns the federal Bank Secrecy Act's requirements into a specific, enforceable obligation on every FINRA member.
FINRA Rule 4110: Capital Compliance
Rule 4110 gives FINRA authority to impose specific capital requirements on a member firm beyond the baseline net capital rule, including the ability to require a firm to restrict its business or hold additional capital if FINRA determines it necessary for the protection of investors. It functions as a supervisory backstop layered on top of the SEC's own net capital requirements.
FINRA Rule 4120: Regulatory Notification and Business Curtailment
Rule 4120 requires a member firm to notify FINRA promptly when its net capital falls below specified thresholds, and gives FINRA authority to restrict or curtail that firm's business operations when its financial condition raises investor-protection concerns. It is the early-warning and intervention mechanism that sits behind FINRA's broader financial responsibility framework.
FINRA Rule 4130: Regulation of Activities of Section 15C Members Experiencing Financial and/or Operational Difficulties
Rule 4130 sets out specific restrictions and heightened FINRA oversight for member firms that deal in government securities and are experiencing financial or operational difficulties. It applies the same protective logic as Rule 4120 to the specific category of firms registered under Section 15C of the Exchange Act.
FINRA Rule 4140: Audit
Rule 4140 sets requirements for the audits a member firm must undergo, including standards for the timing and scope of those audits, tied to the firm's obligations under SEC financial reporting rules. It ensures a firm's financial condition is independently verified on a recurring basis rather than taken solely on the firm's own word.
FINRA Rule 4150: Guarantees by, or Flow Through Benefits for, Members
Rule 4150 addresses arrangements where a member firm's financial obligations are guaranteed by another entity, or where financial benefits flow through to the member from a related party, requiring specific disclosure of these arrangements. It ensures a firm's true financial condition and support structure is transparent to regulators rather than hidden inside a web of related-party arrangements.
FINRA Rule 4160: Verification of Assets
Rule 4160 requires a member firm to verify, on at least an annual basis, that the assets it reports as part of its net capital computation actually exist and are accurately valued. It exists to prevent a firm's reported capital position from being overstated through unverified or stale asset valuations.
FINRA Rule 4210: Margin Requirements
Rule 4210 sets the margin requirements determining how much of a customer's own capital must be posted to hold a securities position on credit, with specific, leverage-scaled requirements for products like leveraged ETFs that carry amplified daily volatility. It works alongside the Federal Reserve's Regulation T, which governs the initial extension of credit, by setting the maintenance margin standards for as long as the position is held.
FINRA Rule 4220: Daily Record of Required Margin
Rule 4220 requires a member firm to make a daily record of the initial or additional margin that must be obtained in a customer's account under Rule 4210. It is the recordkeeping companion to Rule 4210's substantive margin requirements, ensuring compliance can actually be verified on any given day.
FINRA Rule 4230: Required Submissions for Requests for Extensions of Time Under Regulation T and SEA Rule 15c3-3
Rule 4230 sets out the specific information a member firm must submit when requesting additional time to meet a payment or margin deadline under Regulation T or SEC Rule 15c3-3. It standardizes the extension-request process so firms facing a genuine timing issue have a clear, consistent path to seek relief.
FINRA Rule 4240: Margin Requirements for Credit Default Swaps
Rule 4240 sets margin requirements specific to credit default swap transactions, a derivative product whose risk profile differs meaningfully from a standard equity or bond position. It exists because credit default swaps' payout structure, tied to a credit event rather than simple price movement, required its own dedicated margin framework separate from Rule 4210.
FINRA Rule 4311: Carrying Agreements
Rule 4311 governs carrying agreements, the contracts between an introducing broker-dealer and a clearing firm that actually holds and processes customer accounts on the introducing firm's behalf. It sets out what the agreement must specify, including which firm is responsible for which functions, so customer protection responsibilities never fall into a gap between the two firms.
FINRA Rule 4314: Securities Loans and Borrowings
Rule 4314 sets the obligations of a firm engaged in lending or borrowing securities, establishing consistent disclosure and recordkeeping requirements for that activity. It ensures securities lending, an activity that sits somewhat outside a customer's typical view of their own account, still carries clear documentation and accountability.
FINRA Rule 4320: Short Sale Delivery Requirements
Rule 4320 sets delivery requirements specific to short sale transactions, addressing the operational risk that arises when a security sold short is not actually delivered on time. It works alongside SEC Regulation SHO to close settlement gaps that short selling can otherwise create.
FINRA Rule 4330: Customer Protection — Permissible Use of Customers' Securities
Rule 4330 limits how a member firm can use securities it holds on a customer's behalf, restricting activities like lending out a customer's fully paid securities without meeting specific disclosure and consent requirements. It protects a customer's ownership rights over their own securities even while those securities sit in the firm's custody.
FINRA Rule 4340: Callable Securities
Rule 4340 requires a member firm to have fair, impartial procedures for allocating callable securities among customers when an issuer redeems only part of an outstanding issue before maturity. It gives customers clarity and confidence that a firm isn't favoring some accounts over others when a call is only partial.
FINRA Rule 4360: Fidelity Bonds
Rule 4360 requires most member firms to maintain fidelity bond coverage, a form of insurance protecting against losses from employee dishonesty, forgery, and similar risks, at levels tied to the firm's net capital. It ensures a firm has a real financial backstop against internal misconduct, not just external market risk.
FINRA Rule 4370: Business Continuity Plans and Emergency Contact Information
Rule 4370 requires every member firm to create and maintain a written business continuity plan addressing how it will respond to a significant business disruption, along with keeping emergency contact information current with FINRA. It exists so that a firm's obligations to customers and the market don't simply collapse the moment a crisis, natural disaster, or system failure hits.
FINRA Rule 4380: Regulatory Extension of Time
Rule 4380 sits within FINRA's Operations section, addressing circumstances in which a firm may seek regulatory relief from a specific timing requirement elsewhere in the rulebook. It functions as a general safety valve alongside the more specific extension provisions found in rules like 4230.
FINRA Rule 4511: General Requirements (Books and Records)
Rule 4511 sets the general recordkeeping standard requiring every member firm to make and preserve books and records as required under FINRA rules and the applicable SEC recordkeeping rules. It is the umbrella books-and-records requirement that the more specific recordkeeping rules following it build on.
FINRA Rule 4512: Customer Account Information
Rule 4512 requires a member firm to obtain and maintain specific account information for every customer, including, for certain accounts, the name and contact information of a trusted contact person. That trusted-contact-person requirement works directly alongside Rule 2165's temporary-hold authority and Rule 3241's beneficiary restrictions as part of FINRA's broader framework for protecting vulnerable investors.
FINRA Rule 4513: Records of Written Customer Complaints
Rule 4513 requires a member firm to keep records of every written customer complaint received, including the identity of the complainant and how the complaint was resolved. It creates the documentary trail regulators rely on when assessing a firm's pattern of customer disputes over time.
FINRA Rule 4515: Options-Related Recordkeeping Requirements
Rule 4515 sits within FINRA's recordkeeping rules, addressing documentation requirements specific to options business, an area where FINRA has historically required more granular record retention given the added complexity of options positions. It supplements the general recordkeeping standard in Rule 4511 with requirements tailored to this specific product area.
FINRA Rule 4517: Member Filing and Contact Information Requirements
Rule 4517 requires a member firm to keep its contact information and required regulatory filings current with FINRA, ensuring the firm can actually be reached and that its filings accurately reflect its current operations. It is a foundational administrative requirement that keeps FINRA's own records about each member accurate.
FINRA Rule 4518: Reporting Requirements for Clearing Firms
Rule 4518 sets specific reporting obligations for member firms that act as clearing firms, given the elevated systemic importance of the clearing function relative to an ordinary introducing broker-dealer. It reflects that a clearing firm's financial and operational soundness has ripple effects across every introducing firm it services.
FINRA Rule 4521: Notifications, Questionnaires and Reports
Rule 4521 addresses FINRA's authority to request financial and operational information from members to carry out its surveillance and examination responsibilities, and sets out the reporting requirements for members carrying margin accounts for customers. It gives FINRA the direct information-gathering power its broader financial-responsibility oversight depends on.
FINRA Rule 4522: Periodic Security Counts, Verifications and Comparisons
Rule 4522 requires a member firm subject to SEC Rule 17a-13 to perform periodic physical counts, examinations, and comparisons of the securities it holds. It is the recurring, hands-on verification process that confirms a firm's books actually match the securities sitting in its custody.
FINRA Rule 4523: Assignment of Responsibility for General Ledger Accounts and Identification of Suspense Accounts
Rule 4523 requires a member firm to assign clear individual responsibility for each general ledger account and to identify and monitor suspense accounts, where transactions are temporarily parked pending resolution. It closes off a common source of accounting errors and concealment: general ledger entries with no accountable owner.
FINRA Rule 4524: Supplemental FOCUS Information
Rule 4524 requires a member firm to file supplemental financial and operational information beyond its standard FOCUS report when FINRA requests it. It gives FINRA the flexibility to gather additional detail on a firm's financial condition beyond what the standard periodic reporting form captures.
FINRA Rule 4530: Reporting Requirements
Rule 4530 requires a member firm to promptly report specified events to FINRA, including certain criminal or civil actions against the firm or its associated persons, and to report statistical and summary information about written customer complaints on a quarterly basis. It is one of the most consequential reporting rules in the entire rulebook, since it is the mechanism through which FINRA first learns about many of the events that later trigger examinations or enforcement action.
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