What is FINRA Compliance & Who Needs To Comply?

What is FINRA Compliance?

FINRA is authorized by US Congress to protect America’s investors by making sure the broker-dealer industry operates fairly and honestly. FINRA oversees more than 624,000 brokers across the country and analyzes billions of daily market events. FINRA is a subsidiary of the SEC and has the same compliance metrics for records preservation and accessibility.

Who needs to comply with FINRA?

Broker-Dealers, Capital Acquisition Brokers, and Funding Portals. A Broker Dealer is in the business of buying or selling securities on behalf of its customers or its own account or both. A Capital Acquisition Broker is a Broker Dealer subject to a narrower rule book. A Funding Portal is a crowd funding intermediary.

What are the document management functionalities required to effectively maintain FINRA compliance?

  • There must be written and enforceable retention policies
  • There must be a searchable index of stored data
  • Data must be readily retrievable and viewable
  • A backup of data must be stored off-site

How does LuitBiz DMS help you become FINRA compliant?


What it means

How LuitBiz DMS helps

4511: General Requirements

Members shall make and preserve books and records for a period of at least six years. All books and records required to be made pursuant to the FINRA rules shall be preserved in a format and media that complies with SEA Rule 17a-4.

All documents and records are "easily accessible" for not only six years, but for the duration of their existence in LuitBiz DMS unless document deletion periods are specified by LuitBiz Admin. Additionally, documents can be stored in all media formats.

4513: Records of Written Customer Complaints

Each member shall keep and preserve in each office of supervisory jurisdiction either a separate file of all written customer complaints that relate to that office (including complaints that relate to activities supervised from that office) and action taken by the member, if any, or a separate record of such complaints and a clear reference to the files in that office containing the correspondence connected with such complaints.

Broker/dealers should maintain files of written materials relating to customer complaints in LuitBiz DMS and retrieve them within seconds.

4514: Authorization Records for Negotiable Instruments Drawn From a Customer's Account

No member or person associated with a member shall obtain from a customer or submit for payment a check, draft or other form of negotiable paper drawn on a customer's checking, savings, share or similar account, without that person's express written authorization, which may include the customer's signature on the negotiable instrument. Where the written authorization is separate from the negotiable instrument, the member shall preserve the authorization for a period of three years following the date the authorization expires.

All authorization documents from customers can be stored in LuitBiz DMS and the retention periods for these documents can be specified by the Admin for FINRA compliance.

4515: Approval and Documentation of Changes in Account Name or Designation

Before any customer order is executed, there must be placed upon the order form or other similar record of the member for each transaction, the name or designation of the account (or accounts) for which such order is to be executed. No change in such account name(s) (including related accounts) or designation(s) (including error accounts) shall be made unless the change has been authorized by a qualified and registered principal designated by the member. Such person must, prior to giving his or her approval of the account designation change, be personally informed of the essential facts relative thereto and indicate his or her approval of such change in writing on the order or other similar record of the member. The essential facts relied upon by the person approving the change must be documented in writing and preserved for the period of time and accessibility specified in SEA Rule 17a-4(b). With respect to any change that takes place prior to execution of the trade, the required approval and documentation must take place prior to execution.

In LuitBiz DMS only authorised personnel with valid user name and password can make changes in the customer documents. All these changes are tracked by the time-stamped audit trail. Additionally, during document approvals, the approvers can sign the approved documents using their password protected electronic signature.

4517: Member Filing and Contact Information Requirements

Each member shall be required to file with FINRA, or otherwise submit to FINRA, in such electronic format as FINRA may require, all regulatory notices or other documents required to be filed or otherwise submitted to FINRA

In LuitBiz DMS users can track document updates and set alert dates for reminding them regarding various dates when updated information need to be reported to FINRA.

4518: Notification to FINRA in Connection with the JOBS Act

A member shall notify FINRA, in a manner prescribed by FINRA prior to engaging, for the first time, in a transaction involving the offer or sale of securities in reliance on Section 4(a)(6) of the Securities Act; or within 30 days of directly or indirectly controlling, or being controlled by or under common control with, a funding portal as defined pursuant to Rule 300(c)(2) of SEC Regulation Crowdfunding

In LuitBiz DMS all notifications to FINRA can be sent from the system via email and all these sent email history is completely tracked via the system.