NASD Rule 3012 requires associated members to develop and implement procedures to review all customer account activity conducted by its producing managers. These reviews must generally be conducted by someone that is senior or otherwise independent of the producing manager. However, if a firm is so limited in size and resources that there is no qualified person that is senior to or otherwise independent of a producing manager, the firm may rely on the limited size and resource exception contained within the rule to appoint a knowledgeable principal to review the producing manager’s activity.

Firms relying on the exemption must notify the NASD within 30 days of the date that the firm began relying on the exemption and annually thereafter. The notification process includes logging onto the Rule 3012 Exception Notification System and completing and submitting the notification form.

Conversely, if a firm ceases to rely on the exception, they must notify the NASD within 30 days after the reliance ceases to exist.