FINRA Conduct Rules - Rules and By-Laws of FINRA

FINRA outlines its four purposes in its articles of incorporation.

  • FINRA seeks to promote the financial industry by encouraging its members to uphold the highest ethical standards.
  • FINRA seeks to develop lines of communication between the securities industry and governmental agencies that protect the public and encourage an exchange of information and ideas.
  • FINRA has the power to write and enforce rules for its members to promote fair practices and to reduce fraudulent dealings with the public.
  • FINRA seeks to police its members and assist in settling disputes with the public or between members.

FINRA By-Laws
FINRA Bylaws require that no member shall permit any person associated with the member to engage in the investment banking or securities business unless the member determines that such person satisfies the qualification requirements established in the Bylaws. Each member and associated person must file an application with the FINRA, pay required dues and agree to abide by all FINRA conduct rules. Each associated person must complete t and sign form U4 to begin their association with the member firm.

When terminating an associated person, the member must notify the FINRA via electronic process within 30 days, and must provide a written copy of that form known as form U5 to the terminated associated person within that time. Failure to do so results in a late filing penalty. If complaints are open against the associated person, the termination is not accepted until these complaints have been resolved.

Furthermore, even after termination of registration, the FINRA retains jurisdiction over the member or associated person for two years. This time frame allows the FINRA to file complaints against them for behavior that occurred prior to the termination.

Membership and Registration Rules
When registering with the FINRA, a person must register as either a principal or a representative. A principal is actively involved in the management of a broker-dealer's securities or investment banking business. A principal may also have supervisory or training responsibilities for registered representatives, and new representatives must go through a carefully planned training program.

A registered representative must be associated with a member (broker-dealer) and be supervised by a principal. Anyone who is associated with a member and who is engaged in the investment banking or securities business for the member, (including the functions of supervision, solicitation or conduct of business in securities), or who is engaged in the training of persons associated with a member for any of these functions, is designated as a representative and must be registered. This includes all assistant officers besides principals.

A General Securities Representative holds a Series 7 license, which permits transacting individual securities such as stocks and bonds, as well as mutual funds and other securities. However, a person who plans to sell only mutual funds and/or variable contracts registers as a Limited Securities Representative (Series 6).

To become registered, the individual must pass the appropriate qualification exam. Such exams are considered highly confidential. As such, the removal from an examination center, reproduction, disclosure, receipt from or passing to any person, or use for study purposes of any portion of such a qualification examination, is prohibited and is deemed a violation of Rule 2110. This rule includes all exams, whether of a present or past series, or any other use which would compromise the effectiveness of the examinations.

Not all employees of the member must register. Employees of a member who meet the following criteria do not have to register as a representative:

  • Those whose responsibilities are merely clerical or ministerial
  • Those not actively involved in either investment banking or securities business
  • Those whose functions are exclusively who affect transactions on the floor of a national securities exchange and who are registered as floor members with such an exchange
Standards of Commercial Honor and Principles of Trade


Related Articles
  1. Fundamental Analysis

    FINRA: How It Protects Investors

    Find out the history of FINRA, and how it's organized to monitor the markets and protect investors.
  2. Professionals

    SEC's CARDS Plan Creates Controversy for Brokers

    The securities industry isn't happy with the hand it may be dealt with the SEC's proposed CARDS rules.
  3. Financial Advisors

    Why Financial Advisor Background Checks Are Vital

    An alliance of public interest groups is pressuring FINRA to broaden its BrokerCheck tool.
  4. Trading Systems & Software

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
  5. Professionals

    Understanding Series 6

    Upon successful completion of the Series 6, an individual will have the qualifications needed to sell open end mutual funds and variable annuities
  6. Your Practice

    Expect FINRA to Ask These Culture Questions

    This month, FINRA kicks off its culture examinations for brokerage firms. Here's how to cram for the test.
  7. Investing News

    Elizabeth Warren: FINRA Too Lax on Bad Advisors

    Two senators have sent a letter to FINRA's CEO that maintains the regulator is not doing enough to protect investors from bad advisors.
  8. Professionals

    The Difference Between Series 63, 65 and 66

    After passing the first core examination, usually the FINRA Series 6 or Series 7, one hurdle remains. That’s the Series 63, 65 or 66.
  9. Professionals

    Introduction To The Series 65 Exam

    The Series 65 is required in many states in order to be a fee-based advisor. Find out what it is and whether you need it.
  10. Investing Basics

    How Does Your Stockbroker Rank?

    Evaluate your broker by more than current performance. Here's how to find their history, including any formal complaints or legal actions against them.
RELATED TERMS
  1. Series 11 License - Assistant Representative ...

    A securities license, administered by the Financial Industry ...
  2. Financial Industry Regulatory Authority ...

    A regulatory body created after the merger of the National Association ...
  3. Series 27

    A securities license entitling the holder to become a chief financial ...
  4. Rules Of Fair Practice

    A set of rules and regulations developed by the National Association ...
  5. Series 7

    A general securities registered representative license administered ...
  6. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
RELATED FAQS
  1. I have already obtained my Series 7; however, I am no longer working for a member ...

    According to the Financial Industry Regulatory Authority or FINRA, (previously the National Association of Securities Dealers ... Read Answer >>
  2. I want to start my own brokerage company, how do I become a member of FINRA?

    Before you read on, note that the Financial Industry Regulatory Authority (FINRA), (previously the National Association of ... Read Answer >>
  3. Do financial advisors need to be approved by FINRA?

    Learn about whether a financial advisor may be required to be approved by FINRA, and what exams a financial advisor needs ... Read Answer >>
  4. What are the differences between the Series 6 exam and the Series 7 exam?

    Learn about the regulatory exams needed to become a limited or registered representative and the main differences between ... Read Answer >>
  5. If my employment with my current firm terminates relatively soon, do I have two years ...

    Yes. When your employment ends with the current firm, your registration with the Financial Industry Regulatory Authority ... Read Answer >>
  6. Is it possible to take the Series 6 exam without being sponsored?

    Unfortunately, the answer to this question is "No." The Financial Industry Regulatory Authority or FINRA (previously the ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center