60 Series 24 Exam Concepts You Need to Know Before Test Day

Form BD is the uniform application for broker-dealer registration filed with the SEC under Exchange Act Section 15(b). On it, the firm identifies the SROs through which it intends to operate. Form BR is the SRO-facing document filed through CRD: it establishes FINRA membership and registers each branch office, and it must be updated when offices open, relocate, or close. Form BDW is the withdrawal form used to terminate SEC registration, generally when the firm ceases business. The practical decision rule: registering the firm means Form BD plus Form BR; leaving means Form BDW; adding or moving an office means a Form BR amendment. An investment adviser is a different animal entirely, filing Form ADV under the Advisers Act.

Memory hook:BD registers the firm, BR branches and membership, BDW bows out.

FINRA By-Laws Article III, Section 4 defines statutory disqualification: certain criminal convictions, injunctions, and disciplinary expulsions disqualify a person from association with a member. Before filing a Form U4, Rule 3110(e) obligates the firm to investigate the applicant's good and bad reputation, including whether the person is subject to disqualification. A statutorily disqualified person is not automatically barred from the industry: the firm may seek approval from the applicable SRO to associate the person, but the price is heightened supervision. That means documented, enhanced supervisory procedures specifically designed around the person's history, plus disclosure on the U4. The decision rule: disqualification triggers an approval process and special supervision, not an automatic no.

Memory hook:Disqualified means presumptively out, not permanently out: investigate, get approval, supervise harder.

Form U4 opens the file: the firm files it through CRD when an associated person registers, and it must be amended promptly whenever information becomes inaccurate, such as new customer complaints, judgments, regulatory events, or outside business activities. Form U5 closes the file: filed at termination, it states the reason the person left, and the firm must amend it if it later learns the disclosure was materially incomplete or false. Accuracy obligations run both ways, and a misleading U5 exposes the firm to liability. Before signing a U4, the person also receives the Rule 2263 arbitration disclosure. The mechanism to remember: U4 is a living document while the person is registered; U5 is accurate at filing and amendable after.

Memory hook:U4 while employed, U5 upon exit; both follow the person for life.

Rule 1240 splits continuing education into two pieces. The Regulatory Element is FINRA's standardized online program that every registered person must complete annually, within 120 days of the person's registration anniversary date; failure to complete it suspends the person's registration until done. The Firm Element is the firm's own annual needs analysis and training plan, tailored to the products, services, and roles its people actually perform. Fingerprinting sits under SEA Rule 17f-2: partners, officers, directors, and employees who sell securities, handle money or securities, or supervise those functions must be fingerprinted, with narrow exemptions for purely clerical or ministerial personnel. The decision rule: registration, training, and fingerprints are conditions of staying registered, not one-time hurdles.

Memory hook:Regulatory Element on your anniversary, Firm Element on your firm's needs; miss it and you're suspended.

Rule 3110 is the supervision rule itself: the firm must adopt written supervisory procedures reasonably designed to achieve compliance, designate qualified principals as supervisors, and conduct real oversight, including reviewing correspondence and internal communications and reviewing and endorsing customer transactions. Rule 3120 sits on top of it: the firm must test and verify that those written procedures actually work, modify them when testing shows gaps, and deliver an annual report to senior management summarizing the testing results and the system's effectiveness. The relationship is sequential: 3110 tells you to write and follow the playbook; 3120 tells you to audit the playbook and report upstairs. A firm can have beautiful procedures and still fail 3120 if nobody ever tests them.

Memory hook:3110 writes the playbook; 3120 checks the playbook and reports to the top.

Rule 3130 requires the CEO, or the person with equivalent final authority regardless of title, to certify annually that the firm has in place processes to establish, maintain, review, test, and modify its written compliance policies and supervisory procedures. The certification is not a guarantee that no violation occurred; it certifies the existence of reasonable processes, not perfect outcomes. Supporting the certification, the firm must hold at least one meeting each year between the CEO and the heads of compliance and legal to discuss the processes. The signed certification must be retained and provided to FINRA upon request. The mechanism matters: accountability is placed on one named senior executive, which is why the rule specifies who can sign.

Memory hook:The CEO certifies the process exists, not that perfection happened.

Rule 3110.12(b) sets minimum inspection cycles tied to what happens at the location. Offices of Supervisory Jurisdiction must be inspected at least annually. Branch offices that are not OSJs but that handle customer funds and securities must be inspected at least once every two years. All other branch offices must be inspected at least once every three years. Non-branch locations are not on a FINRA-mandated cycle, but the member must inspect them on a periodic schedule it prescribes, and they remain subject to supervisory review. Inspections must be documented, and written procedures should address escalation and remediation of defects. The decision rule: the more asset-handling the office, the shorter the cycle.

Memory hook:OSJ every year, funds branches every two, everything else every three.

Rule 4370 requires every member to create and maintain a written business continuity plan reasonably designed to address significant business disruptions. The plan must cover specific objectives: data backup and recovery, all mission-critical systems, financial and operational risk assessments, alternate physical work locations, communications with employees, regulators, customers, and critical counterparties, regulatory reporting, media communications, and prompt customer access to funds and securities. The plan must be reviewed and updated as circumstances change, and the firm must provide FINRA with emergency contact information and keep it current. The exam logic: a BCP is not a generic disaster memo; it is a checklist of enumerated, testable components, and the firm is expected to test the plan, not just file it.

Memory hook:BCP is a checklist: backup, backup site, communications, and customers get their money.

SEA Rule 17a-4 sets retention periods by record type. Core financial books, including ledgers, trial balances, and memoranda of securities transactions and related records, must be kept six years, the first two in an easily accessible place. Most other books and records, including correspondence and communications with the public, must be kept three years, again with the first two easily accessible. The easily accessible requirement is a separate test from the retention period itself: a firm can violate the rule by warehousing records off-site even within the retention window. The practical rule for a principal: identify the record first, then apply the period. Six years for the financial backbone, three years for the rest, two years of easy access layered on both.

Memory hook:Ledgers six, everything else three; first two years within easy reach.

SEA Rule 17a-4(f) governs electronic recordkeeping. Traditionally, a firm using an electronic storage medium had to preserve records in a non-rewriteable, non-erasable format, the WORM standard, for the entire retention period. The SEC's 2022 amendments added an audit-trail alternative: a firm may instead maintain an audit system that tracks and prevents alteration or erasure of records from creation through the required retention period, providing equivalent assurance without WORM hardware. Rule 17a-4(g) requires an orderly index of stored records so they can be readily located, and the firm must promptly provide information about its storage system to regulators upon request. The decision rule: the regulator cares about immutability, and either WORM or a compliant audit trail delivers it.

Memory hook:WORM or a working audit trail; either way, records cannot be rewritten.

Rule 3270 covers outside business activities: any non-securities compensation venture, such as selling insurance or consulting, requires written notice to the firm before the person begins, describing the activity and the compensation. The firm may condition or restrict it, but the activity is not treated as firm business. Rule 3280 covers private securities transactions: selling securities away from the firm requires written notice describing the person's role and whether compensation is involved. If the person is compensated, the firm must treat the person as though associated with the firm for that transaction, supervising it and applying its books and records requirements. The distinguishing question is simple: is the outside activity a securities transaction? If yes, 3280; if no, 3270.

Memory hook:3270 notice for outside work; 3280 makes paid securities deals firm business.

Rule 3210 bars an associated person from maintaining an account with another broker-dealer or financial institution without notifying the employer firm promptly in writing. Once notified, the firm may require the other firm to provide duplicate confirmations and account statements so it can monitor the person's outside trading. The rule also covers accounts in which the associated person holds a beneficial interest, not just accounts titled in the person's own name. The purpose is surveillance: the employer firm cannot monitor for front-running, insider trading, or other conflicts if it does not know where its people trade. The decision rule: notice first, account second, and the firm's monitoring rights attach through duplicate statements on demand.

Memory hook:Trade elsewhere? Tell your firm first, or the account is out of bounds.

Rule 3240 prohibits registered persons from borrowing from or lending to customers unless the arrangement fits a permitted category: the customer is an immediate family member; the customer is a financial institution in the lending business; both parties are employees of the same member; the loan rests on a personal relationship independent of the broker-customer relationship; or it rests on the person's outside business relationship with the customer. The firm must maintain written procedures addressing such arrangements and may require pre-approval of any loan. The exam logic: this is not a flat ban but a closed list of exceptions, and the firm's written procedures are what make any arrangement defensible.

Memory hook:No loans from customers unless family, bank, coworker, or a truly outside relationship.

Rule 10b5-1 defines trading on the basis of material nonpublic information: a person trades on the basis of MNPI when aware of it, subject to narrow affirmative defenses such as pre-existing trading plans adopted before awareness. Rule 10b5-2 supplies the duty side of misappropriation claims, identifying relationships, including family members and certain professional and confidentiality relationships, that create a duty of trust or confidence. For the principal, the supervisory layer matters most: information barriers between banking and trading, restricted and watch lists, pre-clearance of employee trades, and documented escalation when a red flag appears. The decision rule: a firm cannot prevent insiders from knowing things, but it must build and test controls that keep knowledge from becoming trades.

Memory hook:10b5-1 is awareness; 10b5-2 is duty; the firm's job is walls and watch lists.

Rule 2040 bars payments to unregistered persons for activities that require registration, unless an exemption applies, for example payments to persons whose functions are clerical or ministerial, or to foreign persons under SEC Rule 15a-6 conditions. The core prohibition targets transaction-based compensation flowing to someone who should have been registered. Rule 3220 governs gifts to employees of other members: no more than 100 dollars per year per employee of another firm, with an exception for gifts of nominal value and for business entertainment that is neither frequent nor excessive and not intended to influence. The distinction that decides questions: a gift is anything of value given without receiving comparable value back; legitimate business entertainment is not a gift.

Memory hook:2040: no pay to the unregistered; 3220: 100 dollars a year per employee of another firm.

Rule 3160 lets a member and a financial institution work together under a written networking arrangement, provided the contract specifies each party's duties and the bank's unregistered employees stay within narrow limits. Unregistered bank personnel may make referrals, meaning identifying and introducing customers to the member, but going further, such as making recommendations or effecting transactions, requires registration. The arrangement must keep the securities business clearly separated from the bank's other operations, and compensation to unregistered bank employees is restricted, generally to non-cash compensation of nominal value. The decision rule: the written contract is the foundation; without it, the arrangement fails regardless of how well the conduct is segregated. The exam tests both the referral boundary and the compensation limit.

Memory hook:Networking needs a written deal; bank staff can introduce, not recommend.

New product approval is a supervisory process, not a formality: before offering a new product, the firm must conduct due diligence to understand its risk features, costs, and complexity; determine which customer types it suits; train associated persons; and perform ongoing risk assessment after launch. Rule 1017 is the membership side: a member must apply for FINRA approval before a material change in business operations, for example adding market making, underwriting, or clearing. The mechanism: the new-product committee decides what the firm sells; Rule 1017 decides whether the firm may change what it fundamentally does. A principal must recognize which question a fact pattern is asking.

Memory hook:New product: diligence and training. New business line: file Rule 1017 first.

Rule 4530 requires members to report specified events to FINRA: customer complaints, certain arbitration claims and civil litigations, regulatory actions, criminal charges, and settlements, generally within 30 calendar days of learning of the event, with a shorter 15-calendar-day window for complaints alleging sales practice violations. Firms also file quarterly statistical reports. Arbitration eligibility runs through the Codes: customers can generally compel arbitration of disputes with the firm; industry disputes between members and associated persons are required arbitration in many cases; smaller claims qualify for simplified arbitration. Expungement under Rule 2080 is deliberately narrow: it requires a court order, specific grounds such as defamatory falsehood or non-involvement, and FINRA review before an award can be confirmed.

Memory hook:4530: thirty days, fifteen for sales complaints; expungement needs a court order.

SEA Rule 15c3-1 requires broker-dealers to maintain minimum net capital, computed by subtracting haircuts and other charges from net worth. The minimums are tiered by business model: a fully disclosed introducing firm that never holds customer assets has the lowest requirement, firms accepting customer funds face more, and carrying or clearing firms face a still higher minimum. Early warning is the supervision piece: FINRA Rule 4120 requires notice to FINRA when net capital falls below 120 percent of the required minimum, and further deterioration can trigger business curtailment. SEA Rule 17a-11 requires notice to the SEC when capital falls below the minimum. The principal's job is watching the trend, not just the floor.

Memory hook:Net capital has a floor, but the early warning fires at 120 percent.

SEA Rule 15c3-3 protects customer assets in two parts. The possession or control provision requires the firm to hold fully paid customer securities and excess margin securities in possession or control, with only short-term deficits permitted and prompt remediation required. The reserve formula provision requires the firm to compute, generally weekly, the amount of customer funds it must set aside in a special reserve bank account, based on the excess of customer-related credits over customer-related debits, and to deposit the required amount promptly. A deficiency triggers notice to the SEC. Fully disclosed introducing firms that promptly transmit customer funds may qualify for an exemption from the rule. The mechanism: possession or control protects securities; the reserve formula protects cash.

Memory hook:Possession or control for securities; reserve formula for cash; compute, deposit, and segregate.

Regulation T, issued by the Federal Reserve Board, sets initial margin requirements for margin account purchases. For equity securities, the initial requirement is 50 percent of the purchase price. The Reg T payment period ends on the earlier of the settlement date or two business days after trade date, so with the current T+1 cycle, payment is effectively due at settlement. If a customer cannot pay, the broker-dealer may seek an extension from its designated examining authority under FINRA Rule 4230. Section 11(d)(1) prohibits extending or maintaining credit on securities the firm is distributing or has distributed within the past 30 days. Rule 11d1-2 exempts certain investment company securities held as margin collateral.

Memory hook:Reg T payment ends at the earlier of settlement or two days; Section 11(d) blocks credit on your own deal for thirty days.

FINRA Rule 4560 requires members to report short interest positions to FINRA twice each month, covering positions as of the 15th and the last day of the month. Carrying agreements under FINRA Rule 4311 define the relationship between a clearing firm and an introducing broker-dealer, allocating responsibilities for custody of customer funds and securities, books and records, and financial reporting. The clearing firm holds customer assets and performs back-office functions while the introducing firm handles the customer relationship. SIPC, created under the Securities Investor Protection Act of 1970, protects customers of failed SIPC-member broker-dealers. Coverage extends to 500,000 dollars per separate customer, with a sublimit of 250,000 dollars for cash claims. SIPC membership is mandatory for most registered broker-dealers.

Memory hook:Twice a month report shorts; 500K protected, 250K in cash.

The Customer Identification Program, required under Section 326 of the USA PATRIOT Act, obligates broker-dealers to collect four core data elements before opening an account: the customer's name, date of birth, address, and an identification number such as a Social Security number for U.S. persons or a passport number for non-U.S. persons. The firm must verify this information within a reasonable time using documentary or nondocumentary methods. OFAC operates separately from the BSA framework. The Office of Foreign Assets Control administers economic and trade sanctions programs and maintains lists of prohibited parties, including Specially Designated Nationals. OFAC screening blocks or rejects transactions involving sanctioned individuals or entities. Unlike CIP, OFAC compliance does not involve verifying identity but rather checking names against sanctions lists.

Memory hook:CIP asks who you are; OFAC asks if you are banned.

FINRA Rule 3310 requires every member to develop and implement a written anti-money laundering program reasonably designed to achieve and monitor compliance with the Bank Secrecy Act. The program must include four elements: written policies and procedures reasonably designed to detect and report suspicious activity, independent testing for compliance conducted by qualified personnel who are not the AML officer, designation and identification to FINRA of an AML compliance officer responsible for day-to-day implementation, and ongoing employee training tailored to the firm's business. Suspicious Activity Reports are filed with FinCEN when a firm knows, suspects, or has reason to suspect a transaction involves funds derived from illegal activity or is designed to evade BSA requirements. SAR confidentiality is absolute: a firm may not notify any person involved in the transaction that a SAR has been filed.

Memory hook:Test independently, train continuously, designate an officer, and never reveal the SAR.

Regulation S-P governs the privacy of consumer financial information. Broker-dealers must deliver an initial privacy notice when a customer relationship is established and annually thereafter. The notice describes the firm's collection and sharing practices. Customers must receive the opportunity to opt out before the firm discloses nonpublic personal information to nonaffiliated third parties, subject to enumerated exceptions. Regulation S-ID requires financial institutions and creditors to implement a written identity theft prevention program. The program must identify relevant red flags for covered accounts, incorporate procedures to detect those red flags, respond appropriately to prevent and mitigate identity theft, and update the program periodically to reflect changing risks. The program must be approved by the board or a designated committee.

Memory hook:S-P says who sees your data; S-ID stops someone from being you.

FINRA Rule 11870 governs the operational mechanics of moving customer accounts between firms through the Automated Customer Account Transfer Service. The receiving firm submits transfer instructions, and the carrying firm must validate the instructions within one business day of receipt. The carrying firm must either affirm or take exception to the transfer. If the carrying firm fails to respond, the transfer proceeds automatically. FINRA Rule 2140 addresses employment disputes. It prohibits a member from using customer account transfers as leverage when an associated person departs to another firm. A firm cannot condition the release of customer accounts on resolution of disputes with a former employee. The customer's right to move their account cannot be obstructed by the firm's internal conflicts.

Memory hook:11870 moves the money; 2140 stops the hostage-taking.

FINRA Rule 3260 requires that a member accept a discretionary account only if the customer has provided written authorization designating the person who will exercise discretion. The member must obtain the customer's written authorization and the acceptance of a registered principal before discretionary trading begins. The principal must review all discretionary activity on an ongoing basis. FINRA Rule 2130 requires members to establish procedures to approve customer accounts for day-trading strategies. The firm must determine whether day trading is appropriate for the customer, provide the day-trading risk disclosure statement required under Rule 2270, and obtain the customer's signed acknowledgment of that disclosure. The firm must also supervise day-trading activity to detect patterns such as excessive trading that generates commissions without customer benefit.

Memory hook:Discretion needs a signature; day-trading needs a warning label.

FINRA Rule 2210 divides communications into three categories based on audience and volume. Retail communications are any written or electronic communications distributed to more than 25 retail investors within any 30 calendar-day period. They require pre-approval by a registered principal before first use, with certain exceptions. Institutional communications are distributed exclusively to institutional investors, and the firm need only have a reasonable basis for believing the recipient is an institutional investor. Correspondence is any written or electronic communication distributed to 25 or fewer retail investors within any 30 calendar-day period. Correspondence does not require principal pre-approval, but the firm must supervise associated persons through procedures such as sampling and review. The 25-investor threshold is the hinge that separates retail from correspondence.

Memory hook:Twenty-five in thirty days draws the line between retail blast and personal note.

FINRA guidance distinguishes two types of social media content with different supervisory obligations. Static content is information that sits on a page and does not change based on user interaction, such as a firm profile, background information, or a posted article. Static content constitutes a retail communication and must be approved by a registered principal before posting. Interactive content is generated in real time through dynamic participation, such as comments, replies, or real-time posts on platforms like X or chat features. Interactive content is treated as a form of public appearance or correspondence and does not require principal pre-approval, but the firm must still supervise it through procedures such as periodic sampling, real-time monitoring, or post-use review. Firms must retain records of both types.

Memory hook:Static sits still and needs a stamp; interactive flows but still gets checked.

FINRA Rule 3230 restricts telemarketing practices. Members may not call a person outside the hours of 8 a.m. to 9 p.m. local time at the called party's location. Firms must honor the National Do Not Call Registry maintained by the Federal Trade Commission and must place on the firm's own do-not-call list any person who requests no further calls. An established business relationship exemption permits calls to persons with whom the member has a current or recent relationship, generally defined as a customer who has had a transaction within the preceding 18 months. The firm must train associated persons on these requirements and maintain records of its do-not-call procedures. Calls to persons on the firm's internal list are prohibited regardless of the business relationship.

Memory hook:Eight to nine local, 18 months of business, but their no always wins.

Regulation Best Interest, adopted as SEC Rule 15l-1, applies when a broker-dealer makes a recommendation of a securities transaction or investment strategy to a retail customer. It imposes four component obligations: disclosure, care, conflict of interest, and compliance. The care obligation requires the broker-dealer to have a reasonable basis to believe the recommendation is in the retail customer's best interest and does not place the firm's interest ahead of the customer's. FINRA Rule 2111 suitability has three components: reasonable-basis suitability, customer-specific suitability, and quantitative suitability. Form CRS, the relationship summary, must be delivered to retail investors at the earliest of a recommendation of an account type, opening of a new account, or placement of an order. It describes services, fees, and conflicts in a standardized format.

Memory hook:Best interest beats suitability; CRS arrives before the first trade.

FINRA Rule 2121 requires members to use reasonable diligence to ascertain the best market available and to execute customer orders so that the resulting price is as favorable as possible under prevailing conditions. Rule 2122 requires charges for services to be fair and reasonable, not unfairly discriminatory, and proportionate to the value of the service. Rule 2124 governs net transactions with customers, where the member buys from or sells to the customer as principal and discloses the markup or markdown. Rule 2232 requires that confirmations for riskless principal transactions in certain debt securities disclose the markup or markdown and the yield. A riskless principal transaction occurs when a firm buys a security to fill a customer buy order or sells to fill a customer sell order, taking no market risk.

Memory hook:Fair price, fair charge, disclose the markup on the riskless trade.

FINRA Rule 2342 addresses breakpoint sales in mutual fund transactions. A breakpoint sale occurs when a representative recommends a purchase of investment company shares at a dollar amount just below a breakpoint, which is the point at which the sales charge percentage is reduced. For example, if a breakpoint exists at 50,000 dollars but the representative recommends a 49,500 dollar purchase, the customer pays a higher sales charge percentage without justification. The rule requires firms to establish and maintain procedures to ensure that representatives inform customers of breakpoint discounts and do not engage in breakpoint sales. Firms must monitor for patterns where purchases cluster just below breakpoints, which may indicate a violation. The burden of supervision falls on the principal reviewing these transactions.

Memory hook:Just under the breakpoint means just over the line.

FINRA Rules 2264 through 2268 require specific disclosures to customers at defined points in the relationship. Rule 2264 requires delivery of a margin disclosure statement before or at the time a customer opens a margin account, explaining the risks of margin including the firm's right to sell securities without notice. Rule 2265 requires delivery of an extended hours trading risk disclosure before or at the time the customer engages in extended hours trading, covering risks such as reduced liquidity and wider spreads. Rule 2266 requires disclosure of SIPC membership and its limitations, including the coverage caps. Rule 2268 governs predispute arbitration agreements, requiring that the customer receive a written disclosure explaining the implications of agreeing to arbitrate before signing the arbitration clause.

Memory hook:2264 margin, 2265 after-hours, 2266 SIPC, 2268 arbitration.

Section 15(h) of the Exchange Act and the accompanying rules under the 15g series impose layered requirements on broker-dealers engaging in penny stock transactions. Rule 15g-2 requires delivery of a penny stock disclosure document explaining the risks of the penny stock market before the first transaction. Rule 15g-3 requires the broker-dealer to disclose the current bid and ask quotation and the compensation the firm receives. Rule 15g-4 requires disclosure of compensation to the broker-dealer, and Rule 15g-5 requires disclosure of compensation to associated persons. Rule 15g-6 mandates monthly account statements showing the market value of penny stock holdings. Rule 15g-9 requires the firm to approve the customer's account for penny stock transactions, obtain a written agreement to the transaction, and obtain a financial statement from the customer.

Memory hook:15g: disclose, quote, pay, state, and get it in writing.

FINRA Rule 5310 requires members to use reasonable diligence to ascertain the best market for a security and to execute customer orders so that the resulting price is as favorable as possible under prevailing market conditions. Interpositioning, which is the insertion of a third party between the member and the best available market, is prohibited unless the member determines that the interposition is necessary and beneficial to the customer. SEC Rule 605 requires trading centers to publish quarterly reports on execution quality for covered orders. SEC Rule 606 requires broker-dealers to publish quarterly reports on order routing practices, including the venues to which orders are sent and the factors considered in routing decisions. Firms should review these reports as part of best execution oversight.

Memory hook:5310 finds the best price; 605 grades the fill, 606 grades the route.

FINRA Rule 5320 prohibits members from trading for their own account ahead of a customer market order that the member holds. The rule also applies to customer limit orders that the member holds, with a specific exception. The same-subordinate-size exception permits a member to trade ahead of a customer limit order if the member's order is for the same size or a smaller size than the customer's order. The logic is that the customer's order will still be fully executable after the member's trade because the member has not consumed the available liquidity that the customer's order requires. The member must still ensure the customer's order is executed promptly. This exception does not apply to customer market orders.

Memory hook:Same size or smaller, limit orders only.

FINRA Rule 5270 prohibits members from trading ahead of customers' block transactions when the member knows a block order is pending. A block transaction is a large order whose execution could move the market. If a member knows a customer intends to buy or sell a large position and trades for its own account first to profit from the anticipated price impact, that is front running. FINRA Rule 5280 prohibits members from trading ahead of their own forthcoming research reports. If a firm plans to publish a research report that is likely to affect the price of a security, the member may not buy or sell that security for its own account in a way that takes advantage of the report before it is published.

Memory hook:5270 guards the block; 5280 guards the report.

Regulation SHO addresses short sale practices through three core requirements. Rule 200 requires that orders be marked as long, short, or short exempt. A long mark means the seller owns the security; a short mark means the seller is borrowing or intends to borrow. Rule 203 requires a broker-dealer to have reasonable grounds to believe the security can be borrowed so that it can be delivered on settlement before accepting or effecting a short sale. This is the locate requirement, and it must be documented. Rule 204 requires close-out of failures to deliver. If a seller fails to deliver securities by settlement, the firm must close out the position by purchasing securities of like kind and quantity within the timeframe specified by the rule.

Memory hook:Mark it, locate it, deliver it or close it out.

Regulation NMS establishes the framework for the national market system. Rule 611, the Order Protection Rule, prohibits a trading center from executing a trade at a price inferior to a protected quotation available elsewhere. A protected quotation is the best bid or offer displayed by an automated trading center. Rule 612 sets minimum pricing increments, which vary by the price level of the security. A locked market exists when the best bid on one venue equals the best ask on another venue. A crossed market exists when the best bid on one venue exceeds the best ask on another venue. FINRA Rule 6240 prohibits members from locking or crossing quotations in NMS stocks, with limited exceptions for certain order types and market conditions.

Memory hook:611 protects the best quote; locked means equal, crossed means inverted.

Rule 15c3-5 puts responsibility on the broker-dealer providing market access, including sponsored access for customers, for every order flowing through its systems. The firm must implement pre-trade financial risk controls that check credit or capital thresholds, restrict trading to authorized securities and maximum order sizes, and block erroneous, duplicate, or runaway orders. The rule also requires real-time monitoring of activity and an annual CEO certification that the controls are reasonably designed and functioning. A member cannot delegate this duty to a customer, vendor, or sponsoring system; the supervising principal should verify controls are tested, enforced, and escalated when they fail.

Memory hook:15c3-5: whoever opens the gate owns the gate, with pre-trade checks and an annual CEO sign-off.

Each reporting facility runs on its own clock, and the product determines the facility. Trades in NMS stocks must be reported to the applicable facility within 10 seconds of execution. OTC equity trades reported through the ORF are on a 30-second clock. Corporate and agency debt trades reported to TRACE must be submitted within one minute of execution. Late or as-of reports are flagged and can trigger reporting violations even when the trade itself was legitimate. Supervisors should map each desk's products to the correct facility and clock, and review exception reports for late submissions rather than assuming the system handles timing automatically.

Memory hook:NMS blinks in 10 seconds, ORF in 30, TRACE takes a minute.

A registered market maker takes on affirmative obligations: maintain continuous two-sided quotations during normal market hours, honor the displayed quotes and size, and meet minimum quotation requirements. Withdrawal is permitted, but it is a process, not a snap decision. The market maker must provide notice to the exchange, and it cannot use withdrawal to escape obligations the rules impose. FINRA Rule 6435 specifically requires that withdrawal of quotations in an OTC equity security comply with Regulation M, which restricts pulling quotes during a distribution to avoid manipulating the price. Supervisors should monitor quote integrity, whether displayed prices are honored, and whether notice and Reg M conditions were satisfied before any withdrawal.

Memory hook:Two-sided, firm, and continuous; leaving takes notice, and never mid-distribution.

Before a member initiates or resumes quotations in an OTC equity security, it must have and review specified current information about the issuer: identifying details such as name, symbol, state of incorporation, titles and class of securities, par value, number of shares outstanding, and recent financial statements. For a non-reporting issuer, the financials cannot be more than 16 months old. Reporting companies under the Exchange Act, investment companies, and certain other issuers are exceptions. FINRA Rule 6432 enforces compliance on the FINRA side. If the information goes stale, quotations must be withdrawn until it is refreshed. The supervisory task is documenting the pre-quote review and monitoring ongoing currency of the information.

Memory hook:15c2-11: know the issuer before you quote; 16 months is the freshness date.

The UPC supplies the mechanics for handling fails. A buy-in under Rule 11810 lets a buyer who has not received securities from the seller give notice and purchase them on the market at the seller's risk and expense. A sell-out under Rule 11820 lets a seller who has not been paid deliver the securities to another buyer at the defaulting purchaser's risk. Due bills, covered in the 11630 series, pass along dividends, rights, or interest when the seller delivers after the record date. Marking to the market under Rule 11740 adjusts the delivery obligation when the value of securities changes between trade and settlement. Notice requirements and timing drive each remedy.

Memory hook:Seller fails, buyer buys in; buyer fails, seller sells out; due bills follow the record date.

SEC Rule 15c6-1 sets the standard settlement cycle for most securities transactions at T+1, so trade date plus one business day is the deadline for delivering securities and payment. Confirmations are governed by SEA Rule 10b-10 and FINRA Rule 2232: the confirmation must be sent at or before completion of the transaction and must disclose capacity, price, commission or markup, and other required items. A member acting as agent discloses commission; a principal discloses that it acted as principal. Late or incomplete confirmations are supervisory failures even when the trade itself is clean, so principals should review confirmation exception reports and verify required disclosures appear on every customer trade.

Memory hook:T+1 settles; confirm at or before completion, with capacity and cost spelled out.

When trading halts, the rules go quiet too. FINRA Rule 5260 prohibits transactions, publications of quotations, or indications of interest during a trading halt, and volatility pauses under Rule 6121 and Nasdaq's 4121 series give the market time to recalibrate during extraordinary moves. On the quoting side, Rule 5210 bans fictitious or misleading quotations, Rule 5220 requires that offers at stated prices be honored, and Rule 6240 prohibits locking or crossing quotations in NMS stocks. A supervisor's job is to ensure traders do not publish IOIs into a halted market, paint the tape with phantom quotes, or display prices the firm will not honor.

Memory hook:Halt means everything stops: trades, quotes, and IOIs; stated prices must be real.

The FINRA 6800 series implements the Consolidated Audit Trail obligations for industry members. Rule 6820 requires synchronization of business clocks to the approved time source so every event is timestamped consistently. Rule 6830 requires members to report order lifecycle events to the plan processor: receipt, routing, modification, cancellation, and execution data for orders in NMS securities and related activity. Rule 6890 covers recordkeeping for the reported information. Members using service bureaus or vendors remain responsible for complete and accurate reporting; the obligation is not outsourced. Supervisors should verify daily submissions, monitor rejected or incomplete reports, and ensure corrections are made promptly.

Memory hook:CAT watches the whole order life: clocks synced, every event reported, records kept.

FINRA Rule 5110 requires that underwriting terms and arrangements in public offerings be fair and reasonable, and it gives FINRA the authority to review them before the offering proceeds. Members must file information describing all underwriting compensation, and the review reaches indirect forms as well: discounts, concessions, expense reimbursements, securities acquired from the issuer by underwriters or their affiliates, and other items of value tied to the deal. Compensation that is excessive can require adjustment before the offering goes forward. The supervisory point is completeness; the most common failure is a buried item of value connected persons receive that never appears in the filing. Document the review and capture every form of compensation.

Memory hook:5110: FINRA reads the whole paycheck, including perks hidden in the fine print.

Rule 5130 keeps hot new issues out of the hands of industry insiders. Restricted persons, including associated persons of broker-dealers, finders, and portfolio managers with trading authority, generally cannot buy new issues in public offerings, subject to limited exceptions such as investment companies and certain employee plans. Rule 5131 attacks allocation abuses on the sell side: spinning, meaning allocating IPO shares to executives to curry investment banking business, is prohibited; quid pro quo allocations are barred; officers and directors of underwriters and their immediate family are restricted; and lock-up practices must be handled with required notices. The supervisor's role is screening accounts for restricted status and reviewing allocations for favoritism.

Memory hook:5130 gates the buyers; 5131 polices the sellers; spinning is the headline sin.

Rule 5121 addresses public offerings with conflicts of interest, where the underwriter is an affiliate of the issuer or otherwise has a conflict. The member must arrange for an independent underwriter to exercise certain responsibilities or, where that is not possible, comply with heightened disclosure and principal approval requirements. Rule 5122 covers private placements of securities issued by the member or an affiliate, requiring a disclosure document and principal approval before sale, with filing obligations unless an exemption applies. Rule 5123 is the broad private placement rule: members selling securities in a private placement must file notice with FINRA within 15 calendar days of the first sale, subject to exemptions for offerings sold to institutional and other qualified types of purchasers.

Memory hook:5121 conflict, 5122 member's own deal, 5123 everybody's private placement, 15 days to file.

Both 506 exemptions permit unlimited dollar amounts, but they diverge on marketing. Rule 506(b) prohibits general solicitation and advertising; the issuer may sell to an unlimited number of accredited investors plus up to 35 non-accredited purchasers who are sophisticated, with required disclosure to the non-accredited group, and the issuer must have a reasonable belief that accredited purchasers qualify. Rule 506(c) permits general solicitation and advertising, but every purchaser must be an accredited investor and the issuer must take reasonable steps to verify that status; belief alone is not enough. Both paths require a Form D notice filing with the SEC within 15 days of the first sale, and bad actor disqualification applies across Regulation D.

Memory hook:506(b) keeps it quiet and believes; 506(c) shouts but must verify; Form D in 15 days.

Rule 144 is the safe harbor for reselling restricted and control securities into the public market. The holding period depends on the issuer: six months for issuers subject to Exchange Act reporting, with current public information required for resales between six months and one year, and one year for non-reporting issuers. Affiliates remain subject to volume, manner-of-sale, and notice limits even after the holding period. The affiliate volume limit is the greater of one percent of shares outstanding or the average weekly trading volume during the four weeks preceding the sale, and Form 144 is filed when thresholds are crossed. Rule 144A is different: it creates a private resale market to qualified institutional buyers without registration.

Memory hook:144 goes public: six months if reporting, one year if not; 144A stays private with the QIBs.

Section 3(a)(11) exempts securities of issuers that are resident in and doing business within a state, offered and sold only to residents of that state, with proceeds and assets substantially employed in-state. Rule 147 spells out the mechanics of that exemption, and Rule 147A provides a modernized version that works alongside Regulation D while preserving the intrastate character. Regulation S covers the opposite geography: offers and sales made outside the United States are exempt from registration if the transaction meets the applicable safe harbor conditions, including that the sale occurs offshore and there are no directed selling efforts toward U.S. persons. Securities sold offshore remain restricted for resale into the U.S. market during the applicable compliance period.

Memory hook:147 stays inside state lines; Reg S crosses the ocean but must not look back at U.S. buyers.

Rule 415 permits shelf registration: a large issuer registers securities now and sells them later in takedowns when conditions suit, using a prospectus supplement for each tranche. A well-known seasoned issuer, or WKSI, enjoys the top tier of flexibility: its automatically effective shelf registration requires no prior SEC review of the registration statement, and it can use free writing prospectuses broadly, including before filing, without the filing burdens smaller issuers face. Free writing prospectuses for other issuers operate under Rule 433, which imposes conditions such as legends, and filing or confirmation requirements depending on the issuer's status. The supervisory task is knowing which tier the issuer occupies and which communication rules attach.

Memory hook:Shelf waits for the moment; WKSI skips the line and speaks freely; everyone else files under 433.

These rules carve communications out of the prospectus definition so normal business does not become an illegal offer. Rule 134 permits tombstone ads with limited factual information about the offering. Rule 135 permits brief notices of a proposed registered offering. Rules 137 and 138 let brokers publish research: 137 covers research by brokers not participating in the issuer's distribution, and 138 covers research by participating brokers on securities other than the one being distributed. Rule 139 permits participating brokers to publish routine periodic research on the distributed security itself. Rule 163A exempts issuer communications made more than 30 days before the registration statement is filed. Each safe harbor has content and timing conditions that must be met exactly.

Memory hook:134 tombstone, 135 notice; 137 outsider, 138 different stock, 139 the offered one, 163A pre-filing.

Rule 15c2-8 governs prospectus delivery by broker-dealers in registered offerings. The purchaser must receive the prospectus within two business days after the later of the transaction date or the confirmation date, and in an IPO the preliminary prospectus must reach the purchaser before the confirmation is sent so there is time to review. Rule 174 handles the dealer's obligation after the offering begins: a dealer selling into the market must deliver a prospectus for a specified period, generally 90 days for a new issue measured from the later of the effective date or first bona fide offering, and 25 days for subsequent offerings. After the period lapses, the Section 4(3) exemption lets dealers trade without delivery.

Memory hook:15c2-8 delivers in two days; Rule 174 keeps dealers delivering: 90 new, 25 subsequent.

Regulation M protects the market price during a distribution. Rules 101 and 102 restrict bidding for and purchasing the offered security by distribution participants and by the issuer or selling security holders during the restricted period, preventing manufactured demand. Rule 105 bars purchasing to cover a short sale in connection with a registered offering during the restricted period, which begins five business days before pricing and ends with the pricing. Rule 104 permits stabilization within limits: the bid must prevent or retard a decline, cannot exceed the offering price or the highest independent bid, and the intent to stabilize must be disclosed. Rule 103 provides a passive market making exception for Nasdaq market makers. Supervisors must document stabilizing activity and review syndicate compliance.

Memory hook:Reg M: no manufactured demand; stabilization only slows the fall; Rule 105 stops short covering before pricing.

FINRA Rule 2241 separates research from banking. Analysts cannot be supervised or reviewed by investment banking, their compensation cannot be tied to specific banking transactions, and reports must disclose conflicts of interest. Personal trading by analysts in covered securities is restricted around the publication of research, and analysts cannot trade contrary to their current recommendations. On timing, a member participating in an IPO cannot publish research on the issuer during the blackout before the offering, and a quiet period applies afterward, generally 10 days for IPOs and 3 days for subsequent offerings for analysts of participating members. Supervisors should review pre-publication approvals, disclosures, and trading records to confirm the walls hold.

Memory hook:2241 builds the wall: bankers don't grade analysts; quiet after the deal, 10 then 3.

Tender offers run on equality and disclosure. Rule 14e-1 requires the highest price paid be extended to all holders, and the offer must stay open at least 20 business days so holders have time to decide. Rule 14e-5 prohibits purchases outside the offer while it is pending, and Rule 14e-3 reaches trading on material nonpublic information in the tender offer context. Going private transactions by an issuer or its affiliates fall under Rule 13e-3, which requires Schedule 13E-3 disclosures about the transaction's fairness. On ownership reporting, a person acquiring more than five percent of a registered class files Schedule 13D within the required period, and insiders file Section 16 forms, with Form 4 due within two business days of a reportable transaction.

Memory hook:Tender offers: 20 days open, best price for all; going private files 13E-3; five percent triggers 13D.