66 Journal of Regulatory Compliance Issue II
significant changes.135 The CCO is offered protection under Rule 38a- 1.136
Any officer, director, employee, or person working under any of these three
positions may not mislead or manipulate the CCO.137 These protections
apply whether the action was direct or indirect.138
D. FINRA Rule 2010
FINRA Rule 2010 is the Standards of Commercial Honor and Principles
of Trade, which also was previously referred to as National Association of
Securities Dealers (“NASD”) Rule 2110.139 Rule 2010 states that, “[a]
member, in the conduct of its business, shall observe high standards of
commercial honor and just and equitable principles of trade.”140 Rule 2010
defines the conduct expected out of FINRA members; the power that broker-dealers hold must be used conservatively with high ethical standards.141
E. NASD 3010
NASD 3010 is a retired rule.142 The new rules that would govern current
cases would be FINRA Rules 3110.143 A supervisory system is mandated for
each member and all activities of each registered employee must be
supervised by the system set in place.144 Ultimately, the member will be held
liable for adequate supervision of associates.145 An office of supervisory
jurisdiction (“OSJ”) must be designated by the member with several criteria
that must be met for each.146
Written procedures are required under NASD 3010 to achieve proper
levels of supervision.147 For example, conversations are required to be tape-recorded and there is a specific length of time that these recordings must be
kept.148 Internal reviews are expected to be conducted at least every year.149
139. Fin. Indus. Reg. Auth., FINRA Manual § 2010.
142. Fin. Indus. Reg. Auth., FINRA Manual §§ 3110, 3170.
143. Fin. Indus. Reg. Auth., FINRA Manual §§ 3110, 3170.
144. Fin. Indus. Reg. Auth., FINRA Manual § 3110(a).
146. Fin. Indus. Reg. Auth., FINRA Manual § 3110(a)( 3).
147. Fin. Indus. Reg. Auth., FINRA Manual § 3110(b)( 1).
148. Fin. Indus. Reg. Auth., FINRA Manual § 3110(b)( 2).