What Is a NASD Rule 407 Letter?
A person who is employed by a member of a stock exchange or Financial Industry Regulatory Authority must complete a Rule 407 letter if he wishes to open accounts with other industry firms, notes Kapitall Generation LLC. This also applies to family members of his immediate household.
Rule 407 of the FINRA Rules and Regulations stipulates that accounts opened by member employees and by family and household members of member employees must provide written direction that allows the member firm to send duplicate statements and confirmations to the member employer, according to FINRA’s official website. This is known as a Rule 407 Letter. It is a way to detect different types of fraud that may otherwise go unnoticed, such as front-running or insider trading.