FINRA Rule 3240

This rule taken from NASD Rule 2370 regulates Borrowing From or Lending to Customers. The rule prohibits registered persons from borrowing money from or lending money to their customers unless the firm has written procedures allowing such lending arrangements and:

(1) the customer is a member of the registered person’s immediate family;

(2) the customer is in the business of lending money;

(3)* the customer and the registered person are both registered persons of the same firm;

(4)* the lending arrangement is based on a personal relationship outside of the broker-customer relationship; or

(5)* the lending arrangement is based on a business relationship outside of the broker-customer relationship.

Additionally, with the exception of lending arrangements between immediate family members and lending arrangements between registered persons and customers in the business of lending money, firms are required to pre-approve in writing the other lending arrangements noted with asterisks.

Registered reps must notify their member firms of the lending arrangements that require pre-approval. Firms then must preserve the written pre-approval for three years after the date that the lending arrangement has terminated or for at least three years after the registered person’s association with the firm has terminated.