300. Funding Portal Compliance
(a) Supervisory System
(1) Each funding portal member shall establish and maintain a system to supervise the activities of each associated person of the funding portal member that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with the Funding Portal Rules. A funding portal member's supervisory system shall provide, at a minimum, for the following:
(A) the establishment and maintenance of written procedures to supervise the activities of the funding portal member and its associated persons;
(B) the designation of a person with authority to carry out the supervisory responsibilities of the funding portal member; and
(C) reasonable efforts to determine that all supervisory personnel are qualified by virtue of experience or training to carry out their assigned responsibilities.
(2) A funding portal member shall permit the examination and inspection of all of its business and business operations that relate to its activities as a funding portal, such as its premises, systems, platforms and records, by representatives of FINRA and the Commission, and shall cooperate with the examination, inspection or investigation of any persons directly or indirectly using its platform.
(b) Executive Representative
Each funding portal member shall designate to FINRA, for purposes of Article IV, Section 3 of the FINRA By-Laws, an executive representative. Each funding portal member shall update its executive representative designation in the manner prescribed by Funding Portal Rule 300(d).
(c) Reporting Requirements
(1) Each funding portal member shall promptly report to FINRA, within 30 calendar days, through such means as FINRA may specify, after the member knows or should have known of the existence of any of the following:
(A) the funding portal member or an associated person of the funding portal member:
(i) is named as a defendant or respondent in any regulatory proceeding, whether foreign or domestic, involving an alleged violation of any securities-, insurance-, commodities-, financial- or investment-related laws, rules, regulations, standards of conduct or by-laws, or has been found by a regulatory body or self-regulatory organization, whether foreign or domestic, to have violated any securities-, insurance-, commodities-, financial- or investment-related laws, rules, regulations or standards of conduct;
(ii) is the subject of any written complaint involving allegations of fraudulent conduct or misuse or misappropriation of funds or assets;
(iii) is denied registration or is expelled, enjoined, directed to cease and desist, suspended or otherwise disciplined by any securities-, insurance-, commodities-, financial- or investment-related regulatory body or self-regulatory organization, whether foreign or domestic, or is denied membership or continued membership in any such self-regulatory organization; or is barred from becoming associated with any member of any such self-regulatory organization;
(iv) is indicted, or convicted of, or pleads guilty to, or pleads no contest to, any felony; or any misdemeanor that involves the purchase or sale of any security, the taking of a false oath, the making of a false report, bribery, perjury, burglary, larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds, or securities, or a conspiracy to commit any of these offenses, or substantially equivalent activity in a domestic, military or foreign court;
(v) is a director, controlling stockholder, partner, officer or sole proprietor of, or an associated person with, a broker, dealer, investment company, investment advisor, funding portal, underwriter or insurance company that was suspended, expelled or had its registration denied or revoked by any regulatory body, jurisdiction or organization, whether foreign or domestic, or is associated in such a capacity with a bank, trust company or other financial institution that was convicted of or pleaded no contest to, any felony or misdemeanor in a foreign or domestic court;
(vi) is a defendant or respondent in any securities- or commodities-related civil litigation or arbitration, is a defendant or respondent in any financial-related insurance civil litigation or arbitration, or is the subject of any claim for damages by an investor, broker, dealer or funding portal member that relates to the provision of financial services or relates to a financial transaction, and such civil litigation, arbitration or claim for damages has been disposed of by judgment, award or settlement for an amount exceeding $15,000. However, when the funding portal member is the defendant or respondent or is the subject of any claim for damages by an investor, broker, dealer or funding portal member, then the reporting to FINRA shall be required only when such judgment, award or settlement is for an amount exceeding $25,000;
(vii) is, or is involved in the sale of any financial instrument, the provision of any investment advice or the financing of any such activities with any person who is, subject to a "statutory disqualification" as that term is defined in the Exchange Act, provided, however, that this requirement shall not apply to activities with a member or an associated person that has been approved (or is otherwise permitted pursuant to FINRA rules and the federal securities laws) to be a member or to be associated with a member. The report shall include the name of the person subject to the statutory disqualification and details concerning the disqualification; or
(B) an associated person of the funding portal member is the subject of any disciplinary action taken by the funding portal member involving suspension, termination, the withholding of compensation or of any other remuneration in excess of $2,500, the imposition of fines in excess of $2,500 or is otherwise disciplined in any manner that would have a significant limitation on the individual's activities on a temporary or permanent basis.
(2) Each funding portal member shall promptly report to FINRA, within 30 calendar days, through such means as FINRA may specify, after the funding portal member has concluded or reasonably should have concluded that an associated person of the funding portal member or the funding portal member itself has violated any securities-, commodities-, financial-or investment-related laws, rules, regulations or standards of conduct of any foreign or domestic regulatory body or self-regulatory organization.
(3) Each person associated with a funding portal member shall promptly report to the funding portal member the existence of any of the events set forth in paragraph (c)(1)(A) of this Rule.
(4) Nothing contained in this Rule shall eliminate, reduce or otherwise abrogate the responsibilities of a funding portal member to promptly disclose required information on SEC Form Funding Portal as applicable, to make any other required filings or to respond to FINRA with respect to any investor complaint, examination or inquiry. In addition, a member need not report an event otherwise required to be reported under paragraph (c)(1)(A) of this Rule if the member discloses the event on the SEC Form Funding Portal, consistent with the requirements of that form, or as required pursuant to Funding Portal Rule 800(b)(2).
(5) For purposes of this Rule, Supplementary Material .01 through .07, .09 and .10 of FINRA Rule 4530 (the "Supplementary Material") shall apply, provided, however, that, as the context requires:
(A) the term "member" as used in the Supplementary Material shall mean "funding portal member" as defined pursuant to Funding Portal Rule 100(b)(6);
(B) the term "associated person" as used in the Supplementary Material shall mean "associated person of a funding portal member" or "person associated with a funding portal member" as defined pursuant to Funding Portal Rule 100(b)(1);
(C) Supplementary Material .01 shall apply to paragraphs (c)(1)(B) and (c)(2) of this Rule;
(D) Supplementary Material .02 and .03 shall apply to paragraphs (c)(1)(A)(i) and (c)(2) of this Rule;
(E) Supplementary Material .05 and .07 shall apply to paragraphs (c)(1) and (c)(2) of this Rule;
(F) Supplementary Material .06 shall apply to paragraph (c)(1)(A)(vi) of this Rule; and
(G) Supplementary Material .10 shall apply to paragraphs (c)(1)(A)(i) and (c)(1)(A)(iii) of this Rule.
(d) Contact Information Requirements
(1) Each funding portal member shall report to FINRA all contact information required by FINRA through such means as FINRA may specify.
(2) Each funding portal member shall promptly update its required contact information (including its executive representative designation and contact information as required by Article IV, Section 3 of the FINRA By-Laws), but in any event not later than 30 days following any change in such information. In addition, each member shall review and, if necessary, update its required contact information, through such means as FINRA may specify, within 17 business days after the end of each calendar year.
(3) Each funding portal member shall comply with any FINRA request for such information promptly, but in any event not later than 15 days following the request, or such longer period that may be agreed to by FINRA staff.
(e) Statement of Gross Revenue
Each funding portal member shall each year report to FINRA, in the manner prescribed by FINRA, the member's gross revenue on Form FP-Statement of Revenue, no later than 60 calendar days following each calendar year-end. The statement of gross revenue shall be prepared in accordance with U.S. Generally Accepted Accounting Principles.
(f) Record of Associated Persons of the Funding Portal Member
Each funding portal member shall make and keep current a record listing every associated person of the funding portal member that shows, for each such associated person, every office of the funding portal member where the associated person regularly conducts any business for the funding portal member, and any registration number, if any, to be prescribed by FINRA, and every identification number or code assigned to the associated person by the funding portal member. A funding portal member shall preserve all records made pursuant to this rule for five years, the first two in an easily accessible place.
|
Adopted by SR-FINRA-2015-040 eff. Jan. 29, 2016. Selected Notice: 16-06. |