NTM 02-10 Seeks Comment on Streamlining and Eliminating Certain Rules
Simplifying, or even removing, regulations in this industry is a goal that every registrant will be happy to hear about. Earlier last year the NASD has announced that it is conducting a comprehensive review of its rules to ensure that they are as streamlined as possible, and “impose the least burden to accomplish their objectives” and asked for comment from the public. The NASD also appointed a special advisory board to look into prospective rule changes.
In Notice to Members 02-10 the NASD is providing its members with what it claims will be the first in a series of questionnaires designed to collect information that will assist the NASD in assessing the costs and benefits of certain rules. The Association is asking member firms to provide responses that include specific explanations of the burdens imposed by a rule and to do so by March 1, 2002.
The rules and proposals which are being examined are whether:
- Regulators should eliminate the current requirement that generally only persons sponsored by broker/dealers may take the General Securities Representative (Series 7) exam.
- Regulators should develop a new registration category that would permit associated persons to perform basic customer support functions without being required to take and pass the comprehensive Series 7 exam.
- The requirement to hold an annual compliance conference, as outlined in NASD Rule 3010(a)(7), should be eliminated in light of the Continuing Education Firm Element required by NASD Rule 1120(b).
- The NASD definition of “branch office,” as outlined in Rule 3010(g)(2), should be modified in light of:
- (1) the SEC‘s recent amendments to the definition of the term “office” in SEC Rules 17a-3 and 17a-4 (see NASD Notice to Members 01- 80);
- (2) the branch office definitions used by the New York Stock Exchange and State regulators;
- (3) the new business practices that are developing based on technological innovations; and
- (4) the potential to develop a uniform registration system for branch offices through the Central Registration Depository (CRD) system maintained by the NASD.
- NASD Rule 2260 should be revised to expand the categories of persons to whom member firms may forward proxy material, annual reports, information statements, and other material sent to stockholders.
None of these proposals will radically alter the regulatory enviorment, but the attempt to streamline is certainly a worthwhile endeavor. There are far too many overlapping regulations in the securities industry, which are not only a waiting trap for the industry, but an unnecessary compliance burden for all members.
Some of the proposal have merit, some, such as the elimination of a sponsorship requirement for the Series 7 exam, may just be cosmetic, but all member firms should take a few moments and forward the questionaire to the NASD. The questionaire has been sent to all member firms, and is also available at the NASD’s web site as part of the release, at http://www.nasdr.com/pdf-text/0210ntm.txt
Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.