Amended FINRA Rule also addresses methods of services to unregistered persons, among other things.

[ by Howard Haykin ]

FINRA is adopting amendments to FINRA Rule 82101 that will:  (i) clarify the scope of FINRA’s authority under Rule 8210 to inspect and copy the books, records and accounts of member firms, associated persons and persons subject to FINRA’s jurisdiction;  (ii) specify the method of service for certain unregistered persons under the rule; and,  (iii) authorize service of requests under the rule on attorneys who are representing firms,  associated persons or persons subject to FINRA’s jurisdiction.  The changes are scheduled to become effective on 2/25/13. 

Background & Discussion.   Under FINRA Rule 8210, the regulator has the authority to inspect and copy the books, records and accounts of member firms, associated persons and other persons over whom FINRA has jurisdiction. 

As amended, the rule now specifies that FINRA staff and adjudicators have the right to inspect and copy information in the “possession, custody or control” of the member firm, associated person or person over whom FINRA has jurisdiction. 

FINRA added the phrase “possession, custody or control” to link this concept to the existing body of case law that has defined possession, custody or control as used in Rule 34 of the Federal Rules of Civil Procedure 

- e.g.,  in using the word “control,” the amended rule requires firms, associated persons and other persons over whom FINRA has jurisdiction to provide records that they have the legal right, authority or ability to obtain upon demand. 

FINRA also added Supplementary Material .01 to address what books, records and accounts are covered by the rule. 

The broad scope of books, records and accounts covered by the rule includes records relating to a FINRA investigation of outside business activities, private securities transactions, and possible violations of just and equitable principles of trade, other FINRA rules, MSRB rules and the federal securities laws.

The Supplementary Material further indicates that all aspects of the relationship between a broker-dealer and its associated persons are potentially the subject of a Rule 8210 request.

The amended rule addresses how FINRA staff or an adjudicator serves a Rule 8210 request ...  on an associated but unregistered person. The CRD generally does not contain addresses for unregistered persons. 

The amended rule therefore allows service at a business address or a home address. FINRA will send a Rule 8210 request to a firm’s business address when an unregistered person is associated with the firm. FINRA will personally serve an unregistered person who is not currently associated with a firm.

The amended rule allows FINRA to serve a Rule 8210 request on the attorney for a member firm, associated person or person subject to FINRA’s jurisdiction. The amended rule provides that, if FINRA staff or an adjudicator knows that a firm, associated person or person subject to FINRA’s jurisdiction is represented by counsel regarding the matter in question, notice of a Rule 8210 request will be provided to counsel rather than to the client.

It is accordingly the responsibility of a firm, associated person or person subject to FINRA’s jurisdiction to communicate clearly to FINRA staff when they are being represented by an attorney in responding to a Rule 8210 request.  When FINRA sends a Rule 8210 request to counsel, counsel receives it as the authorized agent for the firm, associated person or person subject to FINRA’s jurisdiction. In this situation, service of the request on counsel is treated the same as service on the client.

FINRA Staff Contacts.   Direct questions to:   Alan Lawhead, VP and Director, Appellate Group, at (202) 728-8853; or  Matthew Vitek, Asst GC, Office of General Counsel, at (202) 728-8156.

For further details, go to:   [ FINRA RegNote 13-6, January 2013 ].