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Speaker Firms and Organization: 
Stradley Ronon Stevens & Young, LLP 
Lawrence P. Stadulis 
Partner 
Financial Industry Regulatory Authority, 
Inc. 
Kosha Dalal 
Associate Vice President and Associate 
General Counsel 
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Presented By: 
1 
October 24, 2014 
Partner Firms: 
Stradley Ronon Stevens & Young, LLP 
Merrill R. Steiner 
Partner 
Clouse Dunn LLP 
Rogge Dunn 
Partner 
Financial Industry 
Regulatory Authority, Inc.
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October 24, 2014 
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October 24, 2014 
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October 24, 2014 
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Partner Firms: 
October 24, 2014 
6 
Counseling clients since 1926, Stradley Ronon has 
helped private and public companies – from small 
businesses to Fortune 500 corporations – achieve their 
goals by providing pragmatic, value-driven legal counsel. 
With seven offices throughout the mid-Atlantic region, their 
responsive team of more than 200 attorneys seamlessly 
addresses the full spectrum of our clients’ needs, ranging 
from sophisticated corporate transactions to complex 
commercial litigation. Stradley Ronon is nationally 
recognized for having one of the premier investment 
management practices in the United States, representing 
investment company clients with more than 1,000 separate 
mutual funds and assets under management approaching 
$2 trillion. Stradley’s investment management lawyers have 
substantial experience representing registered broker-dealers, 
including handling all aspects of initial formation and 
registration and interfacing with the SEC, FINRA and the IRS 
on broker-dealer matters. 
Financial Industry 
Regulatory Authority, Inc.
Brief Speaker Bios: 
Kosha Dalal 
Kosha Dalal is Associate Vice President and Associate General Counsel with FINRA’s Office of General Counsel. In this role, she 
provides legal guidance on various policy initiatives and rule changes/interpretations including, supervision, non-cash compensation, 
branch office, customer account statements, payments to unregistered persons and corporate actions. She has been with FINRA’s 
Office of General Counsel since 2000. Ms. Dalal also serves on FINRA’s Diversity Leadership Council. Prior to coming to FINRA, she 
was an associate with the law firm of Venable in Baltimore, MD, Kalkines Zall in New York, NY and Skaden Arps in New York, NY. Ms. 
Dalal attended Columbia University in New York, NY where she received a bachelor’s degree in political science and economics. She 
received her law degree from Brooklyn Law School. 
7 
October 24, 2014 
Lawrence P. Stadulis 
Lawrence Stadulis is a partner in the Washington, D.C., office of Stradley Ronon, where he heads the firm’s Broker-Dealer Regulatory 
Practice and is a member of the firm’s Investment Management/Mutual Funds Practice Group. Mr. Stadulis advises clients in matters 
pertaining to the registration and regulation of broker-dealers, investment advisers and investment companies under federal and state 
securities laws and FINRA regulations. He handles a broad range of broker-dealer regulatory matters, including membership and 
continuing FINRA membership applications, written supervisory procedures and supervisory issues, advertising and marketing issues, 
periodic reporting and regulatory examinations issues. Mr. Stadulis is a frequent lecturer and author on legal matters pertaining to the 
broker-dealer and investment management industries. Before Stradley Ronon, Mr. Stadulis was a partner at another law firm, and 
before that, special counsel in the Office of Chief Counsel, Division of Investment Management, U.S. Securities and Exchange 
Commission.
Brief Speaker Bios: 
Merrill R. Steiner 
Merrill Steiner is a partner in the Philadelphia office of Stradley Ronon and member of the firm’s Investment Management/Mutual 
Funds Practice Group. Mr. Steiner focuses his practice on federal and state securities law, advising registered and private investment 
companies, investment advisers, broker-dealers and commodity trading advisors, as well as other corporations and businesses. His 
practice includes providing advice regarding compliance with regulations of federal and state securities and commodities regulatory 
authorities and self-regulatory organizations such as the New York Stock Exchange, the (FINRA) and the National Futures 
Association. 
8 
October 24, 2014 
Rogge Dunn 
Rogge Dunn is a trial attorney and counselor for Fortune 500 companies, wirehouses and prominent Financial Advisors, executives 
and entrepreneurs. Dunn has developed a specialty involving significant matters in the financial industry. This includes regulatory 
issues, wrongful discharge, moving teams, non-competes, the Protocol for Broker Recruiting, promissory note defense and forfeiture 
of deferred compensation. He obtained the largest wrongful discharge arbitration award against Goldman Sachs for an FA in 
California. Dunn has represented a number of FAs who have given FINRA on the record statements. 
Dunn has won more than $2 billion in judgments and settlements for his clients. He has represented more than 10 FAs in Barron’s top 
100 financial advisors nationwide. Dunn has won million dollar jury verdicts or arbitration awards in California, Texas, Louisiana and 
Arkansas. 
► For more information about the speakers, you can visit: http://theknowledgegroup.org/event_name/finra-supervision-rules-what-you-need-to-know-in-2015-live-webcast/
In this two-hour LIVE webcast, a panel of distinguished professionals and thought leaders 
will help broker/dealers and financial advisors implement the new FINRA rules. They will 
discuss important new provisions of the new FINRA consolidated supervision rules and 
discuss best practices. 
Key topics include: 
• Supervision (New FINRA Rule 3110) 
• Supervisory Control System (New FINRA Rule 3120 ) 
• Holding Customer Mail (New FINRA Rule 3150 ) 
• Tape Recording of Registered Persons by Certain Firms (New FINRA Rule 3170 ) 
And a lot more! 
9 
October 24, 2014
Featured Speakers: 
10 
October 24, 2014 
SEGMENT 1: 
Kosha Dalal 
Associate Vice President and Associate General 
Counsel 
Financial Industry Regulatory Authority, Inc. 
SEGMENT 1: 
Lawrence P. Stadulis 
Partner 
Stradley Ronon Stevens & Young, LLP 
SEGMENT 1: 
Merrill R. Steiner 
Partner 
Stradley Ronon Stevens & Young, LLP 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP 
Financial Industry 
Regulatory Authority, Inc.
Financial Industry 
Introduction 
Kosha Dalal is Associate Vice President and Associate General Counsel with FINRA’s Office of General Counsel. In this 
role, she provides legal guidance on various policy initiatives and rule changes/interpretations including, supervision, non-cash 
compensation, branch office, customer account statements, payments to unregistered persons and corporate 
actions. She has been with FINRA’s Office of General Counsel since 2000. Ms. Dalal also serves on FINRA’s Diversity 
Leadership Council. Prior to coming to FINRA, she was an associate with the law firm of Venable in Baltimore, MD, 
Kalkines Zall in New York, NY and Skaden Arps in New York, NY. Ms. Dalal attended Columbia University in New York, NY 
where she received a bachelor’s degree in political science and economics. She received her law degree from Brooklyn 
Law School. 
11 
October 24, 2014 
SEGMENT 1: 
Kosha Dalal 
Associate Vice President and Associate General 
Counsel 
Financial Industry Regulatory Authority, Inc. 
Regulatory Authority, Inc.
Introduction 
Lawrence Stadulis is a partner in the Washington, D.C., office of Stradley Ronon, where he heads the firm’s Broker-Dealer 
Regulatory Practice and is a member of the firm’s Investment Management/Mutual Funds Practice Group. Mr. Stadulis 
advises clients in matters pertaining to the registration and regulation of broker-dealers, investment advisers and investment 
companies under federal and state securities laws and FINRA regulations. He handles a broad range of broker-dealer 
regulatory matters, including membership and continuing FINRA membership applications, written supervisory procedures 
and supervisory issues, advertising and marketing issues, periodic reporting and regulatory examinations issues. Mr. 
Stadulis is a frequent lecturer and author on legal matters pertaining to the broker-dealer and investment management 
industries. Before Stradley Ronon, Mr. Stadulis was a partner at another law firm, and before that, special counsel in the 
Office of Chief Counsel, Division of Investment Management, U.S. Securities and Exchange Commission. 
Stadulis can be reached at lstadulis@stradley.com, office: 202.419.8407 or cell: 202.378.8774, or on the Stradley Ronon 
website at http://www.stradley.com. 
12 
October 24, 2014 
SEGMENT 1: 
Lawrence P. Stadulis 
Partner 
Stradley Ronon Stevens & Young, LLP
Introduction 
Merrill Steiner is a partner in the Philadelphia office of Stradley Ronon and member of the firm’s Investment 
Management/Mutual Funds Practice Group. Mr. Steiner focuses his practice on federal and state securities law, advising 
registered and private investment companies, investment advisers, broker-dealers and commodity trading advisors, as well 
as other corporations and businesses. His practice includes providing advice regarding compliance with regulations of 
federal and state securities and commodities regulatory authorities and self-regulatory organizations such as the New York 
Stock Exchange (FINRA) and the National Futures Association. 
Steiner can be reached at msteiner@stradley.com, office: 215-564-8039 or cell: 610-745-7996, or on the Stradley Ronon 
website at http://www.stradley.com. 
13 
October 24, 2014 
SEGMENT 1: 
Merrill R. Steiner 
Partner 
Stradley Ronon Stevens & Young, LLP
SEGMENT 1: 
Merrill R. Steiner 
Partner 
Stradley Ronon Stevens & Young, LLP 
The New FINRA Consolidated Supervision Rules 
14 
October 24, 2014 
SEGMENT 1: 
Kosha Dalal 
Associate Vice President and Associate General 
Counsel 
Financial Industry Regulatory Authority, Inc. 
SEGMENT 1: 
Lawrence P. Stadulis 
Partner 
Stradley Ronon Stevens & Young, LLP 
Financial Industry 
Regulatory Authority, Inc.
Overview 
This presentation is intended to cover the modifications to, and 
additions incorporated in, FINRA’s four new consolidated 
supervision rules, in the following order: 
▫ Timing 
▫ Highlights 
▫ Organization 
▫ Content of the Four Rules: 
 Supervision – 3110 
 Supervisory Control System – 3120 
 Holding of Customer Mail – 3150 
 Taping Rule – 3170 
▫ Practical Suggestions 
15 
Stradley Ronon Stevens & Young, LLP
Timing 
• All member firms must comply with the new rules by 
December 1, 2014. 
▫ 38 days and counting 
• Therefore, firms should make all changes and implement 
the changes by that date. 
• If not already addressed, this is a priority; firms need to 
act quickly. 
• Two of FINRA’s announced priorities in 2013 and 2014 for 
examinations are branch office supervision and conflicts of 
interest management policies and practices. 
16 
Stradley Ronon Stevens & Young, LLP
Highlights 
What Amendments Do 
• Rules restate and continue to apply same core supervision concepts. 
• Rules codify a number of existing FINRA interpretations. 
• Rules add new provisions or guidance, including, among others, in the 
following areas 
▫ Presence of on-site principal for OSJ 
▫ Risk-based review principles 
▫ Avoiding conflicts of interest in supervision 
▫ Calendar year inspection requirements 
▫ Increased inspection report content 
▫ Inspections by unregistered Persons 
▫ Insider trading policies 
▫ Increased content of report to senior management for large firms 
• Clarification Regarding Supplementary Material. The adopting release states that 
the supplementary material at the end of Rule 3110 is part of the rule, and a provision’s 
location as supplementary material is intended to improve the readability of the rule 
without affecting the weight, significance, or enforceability of the provision. 
Stradley Ronon Stevens & Young, LLP 
17
Highlights (Continued) 
What Amendments Do Not Do 
• Do not update the definitions of OSJs and branch offices 
• Do not require that supervisory system be designed to include supervision of all 
of a member’s business lines irrespective of whether a particular business line 
requires registration 
• Do not require a designated senior principal to have a physical presence on a 
regular periodic schedule at a one-person OSJ 
• Do not expand the record retention period from three years to six years 
• Do not include a requirement to capture and respond to oral complaints 
• Do not require elimination of all conflicts of interest in supervision standards, 
which would in effect impose a strict liability standard 
Stradley Ronon Stevens & Young, LLP 
18
Organization 
• The Rules essentially amend and replace existing requirements in 
previous NASD and NYSE rules and codify various previous 
provisions and interpretations under the law and rules, as follows: 
▫ Supervision, Rule 3110 
 Replaces NASD Rule 3010 and corresponding provisions of NYSE Rules and 
Interpretations. 
▫ Supervisory Control System, Rule 3120 
 Replaces NASD Rule 3012 and corresponding provisions of NYSE Rules and 
Interpretations. 
▫ Holding of Customer Mail, Rule 3150 
 Relocates NASD Rule 3110(i) into a separate standalone rule. 
▫ Taping Rule, Rule 3170 
 Relocates NASD Rule 3010(b)(2) into a separate standalone rule. 
19 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Supervisory System Requirements 
• Main Office Registration. Codifies the long-standing position 
that the member’s main office must be registered and designated as 
a branch office or OSJ 
Rule 3110(a)(3) 
20 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Supervisory System Requirements (Continued) 
• Designated Principals for OSJ 
▫ On-site Principals. The Rule clarifies that each member must designate one or 
more appropriately registered principals in each OSJ (defined in the Rule as the 
“on-site principal”) for which the principal(s) has supervisory responsibilities 
and a regular and routine physical presence at the OSJ. 
▫ A Principal May Supervise Only One OSJ. The Rule establishes a new 
general presumption that a principal will not be designated of assigned to be 
the on-site principal to supervise more than one OSJ. 
 If necessary to designate and assign one registered principal to be the on-site principal for two or 
more OSJs, member must consider, among others, the factors on the next slide. 
Rule 3110(a)(4) 
Stradley Ronon Stevens & Young, LLP 
21
Supervision Rule 
Supervisory System Requirements (Continued) 
Factors in Designation of Principal to Supervise More Than One OSJ 
The Rule adds a list of the following factors, among others, for the member to 
consider in designating and assigning one registered principal to be the on-site 
principal for two or more OSJs: 
▫ Principal’s qualification by experience/training to supervise the activities and associated 
persons in each OSJ; 
▫ principal’s capacity and time to supervise the activities and associated persons in each OSJ; 
▫ whether the on-site principal is a producing registered representative; 
▫ proximity of OSJs to ensure the principal is physically present at each on a regular and routine 
basis; and 
▫ nature of activities at each OSJ, including size and number of associated persons, scope of 
business activities, nature and complexity of products and services, business volume, 
disciplinary history of assigned persons, and other indicators of irregularities or misconduct. 
(3110(a)(4); and Supp. Materials .03) 
22 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Supervisory System Requirements (Continued) 
Documentation of Factors 
The Rule adds that if the member designates and assigns one on-site 
principal to supervise more than one OSJ, member 
▫ must document in the written supervisory and inspection procedures the 
factors used to determine the reasonableness of such supervisory 
structure, and 
▫ Member’s determination of reasonableness will be subject to scrutiny by 
FINRA. (3110(a)(4); and Supp. Materials .03) 
23 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Supervisory System Requirements (Continued) 
Need Not Hold In-Person Annual Compliance Meetings. 
• The Rule continues without change the requirement for an annual 
compliance meeting for each registered principal and registered 
representative, but codifies existing guidance that members are not 
required to conduct in-person meetings – 
▫ if use other methods, such as on-demand webcast or course, video conference, or 
other electronic means), must ensure each registered person 
 attends the entire meeting, using, for example, user IDs and passwords to gain 
access, technology to track time spent, provide click-as-you go confirmation, with 
attestation of completion at the end, and 
 is able to ask questions regarding the presentation and receive answers in a timely 
fashion. (3110(a)(7); and Supp. Material .04 ) 
24 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures 
Written Review of All Transactions 
• The Rule continues to require, based on the replaced rule, that the 
supervisory procedures must provide for the review 
▫ By a registered principal, 
▫ Evidenced in writing, 
▫ Of all transactions relating to the “investment banking or securities 
business” of the member 
 "investment banking or securities business" means the business, carried on by a broker, 
dealer, or municipal securities dealer (other than a bank or department or division of a 
bank), or government securities broker or dealer, of underwriting or distributing 
issues of securities, or of purchasing securities and offering the same for sale 
as a dealer, or of purchasing and selling securities upon the order and for the 
account of others.” FINRA Corp. Bylaws, Art. I(u). 
Rule 3110(b)(2) 
25 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Written Review of All Transactions (Continued) 
• Risk-Based Review System. As a new provision, for this required written review of all transactions, 
member is not required to conduct detailed reviews of each transaction, but may now use 
▫ A reasonably designed risk-based review system 
▫ That permits focus on the areas that pose the greatest numbers and risks of violation, but 
▫ Principal using the system remains responsible for compliance with Rule and any deficiency in the system’s 
criteria. (Supp. Material .05 & Reg Notice 10-14, Section I.B.1.) [TP] 
• Member Not Engaged in Effecting Securities Transactions. A firm that does not engage in any 
transactions relating to its “investment banking or securities business” 
 (e.g., firm conducting only a mutual fund underwriting business that effects no transactions) 
▫ does not have any review obligations and 
▫ may comply by acknowledging in its supervisory procedures that 
 it does not engage in any such transactions and 
 it must have supervisory policies and procedures in place before doing so. 
(Supp. Material .05 & Reg Notice 10-14, Section I.B.1.) [TP] Rule 3110(b)(2) 
26 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Written Review of All Transactions (Continued) 
• Use of Technology-Based Review Systems. In a clarification based on 
prior guidance, if a firm’s procedures for the review of its transactions 
include the use of technology-based review systems with parameters 
designed to assess which transactions merit further review, a principal 
▫ must review the parameters and document the review in writing; 
▫ remains responsible for the discharge of supervisory responsibilities; and 
▫ is responsible for any deficiency in the system’s criteria that would result in the 
system not being reasonably designed. (Reg Notice 
10-14, Section I.B.1., Citing Reg. Notice 07-53 (Nov 2007)) Rule 3110(b)(2) 
Stradley Ronon Stevens & Young, LLP 
27
Supervision Rule 
Written Procedures (Continued) 
Review of Correspondence and Internal Communications 
• The Rule generally incorporates and expands on the replaced rule requiring 
members to have supervisory procedures to review correspondence and internal 
communications relating to the member's “investment banking or securities business,” as 
follows, 
▫ Correspondence. Member must review incoming and outgoing hard copy or electronic 
written correspondence to properly identify and handle in accordance with firm 
procedures, 
 customer complaints, instructions, funds and securities, and 
 That are communications of a subject matter that require review under FINRA 
rules and federal securities laws, and 
▫ Internal Communications. The Rule expressly adds that the member must review 
internal communications to properly identify those communications that are of a 
subject matter that require review under FINRA rules and federal securities laws. 
Rule 3110(b)(4) [TP] 
28 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Review of Correspondence and Internal Communications (Continued) 
• Use of term “Correspondence.” The Rule’s use of the term “correspondence” is 
to be consistent with FINRA Rule 2210’s (Communications with the Public) 
definition and use of the term “correspondence.” (Reg Notice 10-14, Endnote 10.) 
• Subject Matter Requiring Review. Communications that are of a subject 
matter that require review under FINRA rules and the federal securities laws include 
(without limitation): 
• Communications between non-research and research departments concerning a research report’s 
contents (NASD Rule 2711(b)(3) and NYSE Rule 472(b)(3)); 
• Certain communications with the public that require a principal’s pre-approval (FINRA Rule 2210); 
• The identification and reporting to FINRA of customer complaints (FINRA Rule 4530) (as further 
detailed herein, FINRA Rule 3110(b)(5) also affirmatively requires firms to capture, acknowledge and 
respond to all written (including electronic) customer complaints); and 
• The identification and prior written approval of changes in account name(s) (including related 
accounts) or designation(s) (including error accounts) regarding customer orders (FINRA Rule 
4515). (Reg Notice 10-14, Endnote 11.) Rule 3110(b)(4) 
Stradley Ronon Stevens & Young, LLP 
29
Supervision Rule 
Written Procedures (Continued) 
Review of Correspondence and Internal Communications (Continued) 
Codification of Required Manner and Evidence of Review. The Rule continues to 
require that review be appropriate for the member's business, size, structure, and customers, and 
codifies existing guidance that reviews are to be 
▫ conducted by a registered principal, and 
▫ evidenced in writing, either electronically or on paper. (Reg Notice 10-14, Sec. I.B.2) 
Use of Risk-based Principles for Review. Rule reflects existing guidance permitting use 
of risk-based principles to review communications, where member determines that: 
▫ Some incoming and outgoing correspondence, having none of the subject matters 
listed above, is necessary for its business and structure, and does not require review 
before use or distribution, in which case, the procedures must provide for: 
 the education/training of associated persons of the procedures governing correspondence; 
 the documentation of such education and training; and 
 surveillance and follow-up to ensure such procedures are implemented and followed; and 
▫ Some internal communications, having none of the subject matters that requires 
review by rule or law, are necessary for its business and structure -- Rule and guidance do 
not require a member to review every internal communication. (Supp. Materials .06; 
and Reg Notice 10-14, Sec. I.B.2(i) and endnote 13, citing Reg. Notice 07-59.) [TP] Rule 3110(b)(4) 
30 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Review of Correspondence and Internal Communications (Continued) 
• Codification of Criteria for Evidence of Review. The Rule codifies existing guidance that 
evidence of review must be chronicled either electronically or on paper and clearly 
identify 
▫ the reviewer, 
▫ the internal communication or correspondence that was reviewed, 
▫ the date of review, and 
▫ the actions taken by the member as a result of any significant regulatory issues identified during the review. 
Merely opening a communication is not sufficient. (Supp. Material .07 and Reg. Notice 14-10, Section I.B.2.(ii)) 
• Guidance Clarified for Permitted Use of Lexicon-based Screening Tools or Systems 
for Electronic Communications. Rule continues to permit members to use lexicon-based 
screening tools or systems of electronic communications, provided the supervisor 
▫ understands the limitations of the tools/systems, 
▫ remains responsible for the discharge of supervisory responsibilities in compliance with the rule and 
▫ is responsible for any deficiency in the system's criteria that would result in the system not being reasonably 
designed. 
(Reg. Notice 14-10, Section I.B.2.(ii) and Regulatory Notice 07-59 – “as noted in Regulatory Notice 07-59 
firms using automated tools or systems in the course of their supervisory review of electronic 
communications must have an understanding of the limitations of those tools or systems and should consider 
what, if any, further supervisory review is necessary in light of those limitations”.) [TP] Rule 3110(b)(4) 
31 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Review of Correspondence and Internal Communications (Continued) 
• Codification of Permitted Delegation of Review Functions. The Rule codifies existing 
guidance that a supervisor or principal may delegate review functions to an unregistered 
person, but supervisor or principal 
▫ remains ultimately responsible for the performance of all necessary supervisory reviews, 
▫ must take reasonable and appropriate action so that delegated functions are properly executed, and 
▫ should evidence performance of their procedures sufficiently to demonstrate overall supervisory 
control. (Supp. Mat. .08; Reg. Notice 14-10, Sec. I.B.2(iii)) [TP] 
• Alignment of Retention Period for Communications. The Rule adds that a member must 
retain the internal communications and correspondence of its associated persons as to its 
“investment banking or securities business” 
▫ for the period of time and accessibility specified in SEA Rule 17a-4(b) (three years) and with 
names of persons who prepared and reviewed the correspondence. 
(Supp. Material .09 and Reg. Notice 14-10, endnote 18: The rule purposefully aligns the record retention period 
for communications with the SEC’s record retention period for the same types of communications to achieve 
consistent regulation in this area. ) [TP] Rule 3110(b)(4) 
32 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Review of Customer Complaints 
• Clarification of Requirements for Review of Customer Complaints. Member review of 
complaints must include procedures to capture, acknowledge, and respond to all hard copy or 
electronic written customer complaints. 
▫ Rule does not include review of oral complaints because they are difficult to capture and 
assess and may raise competing views as to the substance of the complaint being alleged. 
▫ FINRA encourages firms to provide customers with a form or other format that will allow 
customers to communicate their complaints in writing. 
▫ FINRA also reminds firms that the failure to address any customer complaint, written or 
oral, may be a violation of FINRA Rule 2010 (Standards of Commercial Honor and Principles 
of Trade). 
▫ To harmonize the NASD and NYSE rules, FINRA amended incorporated NYSE Rule 351(d) 
(Reporting Requirements) to limit the definition of “customer complaint” to include only 
written complaints, thereby making the definition substantially similar to that in NASD Rule 
3070(c) (Reporting Requirements). 
▫ NASD Rule 2340(a) (Customer Account Statements) requires a customer account statement 
to advise the customer that any oral communications should be re-confirmed in writing to 
further protect the customer’s rights, including rights under the Securities Investor Protection 
Act (SIPA)). (Reg. Notice 14-10, Sec. I.B.3 and endnotes 19-20.) Rule 3110(b)(5) 
Stradley Ronon Stevens & Young, LLP 
33
Supervision Rule 
Written Procedures (Continued) 
Documentation and Supervision of Supervisory Personnel. 
• Elimination of Two Aspects of Supervision. The Rule eliminates 
▫ provisions specifying the supervision of a producing manager's customer account activity and 
▫ heightened supervision when any producing manager's revenues rise above a specific 
threshold. 
• Prohibited Supervision Situations. Instead, the Rule expressly requires, with certain 
exceptions, the written procedures to prohibit APs from 
▫ supervising their own activities, and 
▫ reporting to, or having their compensation or continued employment determined by, a 
person(s) they are supervising. 
(Reg. Notice 14-10, Sec. I.B.4) [TP] Rule 3110(b)(6) 
34 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Documentation and Supervision of Supervisory Personnel (Continued) 
• Documentation of Limited Exceptions. The Rule adds a limited exception that 
if a member cannot, as to any supervisor, comply with a prohibition in the above 
bullet point (because of the member's size or the supervisor's position with the 
member), the member must document: 
▫ the factors the member used to reach such determination; and 
▫ how the supervisory system for such supervisor otherwise complies with 
paragraph (a) of this Rule. 
▫ Rule adds a list of possible factors and reflects FINRA’s expectation that this 
exception will be used primarily by a sole proprietor in a single-person firm or 
where a supervisor holds a very senior executive position within the firm. 
▫ Member not required to notify FINRA of reliance on this exception. (Firms have 
in past provided 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. 
(Supp. Material .10; Reg. Notice 14-10, Sec. I.B.4(i); and endnote 24) [TP] Rule 3110(b)(6) 
35 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Documentation and Supervision of Supervisory Personnel (Continued) 
• Conflicts of Interest That May Compromise Supervision by Supervisory Personnel. 
As a new provision, the Rule adds an express requirement that the written supervisory 
procedures (“WSP”) must be reasonably designed to prevent the member’s supervisory system 
from being compromised due to 
▫ conflicts of interest that may be present with respect to the associated person being supervised, including 
 the position of such person, 
 the revenue such person generates for the firm, or 
 any compensation that the associated person conducting the supervision may derive from the associated 
person being supervised. (3110(b)(6)(D)) 
▫ Does not impose a strict liability obligation to eliminate all conflicts of interest, 
▫ Rather requires that the WSPs be reasonably designed despite a firm's conflicts of interest. 
(Reg. Notice 14-10, Sec. I.B.4(ii).) [TP] Rule 3110(b)(6) 
Stradley Ronon Stevens & Young, LLP 
36
Supervision Rule 
Written Procedures (Continued) 
Maintenance of Written Supervisory Procedures 
• Prompt WSP Amendments and Communication of Amendments. 
The Rule introduces the term “promptly” in amending, and communicating 
amendments of, the WSP – each Member 
▫ Is required to promptly amend its WSPs to reflect changes in applicable 
securities laws or rules and in its supervisory system; and 
▫ Is required to promptly communicate its WSPs and amendments thereto 
(“as amended WSPs”) to all associated persons to whom such as amended 
WSPs are relevant based on activities and responsibilities. Rule 3110(b)(7) 
37 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Written Procedures (Continued) 
Maintenance of Written Supervisory Procedures (Continued) 
• Use of Electronic Media to Communicate WSPs. Rule adds express 
permission for member to use electronic media to communicate its WSP 
and amendments to the WSP, if 
▫ WSP with amendments are communicated on, and are readily accessible through, 
for example, the member's intranet system; 
▫ WSP with amendments are promptly posted to the media; 
▫ Notice is given to APs of postings; 
▫ Reasonable procedures are effected to monitor and maintain the security of the 
postings to prevent unauthorized changes; and 
▫ Member complies with record retention requirements of SEA Rule 17a-4(e)(7). 
(Supp. Material .11; Reg. Notice 14-10, Sec. I.B.5; and endnotes 26-27) Rule 3110(b)(7) 
38 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Internal Inspections 
• Internal Inspections. Rule retains same review of businesses and inspection of 
locations requirements, except the Rule adds the following: 
▫ Annual Calendar Year Basis Review/Inspections. The Rule has a new 
requirement that the review/inspections be on an annual calendar year 
basis. 
▫ Presumed Requirement for 3-Year Inspection Cycle for Non-Branch 
Locations. Rule imposes new presumption that member inspect a non-branch 
location at least every three years, and if the period is longer than that, the 
member must document the factors used to support the longer period. 
(Supp. Materials .13 and Reg. Notice 14-10, Sec. I.C.1.) [TP] Rule 3110(c)(1) 
39 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Internal Inspections (Continued) 
Standards for Reasonable Review. Rule adds list of standards for reasonable review -- 
the member’s WSPs must take into consideration, among other things, 
▫ firm's size, 
▫ organizational structure, 
▫ scope of business activities, 
▫ number and location of the firm's offices, 
▫ nature and complexity of the products and services offered by the firm, 
▫ volume of business done, 
▫ number of associated persons assigned to a location, 
▫ disciplinary history of registered representatives or associated persons, and 
▫ any indicators of irregularities or misconduct (i.e., "red flags"), etc. 
• WSPs and reviews must provide that the quality of supervision at remote locations is 
sufficient to ensure compliance with applicable securities laws and regulations 
• Must be especially diligent with respect to a non-branch location where a registered 
representative engages in securities activities. 
• Based on the factors outlined above, may need to 
▫ impose reasonably designed supervisory procedures for certain locations or 
▫ Provide for more frequent reviews of certain locations. (Supp. Materials .12) Rule 3110(c)(1) 
40 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Internal Inspections (Continued) 
Inspection Report Content. The Rule expands on two of areas of the inspection report 
content. The report must include testing and verifying a location's policies and procedures, including 
supervisory policies and procedures: 
▫ As in the prior rule, the areas of safeguarding of customer funds and securities; maintaining books 
and records; and supervision of supervisory personnel; 
▫ As an expansion of the prior rule, in the areas of transmittals of funds or securities from customers to 
third party accounts; from customer accounts to outside entities; from customer accounts to locations other 
than a customer's primary residence; and between customers and registered representatives, including the 
hand-delivery of checks; and 
▫ As an expansion of the prior rule, in the areas of changes of customer account information, including 
address and investment objectives changes, and validation of such changes. 
▫ For the areas of transmittals of funds or securities, the Rule clarifies that all transmittals to an 
account where a customer on the original account is not a named account holder are subject to the rule, as 
follows: 
 Implements this change by not including replaced NASD Rule 3012's parenthetical text ("i.e., a 
transmittal that would result in a change in beneficial ownership"); 
 Provides an important investor protection function by requiring verification that the customer was aware 
of the transfer and 
 Codifies provision that a member may use a reasonable risk-based criteria to determine the authenticity of 
the transmittal instructions. (Reg. Notice 14-10, Sec. I.C.2; and endnote 34.) Rule 3110(c)(2) 
41 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Internal Inspections (Continued) 
Inspection Report Content (Continued) 
▫ For the areas of changes of customer account information, the Rule adds that 
 This include means or method of customer confirmation that can be documented and complies with SEA 
Rules 17a-3(a)(17)(i)(B)(2) and 17a-3(a)(17) (i)(B)(3); and 
 Member must have procedures to monitor all changes of customer account information and not only 
address and investment objective changes, such as changes to a customer's name, marital status, 
telephone, email or other contact information. 
▫ Member may delegate reviews of such changes to an appropriately qualified person who is not a 
principal, unless another FINRA or SEC rule would require principal review (e.g., FINRA Rule 4515 
prohibits an account name or designation change unless authorized by a qualified and registered principal 
designated by the firm). (Reg. Notice 14-10, Sec. I.C.2.) 
• Documentation of Activities Not Engaged In. The Rule adds that if an 
inspected location does not engage in all of the activities listed above, firm must 
▫ identify activities not engaged in and 
▫ document that supervisory policies and procedures must be in place at that location if in the future, location 
does engage in any such activities. Rule 3110(c)(2) 
42 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Internal Inspections (Continued) 
• Preventing Compromise of Office Inspections. The Rule replaces the prior provision 
prohibiting branch office managers and supervisors and the persons they directly or 
indirectly supervise from conducting inspections and imposes less prescriptive 
requirements to prevent office inspections from being compromised by conflicts 
of interest 
▫ In most cases, an associated person (“AP”) may not conduct a location’s inspection 
where 
 AP is assigned to the location or 
 AP is directly or indirectly supervised by, or reporting to, a person assigned to the location. 
▫ Member must consider factors such as economic, commercial or financial interests in 
the associated person and businesses being inspected. 
▫ Does not prohibit use of compliance personnel 
 assigned to a firm's separate compliance department and 
 supervised solely by the compliance department to conduct a location's inspections. 
 Such an arrangement helps to protect against the potential conflicts of interest the 
provision is designed to address. (Reg. Notice 14-10, Section I.C.3.) Rule 3110(c)(3) 
43 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Internal Inspections (Continued) 
Preventing Compromise of Office Inspections (Continued) 
• The Rule retains with modifications the requirement that if a member determines 
that it cannot comply with above requirement, 
▫ either because of a member's size or its business model, 
▫ Member must document in the inspection report both the factors the member used 
to make its determination and how the inspection otherwise complies with paragraph (c)(1) of 
the Rule. 
• Factors Supporting Limited Exception. Factors indicating it is not possible to 
comply with Rule as to who is not allowed to conduct a location's inspection generally 
are: 
▫ the member has only one office; or 
▫ the member has a business model where small or single-person offices report directly to an 
OSJ manager who is also considered the office’s branch office manager (Supp. Materials 
.14) Rule 3110(c)(3) 
44 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Internal Inspections (Continued) 
Preventing Compromise of Office Inspections (Continued) 
• Registered Principal Not Required for Inspection. The Rule eliminates restriction in 
replaced rule that a firm relying on the exception must have a principal who has the requisite 
knowledge to conduct the inspection. 
▫ Firm has flexibility to assign the most appropriate person who has the requisite knowledge, regardless of 
registration status, to conduct a location's inspection, taking into consideration the requirement that a 
firm's review of its businesses be reasonably designed to detect and prevent violations of, and achieve 
compliance with, laws and regulations. (Reg. Notice 14-10, Section I.C.4.) 
• Not required to eliminate all conflicts of interest for a location's inspections, but 
▫ To meet Rule’s requirements, member should be diligent in identifying 
 potential conflicts of interest and 
 How they will be addressed to prevent a location's inspection from being compromised. (Reg. Notice 14-10, 
Section I.C.5) 
• Elimination of Heightened Office Inspection Requirements. The Rule eliminates NASD 
Rule 3010(c)(3)'s heightened office inspection requirements that firms must implement under 
certain circumstances, replacing this with procedures reasonably designed to avoid 
compromised inspections. Rule 3110(c)(3) 
45 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Transaction Review and Investigation 
Process for Review of Transactions for Potential Insider Trading. The Rule 
codifies Section 15(g) of the Securities Exchange Act of 1934 (“SEA”) applicable to 
broker-dealers and extends NYSE Rule 342.21 beyond NYSE-listed securities and 
related financial instruments to cover all securities. The Rule requires that the 
supervisory procedures must include a process 
▫ for review and investigation of potential violations of the Exchange Act, rules thereunder or 
FINRA rules, 
▫ to identify potential insider trading or other manipulative or deceptive devices. 
• Account Transactions to be Reviewed. Member must review transactions effected for 
▫ Accounts of the member; 
▫ Accounts introduced or carried by the member in which an AP of the Member has a beneficial 
interest or the authority to make investment decisions; 
▫ Accounts of an AP of the member disclosed to the member pursuant to NASD Rule 3050 or 
NYSE Rule 407, as applicable; and 
▫ “Covered accounts” as newly defined in Rule. [TP] Rule 3110(d)(1) 
46 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Transaction Review and Investigation (Continued) 
Process for Review of Transactions (Continued) 
• “Covered Accounts” include any account introduced or carried by the member 
that is held by: 
▫ the spouse of an AP of the member; 
▫ a child of the AP of the member or such person's spouse, if the child resides in the 
same household as, or depends financially on, the AP; 
▫ any other related individual over whose account the AP of the member has 
control; or 
▫ any other individual over whose account the AP of the member has control and to 
whose financial support such AP materially contributes. Rule 3110(d)(1) 
47 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Transaction Review and Investigation (Continued) 
Process for Review of Transactions (Continued) 
• When Prompt Internal Investigation Triggered. Each member must conduct 
promptly an internal investigation into any identified potential violative trade to 
determine whether a violation of those laws or rules has occurred. (3110(d)(2)) 
• Gauging Risk of Insider Trading. 
▫ Firms should take the risks of insider trading based on their business model into account when 
developing their policies and procedures 
▫ In implementing a firm’s risk-based approach to these requirements, a firm’s procedures should 
include establishing guidelines or criteria for taking reasonable follow-up steps to determine 
 which trades are potentially violative trades and 
 therefore, merit further review via an internal investigation. 
▫ FINRA does not expect that every trade highlighted in an exception or other report would require a 
firm to conduct an internal investigation. (Reg. Notice 14-10, Section I.[D].2.) Rule 3110(d)(2) 
48 
Stradley Ronon Stevens & Young, LLP
Supervision Rule 
Transaction Review and Investigation (Continued) 
• Filing Written Reports of Internal Investigations with FINRA. Member engaging in 
investment banking services must file with FINRA, written report, signed by member’s 
senior officer, 
▫ Each Calendar Quarter. Within ten business days of the end of each calendar quarter, 
 a report describing each internal investigation initiated in the previous calendar 
quarter with 
 the identity of the member, the date each internal investigation commenced, the status of 
each open internal investigation, the resolution of any internal investigation reached 
during the previous calendar quarter, and, with respect to each internal investigation, the 
identity of the security, trades, accounts, APs of the member (including APs with respect to 
a covered account) under review, and a copy of the member's WSPs required by Rule 
3110(d)(1). 
 If a firm did not have an open internal investigation, or either initiate or complete an 
internal investigation during a particular calendar quarter, the firm is not required to 
submit a report for that quarter. (Reg. Notice 14-10, Section I.[D].2(i)) Rule 3110(d)(2)&(3) 
Stradley Ronon Stevens & Young, LLP 
49
Supervision Rule 
Transaction Review and Investigation (Continued) 
Filing Written Reports of Internal Investigations with FINRA (Continued). 
• “Investment Banking Services” A firm engages in “investment banking services” if it, without limitation, 
 acts as an underwriter; 
 participates in a selling group in an offering for the issuer or otherwise acts in furtherance of a public offering of the 
issuer; 
 acts as a financial adviser in a merger or acquisition; or 
 provides venture capital or equity lines of credit or serves as placement agent for the issuer or otherwise acts in 
furtherance of a private offering of the issuer. (Reg. Notice 14-10, Section I.[D].2.) 
• Upon Completion of an Internal Investigation. Within five business days of completion of an 
internal investigation that determines that a violation of the law or rules prohibiting insider trading and 
manipulative and deceptive devices has occurred, member engaging in investment banking 
services must file with FINRA, written report, signed by member’s senior officer, 
 detailing the completion of the investigation, including 
 the results of the investigation, any internal disciplinary action taken, and 
 any referral of the matter to FINRA, another self-regulatory organization, the SEC, or any other 
federal, state, or international regulatory authority. Rule 3110(d)(3) 
50 
Stradley Ronon Stevens & Young, LLP
Supervisory Control System 
Rule 3120 
• Change in Requirement For Supervisory Control System. The 
Rule is based on the prior rule but adds a provision with respect to 
maintaining and enforcing the supervisory control system, as follows: 
• Content of Annual Report for Certain Members. For members with 
more than $200 million in gross annual revenue, the annual report to 
senior management must include, where applicable, a 
▫ listing of reports for the year to FINRA of customer complaints and internal 
investigations, and 
▫ description of the prior year’s compliance efforts, including procedures and 
educational programs relating to certain enumerated operating areas, practices 
and supervision. [ TP] 
• Definition of “Gross Revenue”. The Rule adds a definition of “gross 
revenue” that generally subtracts commodities revenue, if applicable, from 
total revenue as reported in the FOCUS report. 
51 
Stradley Ronon Stevens & Young, LLP
Holding of Customer Mail 
Rule 3150 
Changes to Requirements for Holding Customer Mail. The 
Rule eliminates the strict time limits in the prior rule and generally 
allows a firm to hold a customer’s mail for a specific time period in 
accordance with the customer’s written instructions if the firm meets 
several conditions. 
• Conditions for Holding Mail. The Rule continues to permit a 
member to hold customer’s mail for up to three months 
▫ as requested by written instructions of the customer 
▫ if the customer will not receive mail at the usual address. 
• Longer Holding Period. Under the Rule customers may request 
a longer holding period, 
▫ if the customer's instructions include an acceptable reason for the 
request (e.g., safety or security concerns), not just convenience. [TP] 
52 
Stradley Ronon Stevens & Young, LLP
Holding of Customer Mail 
Rule 3150 
Changes to Requirements for Holding Customer Mail (Continued) 
• Conditions for holding a customer’s mail. The member must 
▫ Inform the customer in writing of any alternate methods, other than holding the 
customer’s mail, such as email or access through the member's website, to receive 
or monitor account activity and information; and 
▫ Obtain the customer's confirmation of the receipt of such information; 
▫ Verify at reasonable intervals that the customer's instructions still apply; 
▫ Be able, while the member is holding the mail, to communicate with the customer 
in a timely manner, as necessary; and 
▫ Take actions reasonably designed to ensure that the customer's mail 
 is not tampered with, 
 held without the customer's consent, or 
 used by an AP of the member in any manner violating FINRA rules or federal 
securities laws. 
53 
Stradley Ronon Stevens & Young, LLP
Taping Rule 
Rule 3170 
• Previous Taping Requirements Kept. The Rule reconstitutes NASD Rule 3010(b)(2) 
without any substantive changes and adds some provisions, as follows: 
• Added Definition of Term “Tape Recording” 
• Added Requirements for “Taping Firms.” The Rule requires a member 
▫ that is notified by FINRA, or otherwise has actual knowledge, that it is a “taping firm” (based 
on how many of its “registered persons” were associated with a “disciplined firm” during the 
past 3 years) 
▫ to have and enforce special written procedures for supervising the telemarketing activities of 
all of its registered persons, 
▫ including procedures for tape recording and reviewing all telephone conversations. 
• FINRA’s “Disciplined Firms List” To assist firms in complying with the Rule, FINRA 
provides a “Disciplined Firms List” identifying those firms that meet the definition of 
“disciplined firm.” 
54 
Stradley Ronon Stevens & Young, LLP
Practical Suggestions 
Member’s written supervisory procedures must be updated for the changes in Rule 3110 
and other new FINRA rules. 
Designate appropriately registered principal(s) for supervised persons and for office locations. 
Will need to report changes and implementation in meetings with management for 
annual Rule 3130 certification and report to Board 
Ensure that all registered personnel are notified of the changes before the changes go into 
effect for compliance and so the changes can be implemented in a timely manner. 
Annual Calendar Year Basis Review/Inspections. The Rule has a new requirement that 
the review/inspections be on an annual calendar year basis. Does this mean if member 
has not done review this year yet, review must be done between Dec. 1 and 31, 2014? 
FINRA Retrospective Review. Let FINRA know if the new rules cause difficulties, as 
FINRA indicates that the new rules will be subject to FINRA retrospective review for 
appropriateness and possible adjustment. 
55 
Stradley Ronon Stevens & Young, LLP
Introduction 
Rogge Dunn is a trial attorney and counselor for Fortune 500 companies, wirehouses and prominent Financial Advisors, 
executives and entrepreneurs. Dunn has developed a specialty involving significant matters in the financial industry. This 
includes regulatory issues, wrongful discharge, moving teams, non-competes, the Protocol for Broker Recruiting, promissory 
note defense and forfeiture of deferred compensation. He obtained the largest wrongful discharge arbitration award against 
Goldman Sachs for an FA in California. Dunn has represented a number of FAs who have given FINRA on the record 
statements. 
Dunn has won more than $2 billion in judgments and settlements for his clients. He has represented more than 10 FAs 
in Barron’s top 100 financial advisors nationwide. Dunn has won million dollar jury verdicts or arbitration awards in 
California, Texas, Louisiana and Arkansas. 
Dunn can be reached at dunn@financialadvisorlaw.com, 214-220-0077 or on his website 
at http://www.cdklawyers.com/rogge_dunn.html 
56 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
8310. Sanctions for Violation of the Rules 
(a) Imposition of Sanction 
After compliance with the Rule 9000 Series, FINRA may impose one or more of the following sanctions 
on a member or person associated with a member for each violation of the federal securities laws, rules or regulations 
thereunder, the rules of the Municipal Securities Rulemaking Board, or FINRA rules, or may impose one or more of the 
following sanctions on a member or person associated with a member for any neglect or refusal to comply with an 
order, direction, or decision issued under the FINRA rules: 
(1) Censure a member or person associated with a member; 
(2) Impose a fine upon a member or person associated with a member; 
(3) Suspend the membership of a member or suspend the registration of a person associated with a member for a 
definite period or a period contingent on the performance of a particular act; 
(4) Expel a member, cancel the membership of a member, or revoke or cancel the registration of a person 
associated with a member; 
(5) Suspend or bar a member or person associated with a member from association with all members; 
(6) Impose a temporary or permanent cease and desist order against a member or a person associated with a 
member; or 
(7) Impose any other fitting sanction. 
(b) Assent to Sanction 
Each party to a proceeding resulting in a sanction shall be deemed to have assented to the imposition of the sanction 
unless such party files a written application for appeal, review, or relief pursuant to the Rule 9000 Series 
57 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
8310. Sanctions for Violation of the Rules 
58 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
59 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP 
(1) Censure
(2) Impose a fine. 
60 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
(3) Suspend Membership 
61 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
(4) Expel 
62 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
(5) Suspend or bar a member 
63 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
(6) Impose a temporary or 
permanent cease and desist 
order 
64 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
(7) Impose any other fitting 
sanction. 
65 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
FIRST RESPONSE/NOTICE 
66 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP 
You receive ITR requesting documents and OTR 
First, hire and meet with your attorney 
Notify compliance same day you receive OTR 
If possible, delay meeting with compliance until after you’ve received 
your attorney’s advice 
Enlist the aid of your branch manager
MEETING/CALL WITH YOUR ATTORNEY 
67 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP 
Fully disclose all possible issues to your attorney 
Discuss all anticipated areas of inquiry/questioning 
Discuss positioning your situation with Firm/compliance
ANALYZE YOUR SITUATION 
68 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP 
Are you and your Firm Adverse? 
Will the Firm make you a scapegoat? 
Is issue “financial products” or account handling
MEETING WITH COMPLIANCE 
69 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP 
Don’t volunteer 
Answer all questions directly/honestly.
REACHING OUT TO FINRA 
70 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP 
Have your attorney try to learn FINRA’s stated and ulterior 
goal(s).
DEVELOP YOUR TALKING POINTS 
LEARN YOUR BUOYS 
71 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
CLIENT MADE CONSCIOUS, INFORMED CHOICE 
The “C” word 
I warned client many times about 
Client’s knowing choice, against your repeated advice 
72 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
CONTRITION, BUT ONLY WHERE APPROPRIATE 
I know I made a mistake 
I'm very sorry 
It will never happen again 
I have taken the following (specific) steps to 
ensure never happens again 
73 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
HOMEWORK BEFORE OTR 
Review your Talking Points 
Review docs you will be bringing to the OTR 
Review docs you, your attorney and compliance anticipate you will be 
questioned about 
74 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
CLEAR YOUR MIND 
Relax take one or two days off before OTR 
75 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
MOST IMPORTANT 
Get a good night's sleep! 
76 
October 24, 2014 
SEGMENT 2: 
Rogge Dunn 
Partner 
Clouse Dunn LLP
77 
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80 
October 24, 2014 
SEGMENT 1: 
Kosha Dalal 
Associate Vice President and Associate General Counsel 
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Kosha.Dalal@finra.org 
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Lawrence P. Stadulis 
Partner 
Stradley Ronon Stevens & Young, LLP 
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Stradley Ronon Stevens & Young, LLP 
msteiner@stradley.com 
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Clouse Dunn LLP 
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Financial Industry 
Regulatory Authority, Inc.
81 
October 24, 2014 
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October 24, 2014 
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October 24, 2014 
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FINRA Supervision Rules: What You Need to Know in 2015 LIVE Webcast

  • 1. Speaker Firms and Organization: Stradley Ronon Stevens & Young, LLP Lawrence P. Stadulis Partner Financial Industry Regulatory Authority, Inc. Kosha Dalal Associate Vice President and Associate General Counsel Thank you for logging into today’s event. Please note we are in standby mode. All Microphones will be muted until the event starts. We will be back with speaker instructions @ 9:55am. Any Questions? Please email: Info@knowledgecongress.org Group Registration Policy Please note ALL participants must be registered or they will not be able to access the event. If you have more than one person from your company attending, you must fill out the group registration form. We reserve the right to disconnect any unauthorized users from this event and to deny violators admission to future events. To obtain a group registration please send a note to info@knowledgecongress.org or call 646.202.9344. Presented By: 1 October 24, 2014 Partner Firms: Stradley Ronon Stevens & Young, LLP Merrill R. Steiner Partner Clouse Dunn LLP Rogge Dunn Partner Financial Industry Regulatory Authority, Inc.
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  • 6. Partner Firms: October 24, 2014 6 Counseling clients since 1926, Stradley Ronon has helped private and public companies – from small businesses to Fortune 500 corporations – achieve their goals by providing pragmatic, value-driven legal counsel. With seven offices throughout the mid-Atlantic region, their responsive team of more than 200 attorneys seamlessly addresses the full spectrum of our clients’ needs, ranging from sophisticated corporate transactions to complex commercial litigation. Stradley Ronon is nationally recognized for having one of the premier investment management practices in the United States, representing investment company clients with more than 1,000 separate mutual funds and assets under management approaching $2 trillion. Stradley’s investment management lawyers have substantial experience representing registered broker-dealers, including handling all aspects of initial formation and registration and interfacing with the SEC, FINRA and the IRS on broker-dealer matters. Financial Industry Regulatory Authority, Inc.
  • 7. Brief Speaker Bios: Kosha Dalal Kosha Dalal is Associate Vice President and Associate General Counsel with FINRA’s Office of General Counsel. In this role, she provides legal guidance on various policy initiatives and rule changes/interpretations including, supervision, non-cash compensation, branch office, customer account statements, payments to unregistered persons and corporate actions. She has been with FINRA’s Office of General Counsel since 2000. Ms. Dalal also serves on FINRA’s Diversity Leadership Council. Prior to coming to FINRA, she was an associate with the law firm of Venable in Baltimore, MD, Kalkines Zall in New York, NY and Skaden Arps in New York, NY. Ms. Dalal attended Columbia University in New York, NY where she received a bachelor’s degree in political science and economics. She received her law degree from Brooklyn Law School. 7 October 24, 2014 Lawrence P. Stadulis Lawrence Stadulis is a partner in the Washington, D.C., office of Stradley Ronon, where he heads the firm’s Broker-Dealer Regulatory Practice and is a member of the firm’s Investment Management/Mutual Funds Practice Group. Mr. Stadulis advises clients in matters pertaining to the registration and regulation of broker-dealers, investment advisers and investment companies under federal and state securities laws and FINRA regulations. He handles a broad range of broker-dealer regulatory matters, including membership and continuing FINRA membership applications, written supervisory procedures and supervisory issues, advertising and marketing issues, periodic reporting and regulatory examinations issues. Mr. Stadulis is a frequent lecturer and author on legal matters pertaining to the broker-dealer and investment management industries. Before Stradley Ronon, Mr. Stadulis was a partner at another law firm, and before that, special counsel in the Office of Chief Counsel, Division of Investment Management, U.S. Securities and Exchange Commission.
  • 8. Brief Speaker Bios: Merrill R. Steiner Merrill Steiner is a partner in the Philadelphia office of Stradley Ronon and member of the firm’s Investment Management/Mutual Funds Practice Group. Mr. Steiner focuses his practice on federal and state securities law, advising registered and private investment companies, investment advisers, broker-dealers and commodity trading advisors, as well as other corporations and businesses. His practice includes providing advice regarding compliance with regulations of federal and state securities and commodities regulatory authorities and self-regulatory organizations such as the New York Stock Exchange, the (FINRA) and the National Futures Association. 8 October 24, 2014 Rogge Dunn Rogge Dunn is a trial attorney and counselor for Fortune 500 companies, wirehouses and prominent Financial Advisors, executives and entrepreneurs. Dunn has developed a specialty involving significant matters in the financial industry. This includes regulatory issues, wrongful discharge, moving teams, non-competes, the Protocol for Broker Recruiting, promissory note defense and forfeiture of deferred compensation. He obtained the largest wrongful discharge arbitration award against Goldman Sachs for an FA in California. Dunn has represented a number of FAs who have given FINRA on the record statements. Dunn has won more than $2 billion in judgments and settlements for his clients. He has represented more than 10 FAs in Barron’s top 100 financial advisors nationwide. Dunn has won million dollar jury verdicts or arbitration awards in California, Texas, Louisiana and Arkansas. ► For more information about the speakers, you can visit: http://theknowledgegroup.org/event_name/finra-supervision-rules-what-you-need-to-know-in-2015-live-webcast/
  • 9. In this two-hour LIVE webcast, a panel of distinguished professionals and thought leaders will help broker/dealers and financial advisors implement the new FINRA rules. They will discuss important new provisions of the new FINRA consolidated supervision rules and discuss best practices. Key topics include: • Supervision (New FINRA Rule 3110) • Supervisory Control System (New FINRA Rule 3120 ) • Holding Customer Mail (New FINRA Rule 3150 ) • Tape Recording of Registered Persons by Certain Firms (New FINRA Rule 3170 ) And a lot more! 9 October 24, 2014
  • 10. Featured Speakers: 10 October 24, 2014 SEGMENT 1: Kosha Dalal Associate Vice President and Associate General Counsel Financial Industry Regulatory Authority, Inc. SEGMENT 1: Lawrence P. Stadulis Partner Stradley Ronon Stevens & Young, LLP SEGMENT 1: Merrill R. Steiner Partner Stradley Ronon Stevens & Young, LLP SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP Financial Industry Regulatory Authority, Inc.
  • 11. Financial Industry Introduction Kosha Dalal is Associate Vice President and Associate General Counsel with FINRA’s Office of General Counsel. In this role, she provides legal guidance on various policy initiatives and rule changes/interpretations including, supervision, non-cash compensation, branch office, customer account statements, payments to unregistered persons and corporate actions. She has been with FINRA’s Office of General Counsel since 2000. Ms. Dalal also serves on FINRA’s Diversity Leadership Council. Prior to coming to FINRA, she was an associate with the law firm of Venable in Baltimore, MD, Kalkines Zall in New York, NY and Skaden Arps in New York, NY. Ms. Dalal attended Columbia University in New York, NY where she received a bachelor’s degree in political science and economics. She received her law degree from Brooklyn Law School. 11 October 24, 2014 SEGMENT 1: Kosha Dalal Associate Vice President and Associate General Counsel Financial Industry Regulatory Authority, Inc. Regulatory Authority, Inc.
  • 12. Introduction Lawrence Stadulis is a partner in the Washington, D.C., office of Stradley Ronon, where he heads the firm’s Broker-Dealer Regulatory Practice and is a member of the firm’s Investment Management/Mutual Funds Practice Group. Mr. Stadulis advises clients in matters pertaining to the registration and regulation of broker-dealers, investment advisers and investment companies under federal and state securities laws and FINRA regulations. He handles a broad range of broker-dealer regulatory matters, including membership and continuing FINRA membership applications, written supervisory procedures and supervisory issues, advertising and marketing issues, periodic reporting and regulatory examinations issues. Mr. Stadulis is a frequent lecturer and author on legal matters pertaining to the broker-dealer and investment management industries. Before Stradley Ronon, Mr. Stadulis was a partner at another law firm, and before that, special counsel in the Office of Chief Counsel, Division of Investment Management, U.S. Securities and Exchange Commission. Stadulis can be reached at lstadulis@stradley.com, office: 202.419.8407 or cell: 202.378.8774, or on the Stradley Ronon website at http://www.stradley.com. 12 October 24, 2014 SEGMENT 1: Lawrence P. Stadulis Partner Stradley Ronon Stevens & Young, LLP
  • 13. Introduction Merrill Steiner is a partner in the Philadelphia office of Stradley Ronon and member of the firm’s Investment Management/Mutual Funds Practice Group. Mr. Steiner focuses his practice on federal and state securities law, advising registered and private investment companies, investment advisers, broker-dealers and commodity trading advisors, as well as other corporations and businesses. His practice includes providing advice regarding compliance with regulations of federal and state securities and commodities regulatory authorities and self-regulatory organizations such as the New York Stock Exchange (FINRA) and the National Futures Association. Steiner can be reached at msteiner@stradley.com, office: 215-564-8039 or cell: 610-745-7996, or on the Stradley Ronon website at http://www.stradley.com. 13 October 24, 2014 SEGMENT 1: Merrill R. Steiner Partner Stradley Ronon Stevens & Young, LLP
  • 14. SEGMENT 1: Merrill R. Steiner Partner Stradley Ronon Stevens & Young, LLP The New FINRA Consolidated Supervision Rules 14 October 24, 2014 SEGMENT 1: Kosha Dalal Associate Vice President and Associate General Counsel Financial Industry Regulatory Authority, Inc. SEGMENT 1: Lawrence P. Stadulis Partner Stradley Ronon Stevens & Young, LLP Financial Industry Regulatory Authority, Inc.
  • 15. Overview This presentation is intended to cover the modifications to, and additions incorporated in, FINRA’s four new consolidated supervision rules, in the following order: ▫ Timing ▫ Highlights ▫ Organization ▫ Content of the Four Rules:  Supervision – 3110  Supervisory Control System – 3120  Holding of Customer Mail – 3150  Taping Rule – 3170 ▫ Practical Suggestions 15 Stradley Ronon Stevens & Young, LLP
  • 16. Timing • All member firms must comply with the new rules by December 1, 2014. ▫ 38 days and counting • Therefore, firms should make all changes and implement the changes by that date. • If not already addressed, this is a priority; firms need to act quickly. • Two of FINRA’s announced priorities in 2013 and 2014 for examinations are branch office supervision and conflicts of interest management policies and practices. 16 Stradley Ronon Stevens & Young, LLP
  • 17. Highlights What Amendments Do • Rules restate and continue to apply same core supervision concepts. • Rules codify a number of existing FINRA interpretations. • Rules add new provisions or guidance, including, among others, in the following areas ▫ Presence of on-site principal for OSJ ▫ Risk-based review principles ▫ Avoiding conflicts of interest in supervision ▫ Calendar year inspection requirements ▫ Increased inspection report content ▫ Inspections by unregistered Persons ▫ Insider trading policies ▫ Increased content of report to senior management for large firms • Clarification Regarding Supplementary Material. The adopting release states that the supplementary material at the end of Rule 3110 is part of the rule, and a provision’s location as supplementary material is intended to improve the readability of the rule without affecting the weight, significance, or enforceability of the provision. Stradley Ronon Stevens & Young, LLP 17
  • 18. Highlights (Continued) What Amendments Do Not Do • Do not update the definitions of OSJs and branch offices • Do not require that supervisory system be designed to include supervision of all of a member’s business lines irrespective of whether a particular business line requires registration • Do not require a designated senior principal to have a physical presence on a regular periodic schedule at a one-person OSJ • Do not expand the record retention period from three years to six years • Do not include a requirement to capture and respond to oral complaints • Do not require elimination of all conflicts of interest in supervision standards, which would in effect impose a strict liability standard Stradley Ronon Stevens & Young, LLP 18
  • 19. Organization • The Rules essentially amend and replace existing requirements in previous NASD and NYSE rules and codify various previous provisions and interpretations under the law and rules, as follows: ▫ Supervision, Rule 3110  Replaces NASD Rule 3010 and corresponding provisions of NYSE Rules and Interpretations. ▫ Supervisory Control System, Rule 3120  Replaces NASD Rule 3012 and corresponding provisions of NYSE Rules and Interpretations. ▫ Holding of Customer Mail, Rule 3150  Relocates NASD Rule 3110(i) into a separate standalone rule. ▫ Taping Rule, Rule 3170  Relocates NASD Rule 3010(b)(2) into a separate standalone rule. 19 Stradley Ronon Stevens & Young, LLP
  • 20. Supervision Rule Supervisory System Requirements • Main Office Registration. Codifies the long-standing position that the member’s main office must be registered and designated as a branch office or OSJ Rule 3110(a)(3) 20 Stradley Ronon Stevens & Young, LLP
  • 21. Supervision Rule Supervisory System Requirements (Continued) • Designated Principals for OSJ ▫ On-site Principals. The Rule clarifies that each member must designate one or more appropriately registered principals in each OSJ (defined in the Rule as the “on-site principal”) for which the principal(s) has supervisory responsibilities and a regular and routine physical presence at the OSJ. ▫ A Principal May Supervise Only One OSJ. The Rule establishes a new general presumption that a principal will not be designated of assigned to be the on-site principal to supervise more than one OSJ.  If necessary to designate and assign one registered principal to be the on-site principal for two or more OSJs, member must consider, among others, the factors on the next slide. Rule 3110(a)(4) Stradley Ronon Stevens & Young, LLP 21
  • 22. Supervision Rule Supervisory System Requirements (Continued) Factors in Designation of Principal to Supervise More Than One OSJ The Rule adds a list of the following factors, among others, for the member to consider in designating and assigning one registered principal to be the on-site principal for two or more OSJs: ▫ Principal’s qualification by experience/training to supervise the activities and associated persons in each OSJ; ▫ principal’s capacity and time to supervise the activities and associated persons in each OSJ; ▫ whether the on-site principal is a producing registered representative; ▫ proximity of OSJs to ensure the principal is physically present at each on a regular and routine basis; and ▫ nature of activities at each OSJ, including size and number of associated persons, scope of business activities, nature and complexity of products and services, business volume, disciplinary history of assigned persons, and other indicators of irregularities or misconduct. (3110(a)(4); and Supp. Materials .03) 22 Stradley Ronon Stevens & Young, LLP
  • 23. Supervision Rule Supervisory System Requirements (Continued) Documentation of Factors The Rule adds that if the member designates and assigns one on-site principal to supervise more than one OSJ, member ▫ must document in the written supervisory and inspection procedures the factors used to determine the reasonableness of such supervisory structure, and ▫ Member’s determination of reasonableness will be subject to scrutiny by FINRA. (3110(a)(4); and Supp. Materials .03) 23 Stradley Ronon Stevens & Young, LLP
  • 24. Supervision Rule Supervisory System Requirements (Continued) Need Not Hold In-Person Annual Compliance Meetings. • The Rule continues without change the requirement for an annual compliance meeting for each registered principal and registered representative, but codifies existing guidance that members are not required to conduct in-person meetings – ▫ if use other methods, such as on-demand webcast or course, video conference, or other electronic means), must ensure each registered person  attends the entire meeting, using, for example, user IDs and passwords to gain access, technology to track time spent, provide click-as-you go confirmation, with attestation of completion at the end, and  is able to ask questions regarding the presentation and receive answers in a timely fashion. (3110(a)(7); and Supp. Material .04 ) 24 Stradley Ronon Stevens & Young, LLP
  • 25. Supervision Rule Written Procedures Written Review of All Transactions • The Rule continues to require, based on the replaced rule, that the supervisory procedures must provide for the review ▫ By a registered principal, ▫ Evidenced in writing, ▫ Of all transactions relating to the “investment banking or securities business” of the member  "investment banking or securities business" means the business, carried on by a broker, dealer, or municipal securities dealer (other than a bank or department or division of a bank), or government securities broker or dealer, of underwriting or distributing issues of securities, or of purchasing securities and offering the same for sale as a dealer, or of purchasing and selling securities upon the order and for the account of others.” FINRA Corp. Bylaws, Art. I(u). Rule 3110(b)(2) 25 Stradley Ronon Stevens & Young, LLP
  • 26. Supervision Rule Written Procedures (Continued) Written Review of All Transactions (Continued) • Risk-Based Review System. As a new provision, for this required written review of all transactions, member is not required to conduct detailed reviews of each transaction, but may now use ▫ A reasonably designed risk-based review system ▫ That permits focus on the areas that pose the greatest numbers and risks of violation, but ▫ Principal using the system remains responsible for compliance with Rule and any deficiency in the system’s criteria. (Supp. Material .05 & Reg Notice 10-14, Section I.B.1.) [TP] • Member Not Engaged in Effecting Securities Transactions. A firm that does not engage in any transactions relating to its “investment banking or securities business”  (e.g., firm conducting only a mutual fund underwriting business that effects no transactions) ▫ does not have any review obligations and ▫ may comply by acknowledging in its supervisory procedures that  it does not engage in any such transactions and  it must have supervisory policies and procedures in place before doing so. (Supp. Material .05 & Reg Notice 10-14, Section I.B.1.) [TP] Rule 3110(b)(2) 26 Stradley Ronon Stevens & Young, LLP
  • 27. Supervision Rule Written Procedures (Continued) Written Review of All Transactions (Continued) • Use of Technology-Based Review Systems. In a clarification based on prior guidance, if a firm’s procedures for the review of its transactions include the use of technology-based review systems with parameters designed to assess which transactions merit further review, a principal ▫ must review the parameters and document the review in writing; ▫ remains responsible for the discharge of supervisory responsibilities; and ▫ is responsible for any deficiency in the system’s criteria that would result in the system not being reasonably designed. (Reg Notice 10-14, Section I.B.1., Citing Reg. Notice 07-53 (Nov 2007)) Rule 3110(b)(2) Stradley Ronon Stevens & Young, LLP 27
  • 28. Supervision Rule Written Procedures (Continued) Review of Correspondence and Internal Communications • The Rule generally incorporates and expands on the replaced rule requiring members to have supervisory procedures to review correspondence and internal communications relating to the member's “investment banking or securities business,” as follows, ▫ Correspondence. Member must review incoming and outgoing hard copy or electronic written correspondence to properly identify and handle in accordance with firm procedures,  customer complaints, instructions, funds and securities, and  That are communications of a subject matter that require review under FINRA rules and federal securities laws, and ▫ Internal Communications. The Rule expressly adds that the member must review internal communications to properly identify those communications that are of a subject matter that require review under FINRA rules and federal securities laws. Rule 3110(b)(4) [TP] 28 Stradley Ronon Stevens & Young, LLP
  • 29. Supervision Rule Written Procedures (Continued) Review of Correspondence and Internal Communications (Continued) • Use of term “Correspondence.” The Rule’s use of the term “correspondence” is to be consistent with FINRA Rule 2210’s (Communications with the Public) definition and use of the term “correspondence.” (Reg Notice 10-14, Endnote 10.) • Subject Matter Requiring Review. Communications that are of a subject matter that require review under FINRA rules and the federal securities laws include (without limitation): • Communications between non-research and research departments concerning a research report’s contents (NASD Rule 2711(b)(3) and NYSE Rule 472(b)(3)); • Certain communications with the public that require a principal’s pre-approval (FINRA Rule 2210); • The identification and reporting to FINRA of customer complaints (FINRA Rule 4530) (as further detailed herein, FINRA Rule 3110(b)(5) also affirmatively requires firms to capture, acknowledge and respond to all written (including electronic) customer complaints); and • The identification and prior written approval of changes in account name(s) (including related accounts) or designation(s) (including error accounts) regarding customer orders (FINRA Rule 4515). (Reg Notice 10-14, Endnote 11.) Rule 3110(b)(4) Stradley Ronon Stevens & Young, LLP 29
  • 30. Supervision Rule Written Procedures (Continued) Review of Correspondence and Internal Communications (Continued) Codification of Required Manner and Evidence of Review. The Rule continues to require that review be appropriate for the member's business, size, structure, and customers, and codifies existing guidance that reviews are to be ▫ conducted by a registered principal, and ▫ evidenced in writing, either electronically or on paper. (Reg Notice 10-14, Sec. I.B.2) Use of Risk-based Principles for Review. Rule reflects existing guidance permitting use of risk-based principles to review communications, where member determines that: ▫ Some incoming and outgoing correspondence, having none of the subject matters listed above, is necessary for its business and structure, and does not require review before use or distribution, in which case, the procedures must provide for:  the education/training of associated persons of the procedures governing correspondence;  the documentation of such education and training; and  surveillance and follow-up to ensure such procedures are implemented and followed; and ▫ Some internal communications, having none of the subject matters that requires review by rule or law, are necessary for its business and structure -- Rule and guidance do not require a member to review every internal communication. (Supp. Materials .06; and Reg Notice 10-14, Sec. I.B.2(i) and endnote 13, citing Reg. Notice 07-59.) [TP] Rule 3110(b)(4) 30 Stradley Ronon Stevens & Young, LLP
  • 31. Supervision Rule Written Procedures (Continued) Review of Correspondence and Internal Communications (Continued) • Codification of Criteria for Evidence of Review. The Rule codifies existing guidance that evidence of review must be chronicled either electronically or on paper and clearly identify ▫ the reviewer, ▫ the internal communication or correspondence that was reviewed, ▫ the date of review, and ▫ the actions taken by the member as a result of any significant regulatory issues identified during the review. Merely opening a communication is not sufficient. (Supp. Material .07 and Reg. Notice 14-10, Section I.B.2.(ii)) • Guidance Clarified for Permitted Use of Lexicon-based Screening Tools or Systems for Electronic Communications. Rule continues to permit members to use lexicon-based screening tools or systems of electronic communications, provided the supervisor ▫ understands the limitations of the tools/systems, ▫ remains responsible for the discharge of supervisory responsibilities in compliance with the rule and ▫ is responsible for any deficiency in the system's criteria that would result in the system not being reasonably designed. (Reg. Notice 14-10, Section I.B.2.(ii) and Regulatory Notice 07-59 – “as noted in Regulatory Notice 07-59 firms using automated tools or systems in the course of their supervisory review of electronic communications must have an understanding of the limitations of those tools or systems and should consider what, if any, further supervisory review is necessary in light of those limitations”.) [TP] Rule 3110(b)(4) 31 Stradley Ronon Stevens & Young, LLP
  • 32. Supervision Rule Written Procedures (Continued) Review of Correspondence and Internal Communications (Continued) • Codification of Permitted Delegation of Review Functions. The Rule codifies existing guidance that a supervisor or principal may delegate review functions to an unregistered person, but supervisor or principal ▫ remains ultimately responsible for the performance of all necessary supervisory reviews, ▫ must take reasonable and appropriate action so that delegated functions are properly executed, and ▫ should evidence performance of their procedures sufficiently to demonstrate overall supervisory control. (Supp. Mat. .08; Reg. Notice 14-10, Sec. I.B.2(iii)) [TP] • Alignment of Retention Period for Communications. The Rule adds that a member must retain the internal communications and correspondence of its associated persons as to its “investment banking or securities business” ▫ for the period of time and accessibility specified in SEA Rule 17a-4(b) (three years) and with names of persons who prepared and reviewed the correspondence. (Supp. Material .09 and Reg. Notice 14-10, endnote 18: The rule purposefully aligns the record retention period for communications with the SEC’s record retention period for the same types of communications to achieve consistent regulation in this area. ) [TP] Rule 3110(b)(4) 32 Stradley Ronon Stevens & Young, LLP
  • 33. Supervision Rule Written Procedures (Continued) Review of Customer Complaints • Clarification of Requirements for Review of Customer Complaints. Member review of complaints must include procedures to capture, acknowledge, and respond to all hard copy or electronic written customer complaints. ▫ Rule does not include review of oral complaints because they are difficult to capture and assess and may raise competing views as to the substance of the complaint being alleged. ▫ FINRA encourages firms to provide customers with a form or other format that will allow customers to communicate their complaints in writing. ▫ FINRA also reminds firms that the failure to address any customer complaint, written or oral, may be a violation of FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade). ▫ To harmonize the NASD and NYSE rules, FINRA amended incorporated NYSE Rule 351(d) (Reporting Requirements) to limit the definition of “customer complaint” to include only written complaints, thereby making the definition substantially similar to that in NASD Rule 3070(c) (Reporting Requirements). ▫ NASD Rule 2340(a) (Customer Account Statements) requires a customer account statement to advise the customer that any oral communications should be re-confirmed in writing to further protect the customer’s rights, including rights under the Securities Investor Protection Act (SIPA)). (Reg. Notice 14-10, Sec. I.B.3 and endnotes 19-20.) Rule 3110(b)(5) Stradley Ronon Stevens & Young, LLP 33
  • 34. Supervision Rule Written Procedures (Continued) Documentation and Supervision of Supervisory Personnel. • Elimination of Two Aspects of Supervision. The Rule eliminates ▫ provisions specifying the supervision of a producing manager's customer account activity and ▫ heightened supervision when any producing manager's revenues rise above a specific threshold. • Prohibited Supervision Situations. Instead, the Rule expressly requires, with certain exceptions, the written procedures to prohibit APs from ▫ supervising their own activities, and ▫ reporting to, or having their compensation or continued employment determined by, a person(s) they are supervising. (Reg. Notice 14-10, Sec. I.B.4) [TP] Rule 3110(b)(6) 34 Stradley Ronon Stevens & Young, LLP
  • 35. Supervision Rule Written Procedures (Continued) Documentation and Supervision of Supervisory Personnel (Continued) • Documentation of Limited Exceptions. The Rule adds a limited exception that if a member cannot, as to any supervisor, comply with a prohibition in the above bullet point (because of the member's size or the supervisor's position with the member), the member must document: ▫ the factors the member used to reach such determination; and ▫ how the supervisory system for such supervisor otherwise complies with paragraph (a) of this Rule. ▫ Rule adds a list of possible factors and reflects FINRA’s expectation that this exception will be used primarily by a sole proprietor in a single-person firm or where a supervisor holds a very senior executive position within the firm. ▫ Member not required to notify FINRA of reliance on this exception. (Firms have in past provided 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. (Supp. Material .10; Reg. Notice 14-10, Sec. I.B.4(i); and endnote 24) [TP] Rule 3110(b)(6) 35 Stradley Ronon Stevens & Young, LLP
  • 36. Supervision Rule Written Procedures (Continued) Documentation and Supervision of Supervisory Personnel (Continued) • Conflicts of Interest That May Compromise Supervision by Supervisory Personnel. As a new provision, the Rule adds an express requirement that the written supervisory procedures (“WSP”) must be reasonably designed to prevent the member’s supervisory system from being compromised due to ▫ conflicts of interest that may be present with respect to the associated person being supervised, including  the position of such person,  the revenue such person generates for the firm, or  any compensation that the associated person conducting the supervision may derive from the associated person being supervised. (3110(b)(6)(D)) ▫ Does not impose a strict liability obligation to eliminate all conflicts of interest, ▫ Rather requires that the WSPs be reasonably designed despite a firm's conflicts of interest. (Reg. Notice 14-10, Sec. I.B.4(ii).) [TP] Rule 3110(b)(6) Stradley Ronon Stevens & Young, LLP 36
  • 37. Supervision Rule Written Procedures (Continued) Maintenance of Written Supervisory Procedures • Prompt WSP Amendments and Communication of Amendments. The Rule introduces the term “promptly” in amending, and communicating amendments of, the WSP – each Member ▫ Is required to promptly amend its WSPs to reflect changes in applicable securities laws or rules and in its supervisory system; and ▫ Is required to promptly communicate its WSPs and amendments thereto (“as amended WSPs”) to all associated persons to whom such as amended WSPs are relevant based on activities and responsibilities. Rule 3110(b)(7) 37 Stradley Ronon Stevens & Young, LLP
  • 38. Supervision Rule Written Procedures (Continued) Maintenance of Written Supervisory Procedures (Continued) • Use of Electronic Media to Communicate WSPs. Rule adds express permission for member to use electronic media to communicate its WSP and amendments to the WSP, if ▫ WSP with amendments are communicated on, and are readily accessible through, for example, the member's intranet system; ▫ WSP with amendments are promptly posted to the media; ▫ Notice is given to APs of postings; ▫ Reasonable procedures are effected to monitor and maintain the security of the postings to prevent unauthorized changes; and ▫ Member complies with record retention requirements of SEA Rule 17a-4(e)(7). (Supp. Material .11; Reg. Notice 14-10, Sec. I.B.5; and endnotes 26-27) Rule 3110(b)(7) 38 Stradley Ronon Stevens & Young, LLP
  • 39. Supervision Rule Internal Inspections • Internal Inspections. Rule retains same review of businesses and inspection of locations requirements, except the Rule adds the following: ▫ Annual Calendar Year Basis Review/Inspections. The Rule has a new requirement that the review/inspections be on an annual calendar year basis. ▫ Presumed Requirement for 3-Year Inspection Cycle for Non-Branch Locations. Rule imposes new presumption that member inspect a non-branch location at least every three years, and if the period is longer than that, the member must document the factors used to support the longer period. (Supp. Materials .13 and Reg. Notice 14-10, Sec. I.C.1.) [TP] Rule 3110(c)(1) 39 Stradley Ronon Stevens & Young, LLP
  • 40. Supervision Rule Internal Inspections (Continued) Standards for Reasonable Review. Rule adds list of standards for reasonable review -- the member’s WSPs must take into consideration, among other things, ▫ firm's size, ▫ organizational structure, ▫ scope of business activities, ▫ number and location of the firm's offices, ▫ nature and complexity of the products and services offered by the firm, ▫ volume of business done, ▫ number of associated persons assigned to a location, ▫ disciplinary history of registered representatives or associated persons, and ▫ any indicators of irregularities or misconduct (i.e., "red flags"), etc. • WSPs and reviews must provide that the quality of supervision at remote locations is sufficient to ensure compliance with applicable securities laws and regulations • Must be especially diligent with respect to a non-branch location where a registered representative engages in securities activities. • Based on the factors outlined above, may need to ▫ impose reasonably designed supervisory procedures for certain locations or ▫ Provide for more frequent reviews of certain locations. (Supp. Materials .12) Rule 3110(c)(1) 40 Stradley Ronon Stevens & Young, LLP
  • 41. Supervision Rule Internal Inspections (Continued) Inspection Report Content. The Rule expands on two of areas of the inspection report content. The report must include testing and verifying a location's policies and procedures, including supervisory policies and procedures: ▫ As in the prior rule, the areas of safeguarding of customer funds and securities; maintaining books and records; and supervision of supervisory personnel; ▫ As an expansion of the prior rule, in the areas of transmittals of funds or securities from customers to third party accounts; from customer accounts to outside entities; from customer accounts to locations other than a customer's primary residence; and between customers and registered representatives, including the hand-delivery of checks; and ▫ As an expansion of the prior rule, in the areas of changes of customer account information, including address and investment objectives changes, and validation of such changes. ▫ For the areas of transmittals of funds or securities, the Rule clarifies that all transmittals to an account where a customer on the original account is not a named account holder are subject to the rule, as follows:  Implements this change by not including replaced NASD Rule 3012's parenthetical text ("i.e., a transmittal that would result in a change in beneficial ownership");  Provides an important investor protection function by requiring verification that the customer was aware of the transfer and  Codifies provision that a member may use a reasonable risk-based criteria to determine the authenticity of the transmittal instructions. (Reg. Notice 14-10, Sec. I.C.2; and endnote 34.) Rule 3110(c)(2) 41 Stradley Ronon Stevens & Young, LLP
  • 42. Supervision Rule Internal Inspections (Continued) Inspection Report Content (Continued) ▫ For the areas of changes of customer account information, the Rule adds that  This include means or method of customer confirmation that can be documented and complies with SEA Rules 17a-3(a)(17)(i)(B)(2) and 17a-3(a)(17) (i)(B)(3); and  Member must have procedures to monitor all changes of customer account information and not only address and investment objective changes, such as changes to a customer's name, marital status, telephone, email or other contact information. ▫ Member may delegate reviews of such changes to an appropriately qualified person who is not a principal, unless another FINRA or SEC rule would require principal review (e.g., FINRA Rule 4515 prohibits an account name or designation change unless authorized by a qualified and registered principal designated by the firm). (Reg. Notice 14-10, Sec. I.C.2.) • Documentation of Activities Not Engaged In. The Rule adds that if an inspected location does not engage in all of the activities listed above, firm must ▫ identify activities not engaged in and ▫ document that supervisory policies and procedures must be in place at that location if in the future, location does engage in any such activities. Rule 3110(c)(2) 42 Stradley Ronon Stevens & Young, LLP
  • 43. Supervision Rule Internal Inspections (Continued) • Preventing Compromise of Office Inspections. The Rule replaces the prior provision prohibiting branch office managers and supervisors and the persons they directly or indirectly supervise from conducting inspections and imposes less prescriptive requirements to prevent office inspections from being compromised by conflicts of interest ▫ In most cases, an associated person (“AP”) may not conduct a location’s inspection where  AP is assigned to the location or  AP is directly or indirectly supervised by, or reporting to, a person assigned to the location. ▫ Member must consider factors such as economic, commercial or financial interests in the associated person and businesses being inspected. ▫ Does not prohibit use of compliance personnel  assigned to a firm's separate compliance department and  supervised solely by the compliance department to conduct a location's inspections.  Such an arrangement helps to protect against the potential conflicts of interest the provision is designed to address. (Reg. Notice 14-10, Section I.C.3.) Rule 3110(c)(3) 43 Stradley Ronon Stevens & Young, LLP
  • 44. Supervision Rule Internal Inspections (Continued) Preventing Compromise of Office Inspections (Continued) • The Rule retains with modifications the requirement that if a member determines that it cannot comply with above requirement, ▫ either because of a member's size or its business model, ▫ Member must document in the inspection report both the factors the member used to make its determination and how the inspection otherwise complies with paragraph (c)(1) of the Rule. • Factors Supporting Limited Exception. Factors indicating it is not possible to comply with Rule as to who is not allowed to conduct a location's inspection generally are: ▫ the member has only one office; or ▫ the member has a business model where small or single-person offices report directly to an OSJ manager who is also considered the office’s branch office manager (Supp. Materials .14) Rule 3110(c)(3) 44 Stradley Ronon Stevens & Young, LLP
  • 45. Supervision Rule Internal Inspections (Continued) Preventing Compromise of Office Inspections (Continued) • Registered Principal Not Required for Inspection. The Rule eliminates restriction in replaced rule that a firm relying on the exception must have a principal who has the requisite knowledge to conduct the inspection. ▫ Firm has flexibility to assign the most appropriate person who has the requisite knowledge, regardless of registration status, to conduct a location's inspection, taking into consideration the requirement that a firm's review of its businesses be reasonably designed to detect and prevent violations of, and achieve compliance with, laws and regulations. (Reg. Notice 14-10, Section I.C.4.) • Not required to eliminate all conflicts of interest for a location's inspections, but ▫ To meet Rule’s requirements, member should be diligent in identifying  potential conflicts of interest and  How they will be addressed to prevent a location's inspection from being compromised. (Reg. Notice 14-10, Section I.C.5) • Elimination of Heightened Office Inspection Requirements. The Rule eliminates NASD Rule 3010(c)(3)'s heightened office inspection requirements that firms must implement under certain circumstances, replacing this with procedures reasonably designed to avoid compromised inspections. Rule 3110(c)(3) 45 Stradley Ronon Stevens & Young, LLP
  • 46. Supervision Rule Transaction Review and Investigation Process for Review of Transactions for Potential Insider Trading. The Rule codifies Section 15(g) of the Securities Exchange Act of 1934 (“SEA”) applicable to broker-dealers and extends NYSE Rule 342.21 beyond NYSE-listed securities and related financial instruments to cover all securities. The Rule requires that the supervisory procedures must include a process ▫ for review and investigation of potential violations of the Exchange Act, rules thereunder or FINRA rules, ▫ to identify potential insider trading or other manipulative or deceptive devices. • Account Transactions to be Reviewed. Member must review transactions effected for ▫ Accounts of the member; ▫ Accounts introduced or carried by the member in which an AP of the Member has a beneficial interest or the authority to make investment decisions; ▫ Accounts of an AP of the member disclosed to the member pursuant to NASD Rule 3050 or NYSE Rule 407, as applicable; and ▫ “Covered accounts” as newly defined in Rule. [TP] Rule 3110(d)(1) 46 Stradley Ronon Stevens & Young, LLP
  • 47. Supervision Rule Transaction Review and Investigation (Continued) Process for Review of Transactions (Continued) • “Covered Accounts” include any account introduced or carried by the member that is held by: ▫ the spouse of an AP of the member; ▫ a child of the AP of the member or such person's spouse, if the child resides in the same household as, or depends financially on, the AP; ▫ any other related individual over whose account the AP of the member has control; or ▫ any other individual over whose account the AP of the member has control and to whose financial support such AP materially contributes. Rule 3110(d)(1) 47 Stradley Ronon Stevens & Young, LLP
  • 48. Supervision Rule Transaction Review and Investigation (Continued) Process for Review of Transactions (Continued) • When Prompt Internal Investigation Triggered. Each member must conduct promptly an internal investigation into any identified potential violative trade to determine whether a violation of those laws or rules has occurred. (3110(d)(2)) • Gauging Risk of Insider Trading. ▫ Firms should take the risks of insider trading based on their business model into account when developing their policies and procedures ▫ In implementing a firm’s risk-based approach to these requirements, a firm’s procedures should include establishing guidelines or criteria for taking reasonable follow-up steps to determine  which trades are potentially violative trades and  therefore, merit further review via an internal investigation. ▫ FINRA does not expect that every trade highlighted in an exception or other report would require a firm to conduct an internal investigation. (Reg. Notice 14-10, Section I.[D].2.) Rule 3110(d)(2) 48 Stradley Ronon Stevens & Young, LLP
  • 49. Supervision Rule Transaction Review and Investigation (Continued) • Filing Written Reports of Internal Investigations with FINRA. Member engaging in investment banking services must file with FINRA, written report, signed by member’s senior officer, ▫ Each Calendar Quarter. Within ten business days of the end of each calendar quarter,  a report describing each internal investigation initiated in the previous calendar quarter with  the identity of the member, the date each internal investigation commenced, the status of each open internal investigation, the resolution of any internal investigation reached during the previous calendar quarter, and, with respect to each internal investigation, the identity of the security, trades, accounts, APs of the member (including APs with respect to a covered account) under review, and a copy of the member's WSPs required by Rule 3110(d)(1).  If a firm did not have an open internal investigation, or either initiate or complete an internal investigation during a particular calendar quarter, the firm is not required to submit a report for that quarter. (Reg. Notice 14-10, Section I.[D].2(i)) Rule 3110(d)(2)&(3) Stradley Ronon Stevens & Young, LLP 49
  • 50. Supervision Rule Transaction Review and Investigation (Continued) Filing Written Reports of Internal Investigations with FINRA (Continued). • “Investment Banking Services” A firm engages in “investment banking services” if it, without limitation,  acts as an underwriter;  participates in a selling group in an offering for the issuer or otherwise acts in furtherance of a public offering of the issuer;  acts as a financial adviser in a merger or acquisition; or  provides venture capital or equity lines of credit or serves as placement agent for the issuer or otherwise acts in furtherance of a private offering of the issuer. (Reg. Notice 14-10, Section I.[D].2.) • Upon Completion of an Internal Investigation. Within five business days of completion of an internal investigation that determines that a violation of the law or rules prohibiting insider trading and manipulative and deceptive devices has occurred, member engaging in investment banking services must file with FINRA, written report, signed by member’s senior officer,  detailing the completion of the investigation, including  the results of the investigation, any internal disciplinary action taken, and  any referral of the matter to FINRA, another self-regulatory organization, the SEC, or any other federal, state, or international regulatory authority. Rule 3110(d)(3) 50 Stradley Ronon Stevens & Young, LLP
  • 51. Supervisory Control System Rule 3120 • Change in Requirement For Supervisory Control System. The Rule is based on the prior rule but adds a provision with respect to maintaining and enforcing the supervisory control system, as follows: • Content of Annual Report for Certain Members. For members with more than $200 million in gross annual revenue, the annual report to senior management must include, where applicable, a ▫ listing of reports for the year to FINRA of customer complaints and internal investigations, and ▫ description of the prior year’s compliance efforts, including procedures and educational programs relating to certain enumerated operating areas, practices and supervision. [ TP] • Definition of “Gross Revenue”. The Rule adds a definition of “gross revenue” that generally subtracts commodities revenue, if applicable, from total revenue as reported in the FOCUS report. 51 Stradley Ronon Stevens & Young, LLP
  • 52. Holding of Customer Mail Rule 3150 Changes to Requirements for Holding Customer Mail. The Rule eliminates the strict time limits in the prior rule and generally allows a firm to hold a customer’s mail for a specific time period in accordance with the customer’s written instructions if the firm meets several conditions. • Conditions for Holding Mail. The Rule continues to permit a member to hold customer’s mail for up to three months ▫ as requested by written instructions of the customer ▫ if the customer will not receive mail at the usual address. • Longer Holding Period. Under the Rule customers may request a longer holding period, ▫ if the customer's instructions include an acceptable reason for the request (e.g., safety or security concerns), not just convenience. [TP] 52 Stradley Ronon Stevens & Young, LLP
  • 53. Holding of Customer Mail Rule 3150 Changes to Requirements for Holding Customer Mail (Continued) • Conditions for holding a customer’s mail. The member must ▫ Inform the customer in writing of any alternate methods, other than holding the customer’s mail, such as email or access through the member's website, to receive or monitor account activity and information; and ▫ Obtain the customer's confirmation of the receipt of such information; ▫ Verify at reasonable intervals that the customer's instructions still apply; ▫ Be able, while the member is holding the mail, to communicate with the customer in a timely manner, as necessary; and ▫ Take actions reasonably designed to ensure that the customer's mail  is not tampered with,  held without the customer's consent, or  used by an AP of the member in any manner violating FINRA rules or federal securities laws. 53 Stradley Ronon Stevens & Young, LLP
  • 54. Taping Rule Rule 3170 • Previous Taping Requirements Kept. The Rule reconstitutes NASD Rule 3010(b)(2) without any substantive changes and adds some provisions, as follows: • Added Definition of Term “Tape Recording” • Added Requirements for “Taping Firms.” The Rule requires a member ▫ that is notified by FINRA, or otherwise has actual knowledge, that it is a “taping firm” (based on how many of its “registered persons” were associated with a “disciplined firm” during the past 3 years) ▫ to have and enforce special written procedures for supervising the telemarketing activities of all of its registered persons, ▫ including procedures for tape recording and reviewing all telephone conversations. • FINRA’s “Disciplined Firms List” To assist firms in complying with the Rule, FINRA provides a “Disciplined Firms List” identifying those firms that meet the definition of “disciplined firm.” 54 Stradley Ronon Stevens & Young, LLP
  • 55. Practical Suggestions Member’s written supervisory procedures must be updated for the changes in Rule 3110 and other new FINRA rules. Designate appropriately registered principal(s) for supervised persons and for office locations. Will need to report changes and implementation in meetings with management for annual Rule 3130 certification and report to Board Ensure that all registered personnel are notified of the changes before the changes go into effect for compliance and so the changes can be implemented in a timely manner. Annual Calendar Year Basis Review/Inspections. The Rule has a new requirement that the review/inspections be on an annual calendar year basis. Does this mean if member has not done review this year yet, review must be done between Dec. 1 and 31, 2014? FINRA Retrospective Review. Let FINRA know if the new rules cause difficulties, as FINRA indicates that the new rules will be subject to FINRA retrospective review for appropriateness and possible adjustment. 55 Stradley Ronon Stevens & Young, LLP
  • 56. Introduction Rogge Dunn is a trial attorney and counselor for Fortune 500 companies, wirehouses and prominent Financial Advisors, executives and entrepreneurs. Dunn has developed a specialty involving significant matters in the financial industry. This includes regulatory issues, wrongful discharge, moving teams, non-competes, the Protocol for Broker Recruiting, promissory note defense and forfeiture of deferred compensation. He obtained the largest wrongful discharge arbitration award against Goldman Sachs for an FA in California. Dunn has represented a number of FAs who have given FINRA on the record statements. Dunn has won more than $2 billion in judgments and settlements for his clients. He has represented more than 10 FAs in Barron’s top 100 financial advisors nationwide. Dunn has won million dollar jury verdicts or arbitration awards in California, Texas, Louisiana and Arkansas. Dunn can be reached at dunn@financialadvisorlaw.com, 214-220-0077 or on his website at http://www.cdklawyers.com/rogge_dunn.html 56 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 57. 8310. Sanctions for Violation of the Rules (a) Imposition of Sanction After compliance with the Rule 9000 Series, FINRA may impose one or more of the following sanctions on a member or person associated with a member for each violation of the federal securities laws, rules or regulations thereunder, the rules of the Municipal Securities Rulemaking Board, or FINRA rules, or may impose one or more of the following sanctions on a member or person associated with a member for any neglect or refusal to comply with an order, direction, or decision issued under the FINRA rules: (1) Censure a member or person associated with a member; (2) Impose a fine upon a member or person associated with a member; (3) Suspend the membership of a member or suspend the registration of a person associated with a member for a definite period or a period contingent on the performance of a particular act; (4) Expel a member, cancel the membership of a member, or revoke or cancel the registration of a person associated with a member; (5) Suspend or bar a member or person associated with a member from association with all members; (6) Impose a temporary or permanent cease and desist order against a member or a person associated with a member; or (7) Impose any other fitting sanction. (b) Assent to Sanction Each party to a proceeding resulting in a sanction shall be deemed to have assented to the imposition of the sanction unless such party files a written application for appeal, review, or relief pursuant to the Rule 9000 Series 57 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 58. 8310. Sanctions for Violation of the Rules 58 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 59. 59 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP (1) Censure
  • 60. (2) Impose a fine. 60 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 61. (3) Suspend Membership 61 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 62. (4) Expel 62 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 63. (5) Suspend or bar a member 63 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 64. (6) Impose a temporary or permanent cease and desist order 64 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 65. (7) Impose any other fitting sanction. 65 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 66. FIRST RESPONSE/NOTICE 66 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP You receive ITR requesting documents and OTR First, hire and meet with your attorney Notify compliance same day you receive OTR If possible, delay meeting with compliance until after you’ve received your attorney’s advice Enlist the aid of your branch manager
  • 67. MEETING/CALL WITH YOUR ATTORNEY 67 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP Fully disclose all possible issues to your attorney Discuss all anticipated areas of inquiry/questioning Discuss positioning your situation with Firm/compliance
  • 68. ANALYZE YOUR SITUATION 68 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP Are you and your Firm Adverse? Will the Firm make you a scapegoat? Is issue “financial products” or account handling
  • 69. MEETING WITH COMPLIANCE 69 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP Don’t volunteer Answer all questions directly/honestly.
  • 70. REACHING OUT TO FINRA 70 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP Have your attorney try to learn FINRA’s stated and ulterior goal(s).
  • 71. DEVELOP YOUR TALKING POINTS LEARN YOUR BUOYS 71 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 72. CLIENT MADE CONSCIOUS, INFORMED CHOICE The “C” word I warned client many times about Client’s knowing choice, against your repeated advice 72 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 73. CONTRITION, BUT ONLY WHERE APPROPRIATE I know I made a mistake I'm very sorry It will never happen again I have taken the following (specific) steps to ensure never happens again 73 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 74. HOMEWORK BEFORE OTR Review your Talking Points Review docs you will be bringing to the OTR Review docs you, your attorney and compliance anticipate you will be questioned about 74 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 75. CLEAR YOUR MIND Relax take one or two days off before OTR 75 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 76. MOST IMPORTANT Get a good night's sleep! 76 October 24, 2014 SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP
  • 77. 77 CLE PROCESSING The Knowledge Group offers complete CLE processing solutions for your webcasts and land events. This comprehensive service includes everything you need to offer CLE credit at your conference: October 24, 2014  Complete end-to-end CLE credit Solutions  Setting up your marketing collateral properly.  Completing and filing all of the applications to the state bar.  Guidance on how to structure content meet course material requirements for the state Bars.  Sign up forms to be used to check & confirm attendance at your event.  Issuing official Certificates of Attendance for credit to attendees. Obtaining CLE credit varies from state to state and the rules can be complex. The Knowledge Group will help you navigate the complexities via complete cost effective CLE solutions for your conferences. Most CLE processing plans are just $499 plus filing fees and postage. To learn more email us at info@knowledgecongress.org or CALL 646-202-9344
  • 78. 78 October 24, 2014 PRIVATE LABEL PROGRAM & INTERNAL TRAINING The Knowledge Group provides complete private label webcasts and in-house training solutions. Developing and executing webcasts can be a huge logistical nightmare. There are a lot of moving parts and devolving a program that is executed smoothly and cost effectively can prove to be a significant challenge for companies who do not produce events on a regular basis. Live events require a high level of proficiency in order to execute proficiently. Our producers will plan and develop your webcast for you and our webcast technicians will execute your live event with expert precision. We have produced over 1000 live webcasts. Put our vast expertise to work for you. Let us develop a professional webcast for your firm that will impress all your clients and internal stakeholders. Private Label Programs Include:  Complete Project Management  Topic Development  Recruitment of Speakers (Or you can use your own)  Marketing Material Design  PR Campaign  Marketing Campaign  Event Webpage Design  Slides: Design and Content Development  Speaker coordination: Arranging & Executing Calls, Coordinating Slides & Content  Attendee Registration  Complete LIVE Event Management for Speaker and Attendees including: o Technical Support o Event Moderator o Running the Live event (All Aspects) o Multiple Technical Back-ups & Redundancies to Ensure a Perfect Live Event o Webcast Recording (MP3 Audio & MP4 Video) o Post Webcast Performance Survey  CLE and CPE Processing Private Label Programs Start at just $999
  • 79. 79 October 24, 2014 RESEARCH & BUSINESS PROCESS OUTSOURCING The Knowledge Group specializes in highly focused and intelligent market and topic research. Outsource your research projects and business processes to our team of experts. Normally we can run programs for less than 50% of what it would cost you to do it in-house. Here are some ideal uses for our services:  Market Research and Production o List Research (Prospects, Clients, Market Evaluation, Sales Lists, Surveys) o Design of Electronic Marketing Collateral o Executing Online Marketing Campaigns (Direct Email, PR Campaigns) o Website Design o Social Media  Analysis & Research o Research Companies & Produce Reports o Research for Cases o Specialized Research Projects  eSales (Electronic Inside Sales – Email and Online) o Sales Leads Development o eSales Campaigns  Inside Sales people will prospect for leased, contact them and coordinate with your sales team to follow up.  Our Inside eSales reps specialize in developing leads for big-ticket enterprise level products and services. o Electronic Database Building – Comprehensive service which includes development of sales leads, contacting clients, scoring leads, adding notes and transferring the entire data set to you for your internal sales reps.  eCustomer Service (Electronic Inside Sales – Email and Online) o Real-Time Customer Service for Your clients  Online Chat  Email o Follow-Up Customer Service  Responds to emails  Conducts Research  Replies Back to Your Customer Please note these are just a few ways our experts can help with your Business Process Outsourcing needs. If you have a project not specifically listed above please contact us to see if we can help.
  • 80. Q&A: ► You may ask a question at anytime throughout the presentation today. Simply click on the question mark icon located on the floating tool bar on the bottom right side of your screen. Type your question in the box that appears and click send. ► Questions will be answered in the order they are received. 80 October 24, 2014 SEGMENT 1: Kosha Dalal Associate Vice President and Associate General Counsel Financial Industry Regulatory Authority, Inc. Kosha.Dalal@finra.org SEGMENT 1: Lawrence P. Stadulis Partner Stradley Ronon Stevens & Young, LLP lstadulis@stradley.com SEGMENT 1: Merrill R. Steiner Partner Stradley Ronon Stevens & Young, LLP msteiner@stradley.com SEGMENT 2: Rogge Dunn Partner Clouse Dunn LLP Rogge@clousedunn.com Financial Industry Regulatory Authority, Inc.
  • 81. 81 October 24, 2014 Welcome to the Knowledge Group Unlimited Subscription Programs. We have Two Options Available for You: FREE UNLIMITED: This program is free of charge with no further costs or obligations. It includes:  Unlimited access to over 15,000 pages of course material from all Knowledge Group Webcasts.  Subscribers to this program can download any slides, white papers, or supplemental material covered during all live webcasts.  50% discount for purchase of all Live webcasts and downloaded recordings. PAID UNLIMITED: Our most comprehensive and cost-effective plan, for a one-time fee:  Access to all LIVE Webcasts (Normally $199 to $349 for each event without a subscription). Including: Bring-a-Friend – Invite a client or associate outside your firm to attend for FREE. Sign up for as many webcasts as you wish.  Access to all of Recorded/Archived Events & Course Material includes 1,500+ hours of audio material (Normally $299 for each event without a subscription).  Free CLE/CPE/CE Processing3 (Normally $49 Per Course without a subscription).  Access to over 15,000 pages of course material from Knowledge Group Webcasts.  Ability to invite a guest of your choice to attend any live webcast Free of charge. (Exclusive benefit only available for PAID UNLIMITED subscribers.)  6 Month Subscription is $299 with No Additional Fees. Other options are available.  Special Offer: Sign up today and add 2 of your colleagues to your plan for free. Check the “Triple Play” box on the sign-up sheet contained in the link below. https://gkc.memberclicks.net/index.php?option=com_mc&view=mc&mcid=form_157964
  • 82. 82 October 24, 2014 Knowledge Group UNLIMITED PAID Subscription Programs Pricing: Individual Subscription Fees: (2 Options) Semi-Annual: $299 one-time fee for a 6 month subscription with unlimited access to all webcasts, recordings, and materials. Annual: $499 one-time fee for a 12 month unlimited subscription with unlimited access to all webcasts, recordings, and materials. Group plans are available. See the registration form for details. Best ways to sign up: 1. Fill out the sign up form attached to the post conference survey email. 2. Sign up online by clicking the link contained in the post conference survey email. 3. Click the link below or the one we just posted in the chat window to the right. https://gkc.memberclicks.net/index.php?option=com_mc&view=mc&mcid=form_157964 Discounts: Enroll today and you will be eligible for the “Triple Play” program and 3% off if you pay by credit card. Also we will waive the $49 CLE/CPE processing fee for today’s conference. See the form attached to the post conference survey email for details. Questions: Send an email to: info@knowledgecongress.org with “Unlimited” in the subject.
  • 83. 83 October 24, 2014 ABOUT THE KNOWLEDGE GROUP, LLC. The Knowledge Group, LLC is an organization that produces live webcasts which examine regulatory changes and their impacts across a variety of industries. “We bring together the world's leading authorities and industry participants through informative two-hour webcasts to study the impact of changing regulations.” If you would like to be informed of other upcoming events, please click here. Disclaimer: The Knowledge Group, LLC is producing this event for information purposes only. We do not intend to provide or offer business advice. The contents of this event are based upon the opinions of our speakers. The Knowledge Group does not warrant their accuracy and completeness. The statements made by them are based on their independent opinions and does not necessarily reflect that of The Knowledge Group‘s views. In no event shall The Knowledge Group be liable to any person or business entity for any special, direct, indirect, punitive, incidental or consequential damages as a result of any information gathered from this webcast. Certain images and/or photos on this page are the copyrighted property of 123RF Limited, their Contributors or Licensed Partners and are being used with permission under license. These images and/or photos may not be copied or downloaded without permission from 123RF Limited