Continuing Membership Guide
Introduction
FINRA member firms are required to file an application whenever they seek to expand materially their operations or activities and for other business events as indicated in Rule 1017(a) (Continuance in Membership Application or “CMA”), and whenever they seek to modify or remove restrictions previously imposed in a membership agreement (Membership Agreement Change or “MAC”). FINRA staff is responsible for determining whether to approve, deny, or approve with restrictions all such applications pursuant to the procedures set forth in Membership and Registration Rule 1017. In these applications, the overriding consideration is an Applicant's ability to continue to meet the standards for membership contained in Rule 1014.
A webcast on what to expect during this application process became available March 13, 2007.
Any questions or suggestions regarding the Guide should be directed to FINRA through your local District Office or Deborah Siluk, FINRA’s MAP Program Analyst, at (202) 728-8483.
Expediting the Process
NASD Rule 1017(g)(2) requires a written decision be issued for CMAs “… within 30 days after the conclusion of the membership interview or the filing of additional information or documents, whichever is later. If the Department does not require the Applicant to participate in a membership interview or request additional information or documents, the Department shall serve a written decision within 45 days after the filing of the application under paragraph (a)….” However, the biggest factor that causes a delay in processing an application to conclusion is whether sufficient information is supplied to support the request.
In each and every case, FINRA staff is required to verify that the proposed expansion or change meets each of the 14 criteria for membership (Rule 1014), although pains are taken to target the inquiry and limit the scope of analysis as narrowly as possible in each case consistent with FINRA’s obligations under the rules. Therefore, Applicants must be prepared to provide in a timely manner information that addresses how you will satisfy all of the standards for admission and other applicable statutory and regulatory requirements if requested to do so by FINRA staff. Member firms are encouraged to contact their local District Office in advance of filing a CMA if they have questions about documents and information which should be submitted since applications which supply the relevant information at the outset tend to be processed more expeditiously.
Another factor which has historically caused delays is failure to meet the qualifications requirement. Applications should not be submitted until the applicant and employees required to be registered are prepared to satisfy substantially all of the membership and registration requirements necessary to conduct the applicant’s proposed securities activities. Failure to provide information, correct filing deficiencies, schedule and successfully complete qualification examination requirements, or satisfy any other membership prerequisites could result in a failure to complete application processing within prescribed time frames and a lapse or denial of the application. It is strongly recommended that qualifications examinations be scheduled as soon as the material change of business is contemplated before or early on in the application process.
Determining sources of capital is a key step in the application process. The staff takes all reasonable steps to clearly understand the nature and source of capital and the background and relevant disciplinary history of all persons involved in providing such capital. Your application will likely incur delays without supporting documentation of the source of capital. We encourage you to submit any of the following documents when you submit the application in order to assist in reducing delays: copies of canceled checks, deposit slips, monthly bank account statements, securities statements, tax returns, and loan documents.
This Guide provides valuable insights, organized by specific subject matter, into the information that FINRA staff can be expected to consider in evaluating Rule 1017 applications. FINRA’s How to Become a Member Webpage contains additional information and links which may be relevant to the CMA and MAC process, such as information on business plans, amending Form U4, qualifications and examinations, membership interviews. These documents are not, however, intended to present a comprehensive list of all conceivable categories of information that may be relevant to an application, nor should they be interpreted to limit FINRA staff's discretion to request whatever information staff determines is relevant to an application. In many cases, FINRA staff may need to request additional or different information depending on the specific facts and circumstances presented in particular applications in order to verify Applicant’s ability to continue to meet the 14 standards contained in Rule 1014.
The Rule 1010 Series sets forth standards for admission that must be continually met throughout a firm’s membership. Moreover, the Rules define the responsibilities of the parties involved in the CMA and MAC processes, and, where appropriate, specify time frames that are attached to the milestones. (See also Membership Rules Reference.) All specified deadlines for each of the milestones must be met. If the applicant believes it is unable to meet any deadlines, it may request an extension in writing explaining the reason for the extension to the FINRA District Office processing the application. If the deadlines are not met, the application will lapse (i.e., terminate) absent a showing of good cause. The NASD By-Laws and rules may be amended from time to time. You may wish to consult the online NASD Manual for the most up-to-date version of rules.
