Final answer:
FINRA member firms must annually review their Fidelity Bond coverage to ensure it meets regulatory requirements and protects against employee dishonesty. Adjustments are made based on changes in firm’s business or regulatory amendments. Compliance with these rules is crucial for safeguarding financial markets and client assets.
Step-by-step explanation:
FINRA member firms are required to review their Fidelity Bond coverage annually to ensure it is adequate based on the firm’s net capital requirements and other considerations such as the type of business they conduct. Fidelity Bonds, also known as ‘honesty bonds,’ protect firms against losses due to fraudulent or dishonest acts of employees.
Adjustments to Fidelity Bond coverage may be needed when a firm’s business activities change or when there are amendments to the regulatory requirements. Firms must be proactive in their assessment to maintain compliance with FINRA’s rules and to protect their clients’ assets.