What is FINRA Rule 3110?

FINRA Rule 3110, also known as the Supervision Rule, requires securities firms to establish and maintain a system to supervise the activities of their associated persons, such as brokers and investment advisors. This supervision aims to ensure compliance with applicable securities laws, regulations, and FINRA rules.

Here are the key points of FINRA Rule 3110:

• Main Objective: Establish a reasonably designed supervisory system to prevent violations and promote compliance.

• Scope: Applies to all member firms of FINRA and covers the activities of all associated persons.

• Key Requirements:

  • Written Supervisory Procedures (WSPs): Firms must create and enforce WSPs tailored to their business activities and associated persons.

  • Supervision of Supervisory Personnel: WSPs must address how supervisors themselves are supervised to avoid conflicts of interest.

  • Transaction Review: WSPs must include procedures for reviewing transactions for compliance with rules and suitability for customers.

  • Correspondence and Communication Review: Firms must review internal communications and correspondence for potential red flags.

  • Customer Complaint Review: Establish procedures for handling and investigating customer complaints.

• Ultimate Responsibility: The member firm bears the ultimate responsibility for ensuring proper supervision.

Important Note: FINRA Rule 3110 is quite complex and contains several nuances. This summary provides a high-level overview. For a more detailed understanding, consult our law firm and the official FINRA Rules and relevant interpretive materials:

• Rule Text: https://www.finra.org/rules-guidance/rulebooks/finra-rules/3110

• Supervision Overview: https://www.finra.org/rules-guidance/rulebooks/finra-rules/3000

• Supervision FAQs: https://www.finra.org/rules-guidance/key-topics/supervision/faq