FINRA Rule 3130 – Are you talking to yourself?

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If you’re a small(ish) firm complying with FINRA Rule 3130, you know the goal of the Rule is to “promote regular and meaningful interaction between senior management and compliance personnel to ensure that compliance is given the highest priority by a member’s senior executive officers.”


But what if you aren’t big enough for a CEO and a CCO?

Well, FINRA Rule 3130 “assumes” you are. It wants you to designate a Chief Compliance Officer (CCO), and complete the Chief Executive Officer’s (CEO) compliance certification. It requires you to highlight the key roll a CCO plays as the primary compliance advisor to your firm and make that person “an indispensable party to enabling the firm’s CEO to reach the conclusion in the certification” of compliance. And then it wants your CCO and CEO to prepare the Rule 3130 Report and present it to your Board of Directors and Audit Committee, or equivalent bodies.

Sounds simple…

…But what if YOU are the CEO and CCO?

Are you talking to yourself? Well, kind of…

According to Patricia Albrecht, FINRA Member Relations and Education, FINRA 3130 charges firms to designate a CEO and CCO to:

  • certify that there are supervisory processes in place;
  • implement and design supervisory procedures; and
  • create an annual report on those processes to present to the audit committee or Board of Directors “because compliance is so important we [FINRA] wanted to make sure that it was front and center.”

But when Albrecht asked a group of panelists at last year’s Annual Conference: “How do [smaller firms] meet the requirement that the CCO and CEO talk to each other when

both jobs?” they answered:

“This is one of those strange [situations] if you are a small firm,” said Mark Cresap, of Cresap Inc. — a 40- representative broker-dealer in Pennsylvania. “You have to designate a CCO, who has to prepare a report, and the CEO has to certify it.

“If you’re like me,’ he added, “that means you are talking to yourself. That is what the Rule is — a memo to yourself. You are making a statement to regulators that ‘I am the CEO and I am responsible for these procedures and that we maintain them and test them.’ It’s a statement to the regulators that I’m in charge and I’m responsible.”

Mari Buechner, who heads Coordinated Capital Securities, agreed, excepting that as CEO and CCO, she does not “dialogue” with herself. “We’re in the same situation [as Mark Cresap],” she said,” where the CCO and CEO are the same person. FINRA Rule 3130 is about creating a culture of compliance. It’s about creating a dialog around compliance. We simply document it and try not to have conversations with ourselves.”

You may wear 2 hats, but you don’t have to go it alone

Call in reinforcements. Pick up the phone. Talk to us. Open the lines of communication with a trusted technology partner  to help you ensure all your processes and procedures are in place and functioning smoothly. Ask about our comprehensive regulatory archival and compliance solutions specifically designed for CEOs who also wear the CCO hat at Broker/Dealers, RIAs, and FCMs. Or…you could keep talking to yourself….

Let’s talk (212- 233-1155).

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