Bought a BD FAQ

1. District/Membership Considerations

Have you reviewed Rule 1017?
Rule 1017 governs the process for a change in ownership, control, or business operations.  FINRA approval is required for a number of different types of changes in firm organization, including certain mergers, acquisitions, asset transfers and material changes in business.  Rule 1017 specifies when and what type of information needs to be submitted to the district to seek approval in advance of the organization change. Rule 1017 can be found at http://www.finra.org/nasdmanual/rules/r1017/. In addition, FINRA’s Continuing Membership Guide provides additional guidance to firms regarding the approval process. The Guide can be found at http://www.finra.org/continuingmembership/.

Have you contacted your district office? 
Rule 1017 requires that an application that is required to be filed relating to a change in ownership or control must be submitted at least 30 days before a change is scheduled to occur. If the change involves firms in different districts, each firm should contact its respective district office. 

Have you determined what the surviving firm(s) will look like after the change in organization? 
In preparing a Rule 1017 application, you should carefully consider whether the firm, after reorganization, will conform to all of the Rule 1014 standards. The Membership Agreement of the surviving firm(s) should also be reviewed to determine what changes are necessary to ensure accuracy after the change occurs.

Is the successor firm approved to conduct all of the types of business that the predecessor was conducting? 
You should ensure that the registered representatives are aware what types of business they are allowed to conduct with the new firm.

Will the change result in a relocation of the firm? 
If the surviving firm will be located in a different district, that district office should be contacted about the change as well.

Additional Questions? 

Contact your district office.  A list of district contacts is located at www.finra.org/ContactUs/DistrictOffices.

 

2. Web CRD® Considerations

Have you submitted the appropriate firm form filings (i.e., BD Amendment, BDW)? 
To determine whether firm form filings are required, consider the following: Is a Form BD Amendment required to update ownership/control information on the firm, or to add new branch offices or business lines resulting from the organizational change? Is a predecessor firm withdrawing from the industry, requiring submission of a Form BDW? To submit Form BD or BDW filings, your Web CRD user(s) with appropriate entitlement should access Web CRD: https://www.webcrd.com. If you have questions about whether succession rules apply, contact the SEC’s Office of Filing and Information Services at (202) 942-7820.

 

Does your firm qualify for a mass transfer? 
A mass transfer allows the representatives to be systematically terminated with the predecessor firm and registered with the successor firm without requiring submission of Form U4 and U5 filings. To learn more about the mass transfer process and whether it would be suitable for your firm, contact the FINRA Gateway Call Center at (301) 869-6699 and ask to speak with a mass transfer representative. 

 

If you do NOT mass transfer representatives, have you submitted the appropriate form filings? 
If your representatives will be moved from one firm to another without a mass transfer, Form U4 filings must be submitted to register the representatives with the new firm, and Form U5 filings will be required for any representatives who will be terminated from their current firm. To submit Form U4 or U5 filings, your Web CRD user(s) with appropriate entitlement should access Web CRD: https://www.webcrd.com.

 

After a mass transfer, have you printed and provided a current Form U4 to each registered representative? 
The successor firm should encourage each registered representative to verify that the information on record is correct, as the successor firm is now responsible for the records (including disclosure information) of these representatives. 

 

Have you verified via Web CRD that all registrations have been requested or have transferred as intended? 
If you submitted Form U4 filings to register representatives with the new firm, you may wish to verify that all necessary registrations have been requested. If you moved representatives via a mass transfer, be aware that some states may block mass transfers, so it is important to validate registrations in Web CRD after the mass transfer is complete.

 

3. FINRA User Account Management Considerations

 

Have you created the necessary user accounts for individuals moving to the new firm? 

If the predecessor firm is submitting a full Form BDW, the predecessor firm’s entitlement accounts will be terminated once the firm termination is complete. The successor firm should consider whether new user accounts are necessary for any of the following systems:

 

·      IARD

·      FINRA Contact System

·      Report Center

·      Order Audit Trail System (OATS)

·      Regulation Filing Applications

·      Web CRD

·      Web Information Request (Web IR)

 

To request a new Account Administrator, an Account Administrator Entitlement Form (AAEF) for the appropriate application should be submitted. The AAEFs for the applications listed above can be found at https://www.finra.org/entitlementforms. Once a new Account Administrator is created by FINRA, the Account Administrator can create new user accounts via FINRA Account Management (https://accountmgmt.finra.org/ewsadmin2/index.jsp). 

 

Have you deleted user accounts for individuals that no longer require access?

It is an Account Administrator’s responsibility to remove entitlement immediately for individuals who are no longer with the firm. User accounts are deleted via the FINRA Account Management (https://accountmgmt.finra.org/ewsadmin2/index.jsp). A FINRA Entitlement Modification Form is required to delete an application’s Account Administrator. The FINRA Entitlement Modification Forms can be found at https://www.finra.org/entitlementforms.

 

If you access the Report Center, are the appropriate MPID(s)/MSRB number(s) associated with your user accounts?

If the successor firm will use the predecessor’s identifiers or will need continued access to the predecessor’s reports, an Account Administrator should request access to that MPID and/or MSRB number via a FINRA Entitlement Modification Form (Report Center), which can be found at https://www.finra.org/entitlementforms.

 

4. TRACE Considerations

 

Have you notified TRACE that the firm is going through a change in organization? 

To notify TRACE that a change is occurring, please call the TRACE Toll Free Help Line at (866) 776-0800 or send an e-mail to finramarketoperations@finra.org.

 

Have you terminated the predecessor firm’s TRACE Participation Agreement? 

If the firm is filing a full Form BDW filing to terminate, the firm also needs to submit written notice to disable its TRACE agreement. See page 7 of the TRACE Participation Agreement for further information about termination. The TRACE Participation Agreement can be found on the TRACE Subscriber Forms Web page, http://www.finra.org/traceforms. 

 

Have you submitted a new TRACE Participation Agreement and Order Forms as necessary? 
A new signed contract is required when a merger occurs. The TRACE Order Form enables you to request, modify, or terminate your TRACE service. The TRACE Order Form can be found on the TRACE Subscriber Forms Web page, http://www.finra.org/traceforms.

 

5. OATS Considerations

 

Have you established or updated the appropriate reporting relationships in OATS? 

In order for a firm to give other organization(s) permission to transmit on the firm’s behalf, the relationship needs to exist in OATS. See Chapter 6 of the OATS Subscriber Manual (http://www.finra.org/oatsmanual) for instructions on accessing, creating, and modifying firm relationships.

 

Have you transferred necessary open limit orders to the successor’s MPID? 

If the predecessor firm has open limit orders on their books that will be executed under the successor firm’s MPID, the firm should route the orders to the new MPID, and report the route to OATS, or provide the predecessor’s MPID in the “Mergers & Acquisitions Administration” field on the OATS report. 

 

Have you requested a User ID and password for an OATS administrator? 

If a new administrator is necessary based on the firm’s change, a new User ID and password must be requested. 

 

Have you ensured that all necessary departments within the firm are submitting to OATS as required? 

 FINRA has seen instances, during organizational changes, of non-reporting of required order events because the firm has not clearly identified all departments and/or individuals responsible for OATS submissions. You should verify that all departments are submitting to OATS as required.

 

6. Other Considerations

Have you updated the FINRA Contact System (FCS) with current information? 

FINRA Member firms are required to update contact information via the FINRA Contact System (FCS) within 30 days following any changes and to review required contact information annually, pursuant to NASD Rule.  FCS is located at https://regfiling.finra.org/Contacts/fcs_Contacts.aspx. For questions, contact the FINRA Gateway Call Center at (301) 869-6699.

 Have you contacted NASDAQ Subscriber Services (if applicable to your firm’s business)? 

Contact NASDAQ Subscriber Services at (800) 777-5606. NASDAQ Subscriber Agreements and forms can be found at:

http://www.nasdaqtrader.com/trader/tradingservices/productservices/agreements/agreement.stm.

 

Have you contacted the MSRB (if applicable to your firm’s business)? 

Contact the MSRB at www.msrb.org, or by calling (703) 797-6600.

 

Have you notified any service providers the firm uses?

If the firm uses a service provider to do any or all of the firm’s filings, ensure that the service provider knows which identifiers to use when filing on the firm’s behalf.

 You should be aware of the jurisdiction rules governing your firm’s business as well. A list of state securities contacts can be found at: http://www.nasaa.org/About_NASAA/2062.cfm.

 

7. FINRA Contact Summary
Questions about the Process? Call ACI at: 212-668-8700

 

Rule 1017 (notifying NASD of change) - Appropriate district. District contact list: www.finra.org/ContactUs/DistrictOffices

Web CRD - Gateway Call Center: (301) 869-6699

Mass Transfers - Gateway Call Center: (301) 869-6699

Account Management - Gateway Call Center: (301) 869-6699

TRACE - TRACE Toll Free Help Line: (866) 776-0800, or by email: finramarketoperations@finra.org

OATS - OATS Help Desk (800) 321-6273

 

 

If you have feedback about additional items that should be included on this checklist or would like to suggest improvements to the checklist, please send an email to compliancetools@finra.org.