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What is FINRA Rule 3210 – Rule 407 Letter?

FINRA Rule 3210 – Rule 407 Letter featured by top securities fraud attorneys, the White Law Group

FINRA Rule 3210 Protects Investors from Conflicts of Interest 

The Financial Industry Regulatory Authority (FINRA) helps to keep investors and their investments safe by enacting rules and publishing guidance for brokerage firms and financial advisors. In 2016, a new rule FINRA 3210, Accounts At Other Broker-Dealers and Financial Institutions, was introduced and approved by the U.S. Securities and Exchange Commission. Rule 407 is now superseded by Rule 3210 in the United States Securities market. 

Rule 407, under NYSE, was a law that required a letter for FINRA registered representatives allowing the employee to hold investments in equities or bonds in personal accounts.  Rule 407 required the reps to disclose personal bank account information about the account in which they are holding the security. The rule was designed to avoid conflict of interest and protect retail investors. 

What is FINRA Rule 3210? 

The purpose of the rule 3210 (and formerly rule 407) is to ensure that registered brokerage firms, brokers and financial advisors are able to avoid any conflicts of interests by maintaining high ethical standards. 

The rule also applies to associated persons including people who are related to the employee such as spouses, children, and other family members. 

Requirements under FINRA Rule 3210 

FINRA Rule 3210, Accounts At Other Broker-Dealers and Financial Institutions, states that:  

(a) No person associated with a (FINRA) member shall, without the prior written consent of the member, open or otherwise establish at a member other than the employer member, or at any other financial institution, any account in which securities transactions can be effected and in which the associated person has a beneficial interest. 

(b) Any associated person, prior to opening or otherwise establishing an account subject to this Rule, shall notify in writing the executing member, or other financial institution, of his or her association with the employer member. 

(c) An executing member shall, upon written request by an employer member, transmit duplicate copies of confirmations and statements, or the transactional data contained therein, with respect to an account subject to this Rule. 

Stated simply, to avoid conflicts of interest, representatives are required to obtain written permission when opening accounts at other financial institutions where securities transactions take place, including banks or brokerage firms. While a member firm is able to monitor the rep’s activities at own organization, it may not be able to do so at another institution. 

FINRA Rule 3210 Letter 

In the past, Rule 407 was often referred to as Rule 407 Letter, because the declarations are required in writing. The same can be said for FINRA Rule 3210. 

FINRA Rule 3210 requires brokers and financial advisors to declare any outside accounts and notify their member firm in writing when they plan to open any new account where securities transactions take place. The representatives are also required to have consent in writing from their member firms for any outside accounts. 

Securities Attorneys for Investment Losses 

If you have questions about conflicts of interest with your financial advisor, the securities attorneys of The White Law Group may be able to help.  For a free consultation, call the firm’s office at 888-637-5510. 

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.   

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.    

With over 40 years of securities law experience, including experience working at FINRA and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment attempt to recover their investment losses.    

The firm reviews securities fraud cases throughout the country. For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com. 


Tags: , , , , Last modified: February 10, 2023