Rules and Regulation Glossary

FINRA Rule 4140

Audit

FINRA Rule Series 12000

FINRA Code of Arbitration Procedure

FINRA Rule 12302

Filing a Claim - Only requirement is to specify the "relevant facts and remedies requested" - Must include a signed and dated submission agreement - Expedited Hearing - Claimant files the claim with FINRA along with required filing fees

FINRA Rule 4521

Notifications, Questionnaires and Reports

FINRA Rule 12513

Orders of Production - gives arbitrators the authority to order FINRA member firms and their employees and associated persons to produce documents and/or to appear as witnesses without using the subpoena process. - Rule 12512(a)(2) was amended to provide that arbitrators "shall" not issue subpoenas to non-party FINRA members and/or employees or associated persons at the request of FINRA members. Instead arbitrators should use orders of production or appearance to compel compliance

FINRA Rule 12514

Pre-hearing Exchange - At least 20 days before a hearing, both parties must: - Exchange the documents intended for use at the hearing - Exchange (and file with FINRA) a witness list identifying witnesses the party intends to call at the hearing - Failure to timely comply Rule 12514 requirements may result in the panel precluding parties from presenting documents or witnesses unless good cause exists - Good cause includes the use of documents or witnesses for rebuttal purposes

FINRA Rule 12800

Simplified Arbitration - Damages of $50,000 or less (exclusive of costs or interest) - Single arbitrator appointed - No hearing required - Claimant can request a hearing - Option one - regular hearing rules apply - Option two - a special proceeding subject to special provisions and limitations - Discovery is limited

Regulation T

The federal regulation governing the amount of credit that may be advanced by brokers and dealers to customers for the purchase of securities

FINRA Rule 4160

Verification of Assets

Regulation U

governs securities-based loans issued by non-broker-dealers

Form CRS

- Broker-dealers and investment advisers must file with the SEC and provide to retail investors a Form CRS relationship summary - Limited to two pages (four for dual registrants) that helps retail investors compare information about a firm's brokerage and/or investment advisory offerings Form CRS Must contain: - Link to Investor.gov/CRS SEC website - Types of customer relationships and services the firm offers - Fees, costs, conflicts of interest and standard of conduct related to those relationships and services - Disciplinary history of the firm and its financial professionals - How to obtain information about the firm - Must be written in plain language - Disclosure must be truthful and may not omit any material facts necessary to make the disclosures required "not misleading" "in light of the circumstances under which they were made" Initial delivery : - Broker-dealer - before or at the earliest of a recommendation of an account type, securities transaction, or an investment strategy involving securities, placing an order or opening a brokerage account - Investment adviser - before or at the time of entering into an investment advisory contract Additional delivery requirements apply - Recommending a rollover of assets - Other changes in account type/services - Upon request

FINRA NTM 20-18

- Effective June 30, 2020 - FINRA amended its rules to address potential inconsistencies between: The FINRA suitability rule (Rule 2111); The FINRA Capital Acquisition Broker (CAB) rule;The FINRA Non-Cash Compensation rules and Reg BI - FINRA Rule 2111 does not apply to recommendations that are subject to Reg BI - FINRA removed the element of control from the quantitative suitability obligation - FINRA conformed the CAB suitability rule to the amendments to Rule 2111 - FINRA amended Non-Cash Compensation rules (Rule 2310, 2320, 2341 and 5110) to ensure that the arrangements addressed therein are consistent with the applicable requirements of Reg BI

Discovery FINRA Rules

- FINRA Rule 12500 et seq. - FINRA Rule 12505 provides that the parties must cooperate in discovery - FINRA Rule 12506 - Document Production Lists - Documents on the "discovery guide" lists are presumptively discoverable - Parties must produce documents or file objections within 60 days of answer date - FINRA Rule 12508 - Parties can file additional discovery requests - Documents - Information requests - identification of individuals, entities, time periods, etc. - Standard interrogatories are generally not permitted - FINRA Rule 12509 permits motions to compel discovery when the opposing party: - Did not produce presumptively discoverable documents - Did not produce other documents requested - Filed written objections to the production of documents or information - Motions must include the disputed document request or list, a copy of any objection, and a description of the efforts of the moving party to resolve the issue before making the motion

Regulation NMS

- In 2005 the SEC reorganized existing regulations adopted in 1975 and added new regulations - Rule 611 - Order protection rule - Every exchange and ATS is required to adopt rules reasonably designed to prevent trade-throughs of "protected quotations" in NMS stocks - Protected quotations are the best publicly displayed bid and offer - Designed to protect investors entering market orders from receiving inferior prices - Rule 610 - prohibits locked or crossed quotations - Rule 612 - restricts quotes in increments of less than a penny

Insider Trading

- Is a violation of Section 10(b), Rule 10b-5 - The SEC defines illegal insider trader as: Buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security - Premised on some type of duty - Tipper and tippee liability - Misappropriation theory Individuals with a duty or relationship of trust and confidence to the corporation or shareholders must either disclose that information prior to trading the securities, or abstain from trading in the affected or related securities

Regulation SHO

- SEC Rule 203(b) requires all broker-dealers to "locate" or borrow securities before executing short sales and to deliver upon close-out positions in which sort sellers have prolonged fails to deliver - Locate the shares prior to executing short sales - Delivery requirements for closing out short positions - Document compliance with the rule - Prohibits "naked" short selling - Can be used to manipulate market prices - Prior rules required "affirmative determination" that the member could borrow the securities - Bona fide market makers are exempt

Section 11 Liability (Securities Act)

- Section 11 liability arises from the contents of a registration statement that has been declared effective by the SEC - Underwriters, any persons who sign the registration statement and any expert who helps prepare the registration statement are jointly and severally liable for violations - To recover, the purchaser need only establish that the assertion or assertions in the registration statement were misrepresentations or omitted information required to be included - Does not require proof of scienter. Unintentional or negligent material misrepresentations or omissions are enough - Incentivizes underwriters to exercise a high degree of care in investigations and independent verification of the companies

Section 12 Liability (Securities Act)

- Section 12(a)(1) - imposes strict liability against any person who offers or sells a security in violation of § 5 of the Securities Act as a statutory seller - Section 12(a)(2) - antifraud provision for material misstatements and omissions made in the prospectus, or in an oral communication, in connection with a public offering.

FINRA Rule 5310 Best Execution Obligation

- The character of the market for the security (e.g., price, volatility, relative liquidity and pressure on available communications) - The size and type of transaction - The number of markets checked - Accessibility of the quotation - The terms and conditions of the order which result in the transaction, as communicated to the member and persons associated with the member

Hypothecation Rule Section 8c-1 and Section 15c-2

- adopted to limit the amount of customer securities that may be hypothecated and to prohibit hypothecation of customer securities that have been paid for in full without the customer's consent - Allows broker-dealers to borrow or loan securities in customer margin accounts up to the value of the amount the customer borrowed - Limited by the customer protection rule

Sarbanes-Oxley Act

- required the SEC to address conflicts of interest involving research analysts and investment banking personnel - established sweeping auditing and financial regulations for public companies. Lawmakers created the legislation to help protect shareholders, employees and the public from accounting errors and fraudulent financial practices. - mandated that each periodic report containing financial statements which is filed with the SEC be accompanied by the certification of the CEO and CFO that: - the report fully complies with the requirements Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); and - the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer

FINRA Rules 2241 and 2242

2241 Applies to equity securities, and 2242 applies to debt securities. Requires Firms to establish policies and procedures to effectively manage conflicts of interest relating to research analyst activities - Prohibits investment banking involvement in virtually all research analyst activities including: - Pre-publication review of reports - Research coverage decisions - Research Analyst compensation - Research Department budget - Prohibits research analysts from participation in investment banking activities including: - Solicitation and Marketing of Investment Banking transaction - Due diligence prior to selection of underwriter for transaction - Established information barriers drawn from Sarbanes Oxley - Prohibits retaliation for unfavorable research - Restricts research analyst trading in covered securities - Prohibits promise of favorable research as inducement for business - Provides for lengthy disclosures in research reports - Establishes rules relating to third-party research

Maloney Act of 1938

Allowed self-regulation of securities industry through trade associations such as the National Association of Securities Dealers (NASD)

FINRA Rule 12303

Answering a Statement of Claim (SOC) - FINRA serves the SOC by mail or through the FINRA portal - The answer must specify the "relevant facts and available defenses" - Signed submission agreement - Answer due within 45 days of receipt of the SOC unless an extension is granted

FINRA Rule 3310

Anti-Money Laundering - requires broker-dealers to have an anti-money laundering compliance program reasonably designed to achieve and monitor the member's compliance with the requirements of the Bank Secrecy Act - Must establish and implement policies and procedures - Annual independent testing - Designate and identify the individual responsible for AML program - Provide ongoing training - Develop risk-based procedures for conducting ongoing customer due diligence including: - Understanding the nature and purpose of customer relationships for risk profile - Conducting ongoing monitoring to identify and report suspicious transactions

FINRA Rule 12405

Arbitrator Disclosures An arbitrator must disclose if he has - Any direct or indirect financial or personal interest in the outcome of the arbitration - Any existing or past financial, business, professional, family, social, or other relationships or circumstances with related parties that are likely to affect impartiality or might reasonably create an appearance of partiality or bias; - Any such relationship involving family/business associates - Any existing or past service as a mediator for the parties in the case

FINRA Rule 12400

Arbitrator Selection - Neutral list selection - Arbitration rosters - public, non-public, and chairperson Rule 12401 provides that for: - Claims of $50k or less - one arbitrator - Claims of more than $50k up to $100k - one arbitrator unless the parties agree in writing to three arbitrators - Claims over $100k or does not request money damages - three arbitrators unless the parties agree in writing to one arbitrator Rules 12400-12404 lay out the striking and ranking of arbitrators

FINRA Rule 4110

Capital Compliance

Securities Exchange Act Section 21(a)(1)

Contains the authority and discretion of Commission to investigate violations

FINRA Rule 12511

Discovery Sanctions - provides for discovery sanctions when a party has failed to comply with its discovery obligations Potential penalties include: - Assessing monetary penalties - Assessing postponement and/or forum fees - Assessing attorneys' fees or costs - Precluding a party from presenting evidence - Making an adverse inference against a party - Dismissing a claim, defense or proceeding with prejudice - Making a disciplinary referral to FINRA upon conclusion of the arbitration

FINRA Rule 12504

Dispositive Motion - Rule 12504(a) - motions to dismiss prior to the conclusion of a party's case in chief are discouraged and may only be decided by the arbitrators under limited circumstances: - (A) the non-moving party previously released the claim(s) in dispute by a signed settlement agreement or written release - (B)the moving party was not associated with the account(s), security(ies), or conduct at issue; or - (C) the non-moving party previously brought a claim regarding the same dispute against the same party that was fully and finally adjudicated on the merits and memorialized in an order, judgment, award, or decision - Rule 12504(b) states that motions to dismiss after the case in chief are not subject to the provisions of paragraph (a)•The primary motions filed after the case in chief concludes are based on the statute of limitations - Rule 12504(c) - provides for motions to dismiss based on the eligibility rule - Rule 12504(d) - provides for motions to dismiss based on failure to comply with any provision of the Code or a Panel order - Rule 12504(e) - provides for motions to dismiss based on discovery abuse

Securities and Exchange Act Section 17 Rules 17a-3, 17a-4, 17a-5 and 17a-11

Financial Recordkeeping/Reporting - Broker-dealers must make and keep current books and records detailing, among other things, securities transactions, money balances, and securities positions - Broker-dealers must keep records for required periods and furnish copies of those records to the SEC upon request - Broker-dealers must file with the SEC periodic reports, including quarterly and annual financial statements. The financial statements generally must be certified by an independent public accountant - Broker-dealers must notify the SEC and FINRA regarding net capital, recordkeeping, or other operational problems, and in some cases file reports regarding those problems within certain time periods

FINRA Rule 2111(b)

Institutional Customer Suitability A member or associated person fulfills the customer-specific suitability obligation for an institutional account, as defined in Rule 4512(c), if - (1)the member or associated person has a reasonable basis to believe that the institutional customer is capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies involving a security or securities and - (2)the institutional customer affirmatively indicates that it is exercising independent judgment in evaluating the member's or associated person's recommendations. Where an institutional customer has delegated decision-making authority to an agent, such as an investment adviser or a bank trust department, these factors shall be applied to the agent

FINRA Rule 2010

Just and Equitable Principles of trade - Requires that a firm "in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade." - Used to cover any unethical activity not explicitly covered by the securities laws or other FINRA rules - Attempting to introduce a FINRA no-action letter to prove that no misconduct occurred•Interfering with the transfer of customer cost basis information - "Tying" arrangements •Cheating on a FINRA exam - Other conflicts of interest

FINRA Rule 4210

Margin Maintenance Requirement - Requires minimum equity of $2,000 to establish a margin account - Establishes margin maintenance requirements - 25% maintenance requirement for most long marginable securities - Establishes maintenance requirements for short sales as well (g) regulates portfolio

Securities Exchange Act Section 8(b)

Net Capital Rule - Required broker-dealers to keep one dollar of net capital for every $20 of indebtedness - Only applied to broker-dealers who were members of national exchanges

FINRA Rule 2510

No member or registered representative shall exercise any discretionary power in a customer's account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member, as evidenced in writing by the member or the partner, officer or manager, duly designated by the member, in accordance with Rule 3010.

FINRA Rule 3270

Outside Business Activities of Registered Persons No registered person may be an: - employee, - independent contractor, - sole proprietor, - officer, - director or partner of another person, or - Be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, - Unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of Rule 3280 shall be exempted from this requirement.

SEA Section 11A(a)(1)(c)

Overview - Economically efficient execution of transactions - Fair competition among market participants, including broker-dealers and exchanges - Ready availability of quotation and transaction information to broker-dealers and investors - The ability of broker-dealers to execute transactions in the best market - Opportunities for investors to execute orders without the participation of a dealer Rules within Section 11A - Rule 11Ac1-1 (now Rule 602) requires SROs to make the best bids and offers in their trading systems continuously available to quotation vendors - Rule 11Ac1-2 (now Rule 603) requires a securities information processor (SIP) display transaction and quote information on a consolidated basis - Rule 11Aa3-1 created the Consolidate Tape Association as a SIP for transaction and quote data for listed securities - Rule 11Ac1-3 (now Rule 607) requires disclosures about payment for order flow - Rule 11Ac1-5 (now Rule 605) requires venues to publish execution information - Rule 11Ac1-6 (now Rule 606) requires disclosure of information about routing decisions - Rule 11Ac1-4 (now Rule 604) requires a market maker to publish the price and size of customer orders that improve the quote

FINRA Rule 3280

Private Securities Transaction Rule: Prior to participating in any private securities transaction, an associated person shall provide written notice to the member with which he is associated describing in detail - the proposed transaction and - the person's proposed role therein and - stating whether he has received or may receive selling compensation in connection with the transaction; - provided however that, in the case of a series of related transactions in which no selling compensation has been or will be received, an associated person may provide a single written notice.

Securities and Exchange Act 15(c)3-3 Customer Protection Rule

Purpose: Protects customer funds and securities held by broker-dealers by, in effect, forbidding broker-dealers from using customer assets to finance any part of their business activities unrelated to servicing customers - Applies to carrying and clearing broker-dealers - "Customer" is any person from whom or on whose behalf a broker-dealer had received or acquired or holds funds or securities for the account of that person A broker-dealer must have possession or control of all fully-paid and excess margin securities held for the account of customers, and determine daily that it is in compliance with this requirement - Accomplished by segregating fully paid for securities as well as securities carried in customer margin accounts that have no loan value for margin purposes - Also includes securities carried in a margin account having a market value in excess of 140 percent of the total debit balance in the customer's account

Investment Advisers Act of 1940

Regulates registered investment advisers (IA) - Investment Advisers charge a fee for investment advice - The Act itself does not make Investment Advisers fiduciaries - Courts interpreting SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963) have imposed a fiduciary duty on Advisers - Advisers Act Rule 202(a)(11)-1 - Broker-dealer excluded from the definition of Investment Adviser if the advisory services provided are solely incidental to the conduct of their brokerage activities and for which they receive no special compensation 1. Some consequences of becoming an Investment Adviser are: Higher duty of disclosure; Duty to monitor and give ongoing investment advice; Prohibition on principal transactions

Securities Act of 1933 (Securities Act)

Regulates the issuance of securities, by requiring registration and disclosure - "Truth in securities law" Primary Purpose - require that investors receive financial and other significant information concerning securities being offered for public sale - to prohibit deceit, misrepresentations and other fraud in the sale of securities Overview: - Sections 5 and 8 - procedures for registration - Sections 7 and 10 - specify the information that must be disclosed - Sections 3 and 4 - specify the types of securities and securities transactions that are exempt from registration under Section 5 - Sections 11 and 12 - set forth the liability provisions arising from failing to comply with Section 5 as well as material misrepresentations and omissions in offering documents - Section 17 - prohibits fraudulent or deceitful practices

FINRA Rule 4120

Regulatory notice and business curtailment

FINRA Rule 4530

Reporting Requirements Requires members to report certain events to FINRA - What information/events must be reported? o Regulatory enforcement actions o Customer complaints o Certain business dealings o Certain criminal actions, civil complaints, and arbitration/litigation claims o Statutory disqualification events o Certain specified allegations and quarterly statistical and summary information regarding written customer complaints o Open internal investigations when an individual leaves the firm o Internal discipline where the individual is fined >$2,500, or any other significant limitation on activities o Termination disclosures - Such filings are typically due within 30 days from the date of the reportable event - Reporting requirements are the responsibility of both the broker-dealer and the registered representative

Securities Exchange Act Section 15(c)(3) Uniform Net Capital Rule

Requires a broker-dealer to have enough liquid assets to promptly satisfy the claims of customers if the broker-dealer goes out of business Requires two primary calculations: - Computation of required minimum net capital - Computation of actual net capital To be used: - Broker-dealers must meet minimum net capital levels based upon the type of securities activities they conduct and based on certain financial ratios - A broker-dealer must ensure that its actual net capital exceeds its required minimum net capital at all times

Compliance Obligation

Requires broker-dealers to establish, maintain and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI - A risk based approach is acceptable - Provides flexibility to tailor to accommodate different business models - The SEC will examine a Firm's compliance with Regulation BI - The SEC can bring Reg BI charges against broker-dealers for policies and procedures violations in the absence of an underlying Reg BI violation Record Retention Requirements - Retain a record of all information collected from and provided to the retail customer pursuant to Reg BI whether orally or in writing - Refusal or inability by a retail customer to provide or update any such information excuses the BD from obtaining that information - Does not require that the BD create and maintain records to evidence Reg BI best interest determinations on a recommendation-by-recommendation basis

Rule 10b-5

Rule 10b-5, promulgated pursuant to Section 10(b), provides that it shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly... - (a) to employ any device, scheme, or artifice to defraud - (b) to make any untrue statement of material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were make, not misleading; or - (c) to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security Elements of a 10b-5 claim: - The defendant made a material misstatement or omission - The misstatement or omission was made with an intent to deceive, manipulate or defraud (scienter) - There is a connection between the misrepresentation or omission and the plaintiff's purchase or sale of a security - The plaintiff relied on the misstatement or omission - The plaintiff suffered economic loss; and 2. There is a causal connection between the material misrepresentation or omission and the plaintiff's loss

FINRA Rule 12512

Subpoenas - 12512(a) encourages parties, to the extent possible, to make witnesses available and request documents without the use of subpoenas Arbitrators have the authority to issue subpoenas for the production of documents or the appearances of witnesses - Subpoenas may be issued to a party or non-party - Parties must make a written motion requesting a subpoena - The other side has 10 days to object - Notification requirement within 5 days of receipt

FINRA Rule 2111(a)

Suitability A member or an associated person must have a reasonable basis to believe— - That a recommended transaction or investment strategy involving a security or securities is suitable for the customer, - Based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile. A customer's investment profile includes, but is not limited to— - The customer's age, - Other investments, - Financial situation and needs, - Tax status, •Investment objectives, - Investment experience, - Investment time horizon, - Liquidity needs, - Risk tolerance, and - Any other information the customer may disclose to the member or associated person in connection with such recommendation

FINRA Rule 12904

The Award - All awards shall be in writing and signed by a majority of the arbitrators - The panel will endeavor to render an award within 30 business days, however, it can and occasionally does, take longer - The Award can, but generally does not, contain a rationale unless an explained decision is requested by both parties - The Award is final unless appealed - The Award must be paid within 30 days of receipt unless a motion to vacate has been filed in court - FINRA can initiate expedited suspension proceedings against a firm or broker if the award is not timely paid

Care Obligation

The Care Obligation requires Broker Dealers to exercise reasonable diligence, care and skill to: - Understand the risks, rewards, and costs associated with a recommendation, and have a reasonable basis to believe that the recommendation could be in the best interest of at least some retail customers; - Have a reasonable basis to believe that a recommendation is in the best interest of a particular retail customer based on the customer's investment profile and the potential risks, rewards, and costs associated with the recommendation; and - Have a reasonable basis to believe that a series of recommended transactions is not excessive and is in the retail customer's best interest

Form BD

Uniform Application for Broker-Dealer Registration - The Form BD is the Uniform Application for Broker-Dealer registration with the SEC, SROs and jurisdictions. It provides background information on the applicant and the nature of its business.

Form U4

Uniform Application for Securities Industry Registration or Transfer - Used to register new individuals and register existing licensed individuals under a different employee - Information Included: o Includes Personal information such as name, date of birth, SSN, and address history. An applicant will also need to provide her fingerprints, which are used by FINRA to conduct an extensive background check. o All felony charges and convictions, theft-related misdemeanors, bankruptcies, and/or financial judgments against the applicant must be disclosed. Misdemeanors for non-theft-related crimes do not need to be reported, only theft-related misdemeanor convictions. - Forms are completed by the individual, and sponsored by the employing firm. Forms are filed electronically by the employing firms using the Central Registration Depository - The U4 is completed and submitted electronically via the Central Registration Depository (CRD), or via the Investment Advisor Registration Depository (IARD).

Form U5

Uniform Termination Notice for Securities Industry Registration - Used by a firm to terminate a representative's registration in a particular jurisdiction or with a particular self-regulatory organization - The employee's termination may be voluntary or involuntary - After a U5 form is filed, the license will be inactive status unless that person re-registers with a different member firm. A person's license can remain inactive for up to two years. After those two years, a person would have to retake the FINRA exams. - Information included o Whether the individual being terminated was under internal review for fraud, wrongful taking of property, or investment-related statues, regulations, rules or industry standards of conduct o Whether the individual voluntarily resigned or was discharged/terminated after allegations were made against them of: violating investment-related statutes, rules, or industry standards of conduct; fraud or the wrongful taking of property; failure to supervise in connection with investment-related statutes, regulations, rules or industry standards of conduct

Regulation ATS

Written by the SEC in 1998 to address growth of ECNs Requires ATSs to register with the SEC and be regulated as broker-dealers - Adopted in 1998 to regulate non-exchange trading venues known as alternative trading systems (ATS) - Establishes a regulatory framework - Provides an exemption from registration as an exchange if certain conditions are met: - Broker-dealer status - Does not conduct self-regulatory activities - Name limitations - 2018 amendments to increase transparency

Dodd Frank Act

a law enacted in the aftermath of the financial crisis of 2008-2009 that strengthened government oversight of financial markets and placed limitations on risky financial strategies such as heavy reliance on leverage

FINRA Rule 4220

contains prescribed recordkeeping and reporting requirements

Regulation W

governs transactions with Affiliates

FINRA Rule 2020

no member shall effect any transaction, or induce the purchase or sale of, any security by means of any manipulative, deceptive or other device or contrivance."

Regulation B

prohibits lenders from discrimination in credit transactions

Securities Act of 1934 (Securities Exchange Act)

regulates secondary market practices and established the SEC. requires sellers of securities to register as broker-dealers, created regulated securities exchanges and defined the duties of companies whose securities are traded among investors. Primary Purpose: - Register, regulate and oversee brokerage firms, transfer agents, and clearing agencies as well as the self regulatory organizations (SROs) - Regulate securities transactions on the secondary market, ensuring greater financial transparency and less fraud or manipulation - Created the Securities and Exchange Commission Key Provisions: - Section 4 - Established the SEC - Section 7 - Margin Regulation - Section 9 - Prohibits market manipulation by traders - Section 10, Rule 10b-5 - Manipulative and deceptive devices - Section 15, Rule 15c3 - Registration and Net Capital Rules - Section 17 - Books and Records

FINRA Rule 4230

requires clearing broker-dealers to file monthly reports indicating all broker-dealers for which it clears that have overall ratios of extensions of time to meet margin calls to total transactions for the month that exceed a percentage specified by FINRA (currently 2%)

The Banking Act of 1933 (Glass Steagall Act)

separated commercial and investment banking Prohibited commercial banks from selling stock or financing corporations; created FDIC

FINRA Rule 2268

sets forth requirements when using a PDAA - Pre-dispute arbitration clauses must be highlighted - Contains language that must be included in a PDAA - Limits or contradicts the rules of any self-regulatory organization - Limits the ability of a party to file any claim in arbitration - Limits the ability of a party to file any claim in court permitted to be filed in court under the rules of the forum in which a claim may be filed under the agreement - Limits that ability of arbitrators to make any award

Rule 4220

specifies daily recordkeeping requirements of initial and maintenance margin calls issued by broker-dealers