Home      Print This Page

FINRA (NASD & NYSE) RULE QUICKGUIDE

This quick guide is intended to help those interested in quickly finding selected NASD (FINRA) Conduct Rules and Notices related to common litigation topics. This guide does not include all NASD (FINRA) rules, sections or Notices to Members and may become out-of-date as new rules are adopted. Reference the NASD (FINRA) manual on www.finra.org for the most complete and up-to-date information. See also the "Notice to Members" section on the FINRA website.

NASD Conduct Rule 2110 – Standards of Commercial Honor and Principles of Trade
Notice to Members: 06-11, 96-44

“A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.”

Interfering with the transfer of customer accounts in the context of employment disputes – Trading ahead of research reports - Trading ahead of limit orders – Front running

NASD Conduct Rule 2120 – Use of Manipulative, Deceptive or Other Fraudulent Devices
See also: SEC Rule 10b-5 Employment of manipulative and deceptive devices

NASD Conduct Rule 2130 – Expungement of a Customer Dispute from the CRD
Notice to Members: 4-16

NASD Conduct Rule 2210 – Communications with the Public
Notice to Members: 06-48, 04-36, 03-38, 00-22, 00-15, 99-16, 98-83
Refers to sales literature, not individual letters - Public communications not misleading – Variable annuity and variable life insurance – Requirements for the uses of investment analysis tools – Limitations on the use of the FINRA’s name – Mutual fund rankings – CMOs – May not predict or project performance

NASD Conduct Rule 2310 – Recommendations to Customers (Suitability)
Notice to Members: 05-59, 01-23, 96-86, 96-60, 90-52, 90-12

This rule includes suitability standards related to the recommendation of a purchase, sale or exchange of securities. Sections include: low priced securities - excessive trading - trading in mutual fund shares - fraudulent activity - discretionary accounts - unauthorized transactions - misuse of customer funds - recommendations beyond customer financial capacity and fair dealing regarding derivative or new financial products.

NASD Conduct Rule IM-2310-2 – Fair Dealing with Customers
Notice to Members: 96-60, 96-32, 95-21, 94-62, 90-52

“Sales efforts must be judged on the basis of whether they can be reasonably said to represent fair treatment for the persons to whom the sales efforts are directed, rather than on the argument that they result in profits to customers.”

NASD Conduct Rule 2330 – Customers’ Securities or Funds
Notice to Members: 03-21, 01-24, 94-93, 88-55, 86-74, 83-74, SEC Rules: 8c-1, 15c3-3

Sections include: Improper use of customer funds – Guaranteeing a customer against loss – Sharing in customers’ profits or losses – Segregation of customer’s securities – Authorization to lend

NASD Conduct Rule 2340 – Customer Account Statements
Notice to Members: 06-68, 06-60, 01-08, 97-14, 94-96, 92-60, 92-30

This rule covers the rules relating to the frequency and content of customer statements.

NASD Conduct Rule 2350 – Broker / Dealer Conduct on the Premises of Financial Institutions
Notice to Members: 97-89, 97-26, 96-3, 94-94

This rule covers broker/dealer services in institutions where retail deposits are taken.

NASD Conduct Rule 2360 – Approval Procedures for Day-Trading Accounts
Notice to Members: 00-62

NASD Conduct Rule 2370 – Borrowing From or Lending to Customers
A registered representative may not borrow money form or lend money to a customer

NASD Conduct Rule 2440 – Fair Prices and Commissions

This rules concerns issues of commissions and markups including the 5% markup policy.

NASD Conduct Rule 2510 – Discretionary Accounts
Notice to Members: 04-71, 93-1, 92-25, 91-80, 83-30

This rule covers the requirement for prior written discretionary authorization from the client. It also covers issues of excessive transactions, account acceptance and transaction approval and review.

NASD Conduct Rule 2520 – Margin Requirements
Notice to Members: 07-14, 07-11, 06-26, 03-66, 01-26, 01-11, 00-51, 93-23

NASD Conduct Rule 2810 – Direct Participation Programs
Notice to Members: 95-64, 95-63, 94-70, 94-24, 93-44, 93-15, 91-78, 91-56, 89-16, 86-81, 86-77, 86-66, 85-29, 85-17, 84-64, 84-28

These securities are commonly known as limited partnerships and are often considered to be speculative due to their lack of liquidity.

NASD Conduct Rule 2820 – Variable Contracts of Insurance Company
Notice to Members: 01-63, 00-44, 99-103, 99-55, 99-35, 98-75, 97-50, 97-48, 97-27, 96-86, 95-56, 96-52, 94-67, 91-68, 91-25, 88-17

This section covers the rules and requirements for Variable Annuities and Variable Life Insurance.

NASD Conduct Rule 2830 – Investment Company Securities
Notice to Members: 05-04, 00-53, 99-103, 99-55, 98-75, 97-50, 97-48, 95-56, 95-36, 94-67, 94-41, 94-16, 94-14, 94-13, 93-82, 93-52, 93-12, 92-41, 91-86, 89-51, 88-96, 84-40, 83-31

This rule relates to mutual funds, variable annuities and variable insurance contracts. This includes such issues as “breakpoint” sales, selling dividends, withholding orders and contingent deferred sales charges.

NASD Conduct Rule 2860 – Options
Notice to Members: 08-04, 07-37, 07-11, 07-08, 07-03, 06-54, 06-51, 06-09, 05-06, 01-01, 99-20, 96-15, 95-47, 95-25, 94-46, 94-24, 93-15, 89-64, 86-74, 85-18

NASD Conduct Rule 3010 – Supervision
Notice to Members: 07-64, 06-12, 05-67, 05-46, 05-44, 04-71, 99-45, 99-03, 98-96, 98-52, 98-38, 98-18, 98-11, 96-82, 96-59, 96-33, 92-18, 91-48, 89-57, 89-34, 88-84, 86-65, 85-84, SEC Rule 17a-3,

“Each member shall establish and maintain a system to supervise the activities of each registered representative, registered principal, and other associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA Rules.”

NASD Conduct Rules 3012 & 3013 Supervisory Control System and CEO Certification
Notice to Members: 07-32, 06-04, 05-29, 04-79, 04-71, NYSE Rule 342

These rules establish a supervisory controls system requiring testing and CEO certification including annual reports.

E-mail Greg Wood for a laminated complementary copy of the FINRA (NASD & NYSE) RULE QUICKGUIDE.