Taping Rule

What Is the Taping Rule?

The taping rule requires special monitoring of FINRA- registered persons with a troubled history and firms that hire such people on a huge scale. All the more officially known as Financial Industry Regulatory Authority Rule 3170, "Tape Recording of Registered Persons by Certain Firms," the supposed "taping rule" is intended to assist with meeting an overall requirement for greater oversight of certain registered representatives with troubled regulatory and compliance records.

It likewise addresses the conditions and special oversight needs when a firm hires a large number of restrained people who formerly worked at a firm that has been ousted or has had its registration revoked and where they were deficiently directed and prepared.

Understanding the Taping Rule

The taping rule became real Dec. 1, 2014, and was adopted into the consolidated FINRA Rulebook supplanting NASD Rule 3010(b)(2), however the taping rule provisions became real in 1998 when the Securities and Exchange Commission (SEC) approved amendments to the NASD rule. In particular, the SEC approved a requirement that individuals "lay out, uphold and keep up with special written supervisory procedures, including the tape recording of discussions, when they have hired in excess of a predefined percentage of registered persons from certain firms that have been ousted or that have had their representative/vendor registrations revoked for infringement of sales practice rules ('restrained firms')."

Taping Rule Firm Supervision in Practice

All as per FINRA, the taping rule "requires a firm to lay out, implement and keep up with special written procedures managing the telemarketing activities of its registered persons, including the tape recording of discussions, assuming that the firm has hired in excess of a predetermined percentage of registered persons from firms that meet FINRA Rule 3170's definition of 'restrained firm.'" To help firms in consenting to FINRA Rule 3170, FINRA gives a "Trained Firms List," distinguishing those firms that meet the definition of "restrained firm."

The percentage that is utilized to decide if the supervisory procedures should be sanctioned relies upon the size of the firm. It goes from 40% for a small firm to 20% for a large firm. The supervisory procedures include recording all of the telephone discussions made between registered employees and both potential and existing customers for a very long time. As of January 2021, there were six firms that are recognized by FINRA as focused firms.

Firms must guarantee that they tape record any means of media transmission consistently involved by registered persons in speaking with customers. This incorporates landlines and phones. On the off chance that phone taping is beyond the realm of possibilities, the firm must disallow their utilization while speaking with customers except if their utilization is justified for other business reasons.

Features

• All recordings made will be retained for a period of at least a long time from the date they were made, the initial two years in an effectively open place.
• Each taping firm will catalog the retained tapes by registered person and date.
• The requirements for recording will change contingent upon the size of the trained firm.
• The taping rule is a FINRA order to grant extra oversight and surveillance to monitor firms that hire registered delegates that have had a history of compliance issues.