FINRA Rule 3160

This rule comes largely unchanged from the original NASD Rule 2350 dealing with Networking Arrangements Between Members and Financial Institutions with a little nip tuck to capture certain provisions of the Gramm-Leach-Bliley Act and the relatively new Regulation R. Rule 3160 applies to a member that is a party to a networking arrangement with a financial institution under which the member offers broker-dealer services, regardless of whether the member is conducting broker-dealer services on or off the premises of a financial institution. It requires that a member in such a networking arrangement with a financial institution provide certain written disclosures, at or prior to the opening of a customer account, including that securities products are:

(1) not FDIC insured;

(2) not deposits or other obligations of the financial institution and are not guaranteed by the financial institution; and

(3) subject to investment risk, including possible loss of the principal invested

The rule further requires that a member make the above disclosures orally at or prior to the time that a customer account is opened if the account is opened on the premises of a financial institution. In addition, FINRA Rule 3160 expands the disclosure requirements with respect to a member’s advertisements and sales literature so a member must include the disclosures on any advertisements and sales literature that:

(1) announce the location of a financial institution where broker-dealer services are provided by the member;

(2) are distributed by the member on the premises of a financial institution;

(3) promote the name or services of the financial institution; or

(4) are distributed by the member at any other location where the financial institution is present or represented.