Rule G-27.
(a) Obligation to supervise. Each broker, dealer and municipal
securities dealer ("dealer") shall supervise the conduct of the
municipal securities activities of the dealer and its associated persons to
ensure compliance with Board rules and the applicable provisions of the Act and
rules thereunder (“applicable rules”).
(b) Supervisory System. Each dealer shall establish and maintain a
system to supervise the municipal securities 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 Board rules. Final responsibility for
proper supervision shall rest with the dealer. A dealer’s supervisory
system shall provide, at a minimum, for the following:
(i) The establishment and maintenance of written
procedures as required by sections (c), (d), (e) and (f) of this rule.
(ii)(A) General. The designation of one or
more associated persons qualified as municipal securities principals, municipal
securities sales principals, municipal fund securities limited principals,
financial and operations principals in accordance with Board rules, or as
general securities principals to be responsible for the supervision of the
municipal securities activities of the dealer and its associated persons as
required by this rule.
(B) Written Record. A
written record of each supervisory designation and of the designated
principal's responsibilities under this rule shall be maintained and updated as
required under Rule G-9.
(C) Appropriate
Principal.
(1) Each dealer shall designate a
municipal securities principal as responsible for its supervision under
sections (a), (b), (c), (d), (e) and (f) of this rule, except as provided in
this paragraph (C).
(2) A non-bank dealer shall
designate a financial and operations principal as responsible for the financial
reporting duties specified in Rule G-3(d)(i)(A-E) and with primary
responsibility for books and records under paragraph (c)(i)(E) below; provided,
however, that a non-bank dealer meeting the requirements of Securities Exchange
Act Rule 15c3-1(a)(2)(iv), (v) or (vi) or the exemption under Rule 15c3-1(b)(3)
may, but is not required to, designate a financial and operations principal as
responsible for such financial reporting duties and with primary responsibility
for such books and records.
(3) A municipal securities sales
principal may be designated as responsible for supervision under paragraphs
(c)(i)(B), (C) and (G) and subsection (e)(i) of this rule, to the extent the
activities pertain to sales to or purchases from a customer of municipal
securities.
(4) A general securities
principal may be designated as responsible for supervision under paragraph (c)(i)(E)
and subparagraph (c)(i)(G)(1) of this rule and under Rules G-7(b) and G-21(f).
(5) A financial and operations
principal may be designated as responsible for supervision under paragraph
(c)(i)(F) of this rule.
(6) A municipal fund securities
limited principal may be designated as responsible for supervision under
sections (a), (b), (c), (d), (e) and (f) of this rule to the extent that the
activities pertain solely to transactions in municipal fund securities.
(iii) The designation as an office of municipal supervisory
jurisdiction of each location that meets the definition contained in section
(g) of this rule. Each dealer shall also designate such other offices of municipal
supervisory jurisdiction as it determines to be necessary in order to supervise
its registered representatives, registered principals, and other associated
persons with respect to their municipal securities activities in accordance
with the standards set forth in this rule, taking into consideration the
following factors:
(A) whether registered persons at
the location engage in retail sales of municipal securities or other activities
involving regular contact with public customers with respect to municipal
securities;
(B) whether a substantial number
of registered persons conduct municipal securities activities at, or are
otherwise supervised from, such location;
(C) whether the location is
geographically distant from another office of municipal supervisory
jurisdiction of the dealer;
(D) whether the dealer’s
registered persons are geographically dispersed; and
(E) whether the municipal securities
activities at such location are diverse and/or complex.
(iv) The designation of one or more appropriately
registered principals in each office of municipal supervisory jurisdiction, including
the main office, and one or more appropriately registered representatives or
principals in each municipal branch office that is not an office of municipal
supervisory jurisdiction with authority to carry out the supervisory
responsibilities with respect to municipal securities assigned to that office
by the dealer.
(v) The assignment of each registered person to an
appropriately registered representative(s) and/or principal(s) who shall be
responsible for supervising that person's municipal securities activities.
(vi) Reasonable efforts to determine that all
supervisory personnel are qualified by virtue of experience or training to
carry out their assigned responsibilities with respect to municipal securities.
(vii) The participation of each registered
representative and registered principal, either individually or collectively,
no less than annually, in an interview or meeting conducted by persons
designated by the dealer at which compliance matters relevant to the municipal
securities activities of the representative(s) and principal(s) are discussed.
Such interview or meeting may occur in conjunction with the discussion of other
matters and may be conducted at a central or regional location or at the
representative’s or principal’s place of business.
(c) Written supervisory procedures.
(i) General provisions. Each dealer
shall adopt, maintain and enforce written supervisory procedures reasonably
designed to ensure that the conduct of the municipal securities activities of
the dealer and its associated persons are in compliance as required in section
(a) of this rule. Such procedures shall codify the dealer’s supervisory system
for ensuring compliance and, at a minimum, shall establish procedures
(A) that state how a
designated principal shall monitor for compliance by the dealer with all
applicable rules and supervise the municipal securities activities of
associated persons specified in Rule G-3(a)(i);
(B) a designated principal
shall follow when a customer complaint concerning the dealer's municipal
securities activities is received;
(C) for the regular and frequent
review and approval by a designated principal of customer accounts introduced
or carried by the dealer in which transactions in municipal securities are
effected; such review shall be designed to ensure that such transactions are in
accordance with all applicable rules and to detect and prevent irregularities
and abuses;
(D) for the periodic review by a designated
principal of each office which engages in municipal securities activities pursuant
to section (d) of this rule;
(E) for the maintenance and preservation, by a
designated principal, of the books and records required to be maintained and
preserved by Rules G-8 and G-9 of the Board;
(F) for the supervision by a
designated principal of the processing, clearance, and in the case of a
non-bank dealer safekeeping of municipal securities; and
(G) for the prompt review and written approval
by a designated principal of:
(1) the opening of each customer
account introduced or carried by the dealer in which transactions in municipal
securities may be effected; and
(2) each transaction in
municipal securities on a daily basis, including each transaction in municipal
securities effected with or for a discretionary account introduced or carried
by the dealer.
(ii) Provisions concerning tape recording of
conversations.
(A) Each dealer that either is
notified by the applicable regulatory authority (as defined in subsection
(g)(iii)) or otherwise has actual knowledge that it meets one of the criteria
in paragraph (c)(ii)(H) relating to the employment history of its registered
persons at a disciplined firm (as defined in subsection (g)(v)) shall
establish, maintain, and enforce special written procedures for supervising the
telemarketing activities with respect to municipal securities of all of its
registered persons.
(B) The dealer must establish and
implement the supervisory procedures required by this subsection (ii) within 60
days of receiving notice from the applicable regulatory authority or obtaining
actual knowledge that it is subject to the provisions of this subsection.
A dealer that meets one of the
criteria in paragraph (c)(ii)(H) for the first time may reduce its staffing
levels to fall below the threshold levels within 30 days after receiving notice
from the applicable regulatory authority or obtaining actual knowledge that it
is subject to the provisions of paragraph (c)(ii)(H), provided the dealer
promptly notifies the applicable regulatory authority in writing of its becoming
subject to this rule. Once the dealer has reduced its staffing levels to fall
below the threshold levels, it shall not rehire a person terminated to
accomplish the staff reduction for a period of 180 days. On or prior to
reducing staffing levels pursuant to this paragraph (B), a dealer must provide
the applicable regulatory authority with written notice identifying the
terminated person(s).
(C) The procedures required by
this subsection shall include tape-recording all telephone conversations between
the dealer's registered persons and both existing and potential customers with
respect to municipal securities.
(D) The dealer shall establish
reasonable procedures for reviewing the tape recordings made pursuant to the
requirements of this subsection to ensure compliance with applicable securities
laws and regulations and applicable rules. The procedures must be appropriate
for the dealer's business, size, structure, and customers.
(E) All tape recordings made
pursuant to the requirements of this subsection shall be retained for a period
of not less than three years from the date the tape was created, the first two
years in an easily accessible place. Each dealer shall catalog the retained
tapes by registered person and date.
(F) Such procedures shall be
maintained for a period of three years from the date that the dealer
establishes and implements the procedures required by the provisions of this
subsection.
(G) By the 30th day of the month
following the end of each calendar quarter, each dealer subject to the
requirements of this subsection shall submit to the applicable regulatory
authority a report on the dealer's supervision of the telemarketing activities with
respect to municipal securities of its registered persons.
(H) The following dealers shall be
required to adopt special supervisory procedures over the telemarketing
activities with respect to municipal securities of their registered persons:
(1) A dealer with at least five
but fewer than ten registered persons, where 40% or more of its registered
persons have been associated with one or more disciplined firms in a registered
capacity within the last three years;
(2) A dealer with at least ten
but fewer than twenty registered persons, where four or more of its registered
persons have been associated with one or more disciplined firms in a registered
capacity within the last three years;
(3) A dealer with at least twenty
registered persons, where 20% or more of its registered persons have been
associated with one or more disciplined firms in a registered capacity within
the last three years.
(4) For purposes of the
calculations required in paragraph (H), dealers should not include registered
persons who:
(a) have been registered for an
aggregate total of 90 days or less with one or more disciplined firms within
the past three years; and
(b) do not have a disciplinary
history (as defined in subsection (g)(vi)).
(I) The applicable regulatory
authority, upon application and pursuant to such procedures as such authority
shall prescribe, may in exceptional circumstances, taking into consideration
all relevant factors, exempt such dealer unconditionally or on specified terms
and conditions from the requirements of this subsection (ii). A dealer
seeking an exemption must file a written application within 30 days after
receiving notice from the applicable regulatory authority or obtaining actual
knowledge that it meets one of the criteria in paragraph (c)(ii)(H). A dealer
that meets one of the criteria in paragraph (c)(ii)(H) for the first time may elect
to reduce its staffing levels pursuant to the provisions of paragraph
(c)(ii)(B) or, alternatively, to seek an exemption pursuant to paragraph
(c)(ii)(I), as appropriate; such a dealer may not seek relief from this rule by
both reducing its staffing levels pursuant to paragraph (c)(ii)(B) and
requesting an exemption.
(iii) Availability of and revisions to
written supervisory procedures. A copy of a dealer’s written
supervisory procedures, or the relevant portions thereof, shall be kept and
maintained in each office of municipal supervisory jurisdiction and at each
location where supervisory activities with respect to municipal securities are
conducted on behalf of the dealer. Each dealer shall amend its written
supervisory procedures as appropriate within a reasonable time after changes
occur in Board or other applicable rules and as changes occur in its
supervisory system, and each dealer shall be responsible for communicating
amendments through its organization.
(d) Internal Inspections.
(i) Each dealer shall conduct a review, at least
annually, of the municipal securities activities in which it engages, which
review shall be reasonably designed to assist in detecting and preventing
violations of, and achieving compliance with, applicable securities laws and
regulations, and with applicable Board rules. Each dealer shall review the
municipal securities activities of each office, which shall include the
periodic examination of customer accounts to detect and prevent irregularities
or abuses.
(A) Each dealer shall inspect at
least annually every office of municipal supervisory jurisdiction and any municipal
branch office that supervises one or more non-branch locations.
(B) Each dealer shall inspect at
least every three years every municipal branch office that does not supervise
one or more non-branch locations. In establishing how often to inspect each
non-supervisory municipal branch office, the dealer shall consider whether the
nature and complexity of the municipal securities activities for which the
location is responsible, the volume of business done, and the number of
associated persons assigned to the location require the non-supervisory municipal
branch office to be inspected more frequently than every three years. If a
dealer establishes a more frequent inspection cycle, the dealer must ensure
that at least every three years, the inspection requirements enumerated in
subsection (d)(ii) have been met. The non-supervisory municipal branch office
examination cycle, an explanation of the factors the dealer used in determining
the frequency of the examinations in the cycle, and the manner in which a
dealer will comply with subsection (d)(ii) if using more frequent inspections
than every three years shall be set forth in the dealer’s written supervisory
and inspection procedures.
(C) Each dealer shall inspect on a
regular periodic schedule every non-branch location. In establishing such
schedule, the dealer shall consider the nature and complexity of the municipal securities
activities for which the location is responsible and the nature and extent of
contact with customers. The schedule and an explanation regarding how the
dealer determined the frequency of the examination schedule shall be set forth
in the dealer’s written supervisory and inspection procedures.
Each dealer shall retain a written record of the
dates upon which each review and inspection is conducted.
(ii) An office inspection and review by a dealer
pursuant to subsection (d)(i) must be reduced to a written report and kept on
file by the dealer for a minimum of three years, unless the inspection is being
conducted pursuant to paragraph (d)(i)(C) and the regular periodic schedule is
longer than a three-year cycle, in which case the report must be kept on file
at least until the next inspection report has been written. The written
inspection report must also include, without limitation, the testing and
verification of the dealer’s policies and procedures, including supervisory
policies and procedures in the following areas as they relate to municipal
securities:
(A) Safeguarding of customer funds
and municipal securities;
(B) Maintaining books and records;
(C) Supervision of customer
accounts serviced by branch office managers;
(D) Transmittal of funds between
customers and registered representatives and between customers and third
parties;
(E) Validation of customer address
changes; and
(F) Validation of changes in
customer account information.
If a dealer does not engage in all of the
activities enumerated above, the dealer must identify those activities in which
it does not engage in the written inspection report and document in the report
that supervisory policies and procedures for such activities must be in place
before the dealer can engage in them.
(iii) An office inspection by a dealer pursuant to
subsection (d)(i) may not be conducted by the branch office manager or any
person within that office who has supervisory responsibilities or by any
individual who is supervised by such person(s). However, if a dealer is so
limited in size and resources that it cannot comply with this limitation (e.g.,
a dealer with only one office or a dealer has a business model where small or
single-person offices report directly to an office of municipal supervisory
jurisdiction manager who is also considered the offices’ branch office
manager), the dealer may have a principal who has the requisite knowledge to
conduct an office inspection perform the inspections. The dealer, however, must
document in the office inspection reports the factors it has relied upon in
determining that it is so limited in size and resources that it has no other
alternative than to comply in this manner.
A dealer must have in place procedures that are
reasonably designed to provide heightened office inspections if the person
conducting the inspection reports to the branch office manager’s supervisor or
works in an office supervised by the branch manager’s supervisor and the branch
office manager generates 20% or more of the revenue of the business units
supervised by the branch office manager’s supervisor. For the purposes of this
subsection (d)(iii) only, the term "heightened inspection" shall mean
those inspection procedures that are designed to avoid conflicts of interest
that serve to undermine complete and effective inspection because of the
economic, commercial, or financial interests that the branch manager’s
supervisor holds in the associated persons and businesses being inspected. In
addition, for the purpose of this subsection only, when calculating the 20%
threshold, all of the revenue generated by or credited to the municipal branch
office or branch office manager shall be attributed as revenue generated by the
business units supervised by the branch office manager’s supervisor
irrespective of a dealer’s internal allocation of such revenue. A dealer must
calculate the 20% threshold on a rolling, twelve-month basis.
(e) Review of Correspondence.
(i) Supervision of Municipal Securities
Representatives. Each dealer shall establish procedures for the review by a
designated principal of incoming and outgoing written (i.e., non-electronic)
and electronic correspondence of its municipal securities representatives with
the public relating to the municipal securities activities of such dealer. Such
procedures must be in writing and be designed to reasonably supervise each
municipal securities representative. Evidence that these supervisory procedures
have been implemented and carried out must be maintained and made available,
upon request, to a registered securities association or the appropriate
regulatory agency.
(ii) Review of correspondence. Each dealer
shall develop written procedures that are appropriate to its business, size,
structure, and customers for the review of incoming and outgoing written (i.e.,
non-electronic) and electronic correspondence with the public relating to its
municipal securities activities, including review for compliance with Rule
G-21(e)(vii) to the extent applicable to such dealer’s business.
Procedures shall include the review of incoming, written correspondence
directed to municipal securities representatives and related to the dealer’s
municipal securities activities to properly identify and handle customer
complaints and to ensure that customer funds and municipal securities are
handled in accordance with the dealer’s procedures. Where such procedures for
the review of correspondence do not require review of all correspondence prior
to use or distribution, they must include provisions for the education and
training of associated persons as to the dealer's procedures governing
correspondence; documentation of such education and training; and surveillance
and follow-up to ensure that such procedures are implemented and adhered to.
(iii) Retention of correspondence. Each dealer
shall retain correspondence of municipal securities representatives relating to
its municipal securities activities in accordance with Rules G-8(a)(xx) and
G-9(b)(viii) and (xiv). The names of the persons who prepared outgoing
correspondence and who reviewed the correspondence shall be ascertainable from
the retained records and the retained records shall be readily available, upon
request, to a registered securities association or the appropriate regulatory
agency.
(f) Supervisory Control System.
(i) Each dealer shall designate one or more
principals who shall establish, maintain, and enforce a system of supervisory
control policies and procedures that (A) test and verify that the dealer’s
supervisory procedures are reasonably designed with respect to the municipal
securities activities of the dealer and its registered representatives and
associated persons to achieve compliance with applicable rules and (B) create
additional or amend supervisory procedures where the need is identified by such
testing and verification. The designated principal or principals must submit to
the dealer’s senior management no less than annually a report detailing each
dealer’s system of supervisory controls, the summary of the test results and
significant identified exceptions, and any additional or amended supervisory
procedures created in response to the test results.
(ii) The establishment, maintenance, and
enforcement of written supervisory control policies and procedures pursuant to
subsection (f)(i) shall include:
(A) procedures that are reasonably
designed to review and supervise the customer account activity relating to
municipal securities conducted by the dealer’s branch office managers, sales
managers, regional or district sales managers, or any person performing a
similar supervisory function.
(1) General Supervisory
Requirement. A person who is either senior to, or otherwise independent
of, the producing manager must perform such supervisory reviews. For purposes
of this rule, an "otherwise independent" person: may not report either
directly or indirectly to the producing manager under review; must be situated
in an office other than the office of the producing manager; must not otherwise
have supervisory responsibility over the activity being reviewed (including not
being directly compensated based in whole or in part on the revenues accruing
for those activities); and must alternate such review responsibility with
another qualified person every two years or less.
(2) “Limited Size and Resources”
Exception. If a dealer is so limited in size and resources that there is
no qualified person senior to, or otherwise independent of, the producing
manager to conduct the reviews pursuant to subparagraph (1) above (e.g., a
dealer has only one office or an insufficient number of qualified personnel who
can conduct reviews on a two-year rotation), the reviews may be conducted by a
principal who is sufficiently knowledgeable of the dealer's supervisory control
procedures, provided that the reviews are in compliance with subparagraph (1)
to the extent practicable.
(3) Notification Requirement.
If a dealer determines that it must rely on the "limited size and
resources" exception set forth in subparagraph (2) above to conduct any of
its producing managers' supervisory reviews, the dealer must notify the
applicable regulatory authority through an electronic process (or any other
process prescribed by such authority) within 30 days of the date on which the
dealer first relies on the exception, and annually thereafter. If a
dealer subsequently determines that it no longer needs to rely on the exception
to conduct any of its producing managers’ supervisory reviews, the dealer must,
within 30 days of ceasing to rely on the exception, notify the applicable
regulatory authority by using the electronic process or any other process
prescribed by such authority.
(4) Documentation
Requirement. A dealer relying on subparagraph (2) above must document in
its supervisory control procedures the factors used to determine that complete
compliance with all of the provisions of subparagraph (1) is not possible and
that the required supervisory systems and procedures in place with respect to
any producing manager comply with the provisions of subparagraph (1) above to
the extent practicable.
(B) procedures that are reasonably
designed to review and monitor the following activities relating to municipal
securities:
(1) all transmittals of funds
(e.g., wires or checks, etc.) or municipal securities from customers to third
party accounts (i.e., a transmittal that would result in a change of beneficial
ownership); from customer accounts to outside entities (e.g., banks, investment
companies, etc.); from customer accounts to locations other than a customer's
primary residence (e.g., post office box, "in care of" accounts,
alternate address, etc.); and between customers and registered representatives,
including the hand-delivery of checks;
(2) customer changes of address
and the validation of such changes of address; and
(3) customer changes of
investment objectives and the validation of such changes of investment
objectives.
The policies and procedures established pursuant to
this paragraph (f)(ii)(B) must include a means or method of customer
confirmation, notification, or follow-up that can be documented. If a dealer
does not engage in all of the activities enumerated above, the dealer must
identify those activities in which it does not engage in its written
supervisory control policies and procedures and document in those policies and
procedures that additional supervisory policies and procedures for such
activities must be in place before the dealer can engage in them; and
(C) procedures that are reasonably
designed to provide heightened supervision over the activities of each
producing manager who is responsible for generating 20% or more of the revenue
of the business units supervised by the producing manager's supervisor. For the
purposes of this subsection only, the term "heightened supervision"
shall mean those supervisory procedures that evidence supervisory activities that
are designed to avoid conflicts of interest that serve to undermine complete
and effective supervision because of the economic, commercial, or financial
interests that the supervisor holds in the associated persons and businesses
being supervised. In addition, for the purpose of this section only, when
calculating the 20% threshold, all of the revenue generated by or credited to
the producing manager or the producing manager's office shall be attributed as
revenue generated by the business units supervised by the producing manager's
supervisor irrespective of a dealer's internal allocation of such revenue. A
dealer must calculate the 20% threshold on a rolling, twelve-month basis.
(g) Definitions. For purposes of this rule, the following terms
have the following meanings:
(i) "Office of municipal supervisory
jurisdiction" means any office of a dealer at which any one or more of the
following functions take place with respect to municipal securities:
(A) order execution and/or market
making;
(B) structuring of public
offerings or private placements;
(C) maintaining custody of
customers' funds and/or municipal securities;
(D) final acceptance (approval) of
new accounts on behalf of the dealer;
(E) review and endorsement of
customer orders, pursuant to subparagraph (c)(i)(G)(2) above;
(F) final approval of advertising for
use by persons associated with the dealer, pursuant to Rule G-21(f); or
(G) responsibility for supervising
the municipal securities activities of persons associated with the dealer at
one or more other municipal branch offices of the dealer.
(ii)(A) A "municipal branch office" is
any location where one or more associated persons of a dealer regularly
conducts the business of effecting any transactions in, or inducing or
attempting to induce the purchase or sale of any municipal security, or is held
out as such, excluding:
(1) Any location
that is established solely for customer service and/or back office type
functions where no sales activities are conducted and that is not held out to
the public as a branch office;
(2) Any location
that is the associated person's primary residence; provided that
(a) Only one associated person,
or multiple associated persons who reside at that location and are members of
the same immediate family, conduct business at the location;
(b) The location is not held out
to the public as an office and the associated person does not meet with
customers at the location;
(c) Neither customer funds nor
securities are handled at that location;
(d) The associated person is
assigned to a designated municipal branch office, and such designated municipal
branch office is reflected on all business cards, stationery, advertisements
and other communications to the public by such associated person;
(e) The associated person's
correspondence and communications with the public are subject to the dealer's
supervision in accordance with this rule;
(f) Electronic communications
(e.g., e-mail) are made through the dealer's electronic system;
(g) All orders are entered
through the designated municipal branch office or an electronic system
established by the dealer that is reviewable at the municipal branch office;
(h) Written supervisory
procedures pertaining to supervision of sales activities conducted at the
residence are maintained by the dealer; and
(i) A list of the residence
locations is maintained by the dealer;
(3) Any location,
other than a primary residence, that is used for municipal securities
activities for less than 30 business days in any one calendar year, provided
the dealer complies with the provisions of clauses (ii)(A)(2)(a) through (h)
above;
(4) Any office of
convenience, where associated persons occasionally and exclusively by
appointment meet with customers, which is not held out to the public as an
office. Where such office of convenience is located on bank premises,
signage necessary to complywith applicable federal and state laws,
rules and regulations, and applicable rules and regulations of any
self-regulatory organizations and securities and banking regulators, may be
displayed and shall not be deemed “holding out” for the purposes of this
section;
(5) Any location
that is used primarily to engage in non-securities activities and from which
the associated person(s) effects no more than 25 municipal securities
transactions in any one calendar year; provided that any advertisement identifying
such location also sets forth the address and telephone number of the location
from which the associated person(s) conducting business at the non-branch
locations are directly supervised;
(6) The floor of a
registered national securities exchange where a dealer conducts a direct access
business with public customers; or
(7) A temporary
location established in response to the implementation of a business continuity
plan.
(B) Notwithstanding the exclusions
in paragraph (ii)(A), any location that is responsible for supervising the municipal
securities activities of persons associated with the dealer at one or more
non-branch locations of the dealer is considered to be a municipal branch
office.
(C) The term "business
day" as used in paragraph (ii)(A) shall not include any partial business
day provided that the associated person spends at least four hours on such
business day at his or her designated municipal branch office during the hours
that such office is normally open for business.
(iii) “Applicable regulatory authority” means (i)
with respect to a dealer that is a member of a registered securities
association, such registered securities association, and (ii) with respect to
any other dealer, the appropriate regulatory agency as defined in Section
3(a)(34) of the Act.
(iv) "Registered person" means any person
qualified to act as a representative, principal or limited principal pursuant
to Rule G-3.
(v) "Disciplined firm" means either a
dealer that, in connection with sales practices involving the offer, purchase,
or sale of any security, has been expelled from membership or participation in
any securities industry self-regulatory organization or is subject to an order
of the Securities and Exchange Commission revoking its registration as a
broker/dealer; or a futures commission merchant or introducing broker that has
been formally charged by either the Commodity Futures Trading Commission or a
registered futures association with deceptive telemarketing practices or
promotional material relating to security futures, those charges have been
resolved, and the futures commission merchant or introducing broker has been
closed down and permanently barred from the futures industry as a result of
those charges; or a futures commission merchant or introducing broker that, in
connection with sales practices involving the offer, purchase,or sale
of security futures is subject to an order of the Securities and Exchange
Commission revoking its registration as a broker or dealer.
(vi) "Disciplinary history" means a
finding of violation by a registered person in the past five years by the
Securities and Exchange Commission, a self-regulatory organization, or a
foreign financial regulatory authority of one or more of the following rules
(or comparable foreign provision): Sections 15(b)(4)(E) and 15(c) of the
Act; Section 17(a) of the Securities Act of 1933; SEC Rules 10b-5 and 15g-1
through 15g-9; NASD Rules 2110, 2120, 2310, 2330, 2440, 3010 (failure to
supervise only), 3310, and 3330; MSRB Rules G-19, G-30, and G-37(b) and (c).
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