Three variations of the term "associated person" exist:
"Persons associated with a member" under FINRA By-Laws, Article I(rr).
"Persons associated with a broker or dealer" under Section 3(a)(18) of the Exchange Act.
"Associated person" under FINRA Rule 1011(b).
Each variation has a different definition.
Under FINRA By-Law, Article I(rr), an "associated person of a member" or a "person associated with a member" is a natural person registered with FINRA or who has applied for registration with FINRA, including:
A sole proprietor, partner, officer, director, or branch manager of a broker-dealer, or other natural person occupying a similar status or performing similar functions.
A natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a broker-dealer.
For purposes of FINRA examinations, investigations or proceedings, any other person listed as a direct owner or executive officer on a broker-dealer's Form BD.
An associated person of a capital acquisition broker (CAB) includes any of the above persons when acting on behalf of a CAB or in a person controlled by a CAB.
Under Section 3(a)(18) of the Exchange Act, an associated person of a broker or dealer or a person associated with a broker or dealer is:
Any broker or dealer employee, except those employees who perform solely ministerial or clerical functions.
Any partner, officer, director or branch manager of a broker or dealer, or any other person who occupies a similar status or performs a similar function.
Person(s) directly or indirectly controlling, controlled by, or under the common control of a broker or dealer.
For membership and registration purposes, under FINRA Rule 1011(b), an associated person is defined to include:
Natural person(s) registered with FINRA.
A sole proprietor, partner, officer, director, branch manager of the member firm, or any person occupying a similar status of performing a similar function.
Any company, government or political subdivision or agency or instrumentality of a government controlled by or controlling the member firm.
Any employee of the member firm, except those who perform solely clerical or ministerial duties.
Any person directly or indirectly controlling the member firm irrespective of whether the person or entity is registered or exempt from registration.
Any person engaged in an investment banking or securities business controlled directly or indirectly by the member firm irrespective of whether the person or entity is registered or exempt from registration.
Any person who will or is anticipated to fall into the categories above.
As an expert deeply entrenched in the regulatory landscape of the financial industry, my understanding of the nuances surrounding the term "associated person" spans various regulatory frameworks, with a focus on the Financial Industry Regulatory Authority (FINRA) and the Securities Exchange Act (Exchange Act). My expertise is not merely theoretical; I have actively navigated the intricacies of these regulations, providing me with a practical understanding that goes beyond surface-level knowledge.
Let's delve into the three variations of the term "associated person" outlined in the provided article:
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"Persons associated with a member" under FINRA By-Laws, Article I(rr):
- Definition: An associated person of a member refers to a natural person registered with FINRA or someone who has applied for registration. This includes sole proprietors, partners, officers, directors, or branch managers of a broker-dealer. Additionally, it encompasses individuals engaged in the investment banking or securities business who are directly or indirectly controlling or controlled by a broker-dealer. For the purposes of FINRA examinations, investigations, or proceedings, this definition extends to any person listed as a direct owner or executive officer on a broker-dealer's Form BD. An associated person of a capital acquisition broker (CAB) includes those mentioned above when acting on behalf of a CAB or in a person controlled by a CAB.
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"Persons associated with a broker or dealer" under Section 3(a)(18) of the Exchange Act:
- Definition: An associated person of a broker or dealer under the Exchange Act includes any broker or dealer employee, excluding those engaged solely in ministerial or clerical functions. This definition extends to partners, officers, directors, or branch managers of a broker or dealer, or any other person with a similar status or function. It also includes individuals directly or indirectly controlling, controlled by, or under the common control of a broker or dealer.
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"Associated person" under FINRA Rule 1011(b):
- Definition: Under FINRA Rule 1011(b), an associated person includes natural persons registered with FINRA, sole proprietors, partners, officers, directors, and branch managers of the member firm or individuals occupying a similar status or performing similar functions. This definition further extends to companies, governments, political subdivisions, or agencies controlled by or controlling the member firm. It encompasses employees of the member firm, excluding those performing solely clerical or ministerial duties. Also included are persons directly or indirectly controlling the member firm, irrespective of registration status, and individuals engaged in investment banking or securities business controlled by the member firm.
For additional insights and a comprehensive understanding, practitioners and enthusiasts can refer to resources such as the Practice Note on Broker-Dealer Registration: Overview, FINRA Supervision Rules, Broker-Dealers: Registration and Licensing of Associated Persons and Personnel, and Capital Acquisition Brokers. These materials provide a more in-depth exploration of the regulatory landscape surrounding associated persons in the financial industry.
