What is a Broker-Dealer? - Davis Polk & Wardwell
What is a Broker-Dealer? - Davis Polk & Wardwell
What is a Broker-Dealer? - Davis Polk & Wardwell
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§ 1A:7.6 BROKER-DEALER REGULATION<br />
(v) the retiring representative must cease contacting former clients<br />
for solicitation or prov<strong>is</strong>ion of securities related services<br />
or advice;<br />
(vi) the retiring representative must comply with all applicable<br />
securities laws and regulations and SRO rules;<br />
(vii) the retiring representative must cease association with the<br />
securities firm, other broker-dealers or investment adv<strong>is</strong>er<br />
or investment company during the term of the agreement, or<br />
become associated with any bank, insurance company or<br />
insurance agency during the term of the agreement if the<br />
retiring representative’s activities relate to effecting transactions<br />
in securities;<br />
(viii) the retiring representative must certify at least annually to the<br />
securities firm that he/she has adhered to the requirements<br />
and conditions of the agreement; and<br />
(ix) the securities firm must contact a representative sample of the<br />
account holders at least annually to ensure that the retiring<br />
representative has not provided investment advice or solicited<br />
trades in securities in any way. 456<br />
In addition, the securities firm must approve the receiving representative,<br />
who must meet certain eligibility criteria. 457 Prior to the<br />
retirement date, the securities firm must inform the account holders<br />
of the applicable accounts in writing of the retiring representative’s<br />
departure and of the transfer of the applicable accounts to the receiving<br />
representative. 458<br />
On December 2, 2009, FINRA proposed to establ<strong>is</strong>h new FINRA<br />
Rule 2040, which codifies ex<strong>is</strong>ting FINRA staff guidance on the<br />
payment by members of continuing comm<strong>is</strong>sions to retiring reg<strong>is</strong>tered<br />
representatives. 459 The proposal would permit members to pay continuing<br />
comm<strong>is</strong>sions to retiring reg<strong>is</strong>tered representatives of the<br />
456. See Retiring Representative No-Action Letters, supra note 455.<br />
457. A receiving representative <strong>is</strong> the reg<strong>is</strong>tered representative of the securities<br />
firm who will service, and may receive compensation related to, the client<br />
accounts of the retiring representative. The receiving representative must<br />
meet certain eligibility criteria, including continuous employment with<br />
the firm for a minimum of one year, employment in the securities industry<br />
in a reg<strong>is</strong>tered capacity for a minimum of three years, and not being subject<br />
to statutory d<strong>is</strong>qualification in the three years prior to the retirement date.<br />
See id.<br />
458. See id.<br />
459. FINRA Regulatory Notice 09-69, Payments to Unreg<strong>is</strong>tered Persons (Dec.<br />
2009) [hereinafter Regulatory Notice 09-69], available at www.finra.org/<br />
web/groups/industry/@ip/@reg/@notice/documents/notices/p120480.pdf.<br />
1A–104