New FINRA Supervision Rules Become Effective on December 1, 2014

Effective on December 1, 2014, all FINRA members will need to confirm that their written supervisory procedures meet the new supervision requirements set forth in FINRA's Regulatory Notice 14-10.1 In particular, a new requirement mandates that member firms involved with investment banking activities will be required to conduct internal investigations if they discover a potential insider trading violation.

Under Rule 3110(b)(2), FINRA members will soon be required to promptly conduct insider trading investigations and file quarterly reports with FINRA when they initiate internal investigations concerning possible violations of insider trading. If a firm conducts an internal investigation involving insider trading, then it must file a report with FINRA within ten (10) business days after the end of the calendar quarter. The report must be signed by senior management and specifically describe the internal investigation.

If a member firm determines after an internal investigation that a trade has violated provisions of the Securities Exchange Act of 1934, its regulations or FINRA rules prohibiting insider trading and manipulative and deceptive devices, the firm must, within five (5) business days of the internal investigation's completion, file a written report with FINRA.



Cheryl Spratt