Communications by Employees from Disciplined Firms
Each member firm must adopt special supervisory procedures over the telemarketing activities of all its registered personnel if the firm is found to employ an excessive number of registered persons who were previously associated with a disciplined firm during the past three years. This is referred to as the taping rule. A disciplined firm is one that has been expelled from membership in any self-regulatory organization or is subject to an SEC order revoking its registration as a broker-dealer or futures commission merchant.
The maximum allowable number of registered representatives previously employed by a disciplined firm before the taping rule must take effect depends on the member firm’s size: 40% if it employs fewer than 10 registered personnel, four if the firm employs between 10 and 20 registered persons, and 20% if it employs more than 20. A firm that employs 51 registered representatives may employ up to 10 from a disciplined firm without invoking the taping rule. A firm of five registered representatives may employ only one, since a second registered representative from a disciplined firm would hit the 40% cut-off.
A firm that is subject to the taping rule is given a one-time chance to lower its num