What is Failure to Supervise – FINRA Rule 3110?
According to the Financial Industry Regulatory authority (FINRA) FINRA Rule 3110 (Failure to Supervise) requires a firm to establish and maintain a system to supervise the activities of its associated persons that is reasonably designed to achieve compliance with the applicable securities laws and regulations and FINRA rules.
The rule details requirements for a firm to have reasonably designed written supervisory procedures (WSPs) to supervise the activities of its associated persons and the types of businesses in which it engages.
Among other things, a firm’s WSPs must address supervision of supervisory personnel and provide for the review of a firm’s investment banking and securities business, correspondence and internal communications, and customer complaints. WSPs should describe:
the specific individual(s) responsible for each review,
the supervisory activities such persons will perform,
the frequency of the review, and
the manner of documentation.
The rule further sets forth requirements to designate and register branch offices and offices of supervisory jurisdiction (OSJs), conduct internal inspections and review transactions for insider trading.
Firms must also adopt procedures that include a means of customer confirmation for certain transactions such as transmittal of customer funds, changes in address, and changes in investment objectives.
Yesterday, San Antonio-based broker-dealer Investment Professionals Inc. has been censured and fined $170,000 by the Financial Industry Regulatory Authority, for more on the story, click here.
If you invested with suspicious broker and would like to speak to a securities attorney to determine if your brokerage firm may be liable for your investment losses, please call the securities attorneys of The White Law Group at 888.637.5510 for a free consultation.
This information is provided by The White Law Group, a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. For more information on The White Law Group, visit https://www.whitesecuritieslaw.com.