FINRA Rule 3110(b)(4) is a provision within FINRA Rule 3110, which requires a firm to establish and maintain a system to supervise the activities of its associated persons that is reasonably designed to achieve compliance with the applicable securities laws, regulations, and FINRA rules.
Specifically, FINRA Rule 3110 requires firms to have “reasonably designed written supervisory procedures (WSPs) to supervise the activities of its associated persons and the types of businesses in which it engages.” Section 3110(b)(4) of FINRA Rule 3110 applies specifically to the review of correspondence and internal communications.
What does FINRA Rule 3110(b)(4) require?
FINRA Rule 3110(b)(4) requires firms to have supervisory procedures in place specifically for the “review of incoming and outgoing written (including electronic) correspondence and internal communications” relating to the firm’s investment banking or securities business.
FINRA Rule 3110(b)(4) requires that supervisory procedures “be appropriate for the member’s business, size, structure, and customers.” Additionally, the supervisory procedures must require the member's review of:
- Incoming and outgoing written correspondence (including electronic communications) to appropriately identify and handle, in accordance with firm procedures:
- Customer complaints
- Customer instructions
- Funds and securities
- Communications involving subject matter that requires review under FINRA rules or federal securities laws
- Internal communications to identify communications involving subject matter that requires review under FINRA rules or federal securities laws.
Reviews of correspondence and internal communications must be conducted by a registered principal and must be evidenced in writing, either electronically or on paper.
Who does FINRA 3110 apply to?
FINRA 3110 applies to all FINRA member firms and their associated persons.
How Smarsh can help you meet FINRA 3110(b)(4) compliance
Smarsh offers an end-to-end platform of AI-powered compliance solutions designed to streamline your compliance processes, reduce manual workloads and ensure adherence to regulatory requirements. With Smarsh, you can:
- Capture every conversation. Archive communications across all your most important communications channels (email, messaging, voice, social, mobile) for complete visibility and compliance.
- Detect more real risk with AI. Use machine learning and customizable risk scenarios to surface suitability concerns, reduce false positives and flag misconduct faster.
- Customize and test supervision models. Build and refine risk detection logic with no-code tools like Scenario Builder and Scenario Evaluator.
Scale with confidence. Trusted by global financial firms, Smarsh helps you meet regulatory expectations while managing growing communication volumes.