Expense Sharing Agreement and FINRA: What You Need to Know
When it comes to running a business, expenses are unavoidable. Whether it`s the cost of office supplies, utilities, or employee salaries, these expenses can quickly add up. To mitigate these costs, some businesses may choose to enter into an expense sharing agreement, which involves sharing expenses with another business or entity. However, if you work in the financial services industry, it`s important to understand the regulations surrounding expense sharing agreements and the Financial Industry Regulatory Authority (FINRA).
What is an Expense Sharing Agreement?
An expense sharing agreement is a contract between two or more businesses or entities that allows them to share the costs of certain expenses. These agreements can benefit companies by allowing them to share the expenses and reduce overall costs. For example, two small businesses may agree to share office space and utilities, allowing both companies to save on rent and utilities.
Expense sharing agreements can also occur between financial services firms. When it comes to these types of agreements, however, there are specific considerations that must be taken into account.
FINRA and Expense Sharing Agreements
If you work in the financial services industry, you are likely familiar with FINRA. FINRA is a self-regulatory organization (SRO) that oversees the activities of financial services firms and brokers. Their goal is to protect investors and ensure that firms are operating within regulatory guidelines.
When it comes to expense sharing agreements, FINRA has specific regulations that must be followed. Firms must ensure that the arrangement complies with FINRA rules, including Rule 3270, which requires brokers to obtain approval from their firm before participating in any outside business activity. Additionally, firms must ensure that any expense sharing agreement does not result in any conflicts of interest or create any undue influence.
Expense sharing agreements can also create issues related to books and records requirements. Firms must maintain adequate books and records related to these arrangements and disclose any related compensation or benefits received by the firm or its associated persons.
Conclusion
Expense sharing agreements can be a useful tool for businesses looking to reduce costs. However, if you work in the financial services industry, it`s important to understand the regulations surrounding these agreements. Make sure that any expense sharing agreement you enter into complies with FINRA rules and regulations and does not create any conflicts of interest. Finally, ensure that you maintain adequate books and records related to the agreement and disclose any related compensation or benefits received. By following these guidelines, you can use expense sharing agreements to your advantage while also protecting your business and clients.