NASD Rules, Regulations, Clearing Firm Reports

The NASD has proposed rule change which will clearing firms to report certain data to the Department of Member Regulation (“Member Regulation”) on a daily basis, regarding the activities of their own, and their introducing firms.

NASD Regulation’s Department of Member Regulation is developing a new business model regarding the surveillance and examination of NASD members. The new program is officially titled Integrated National Surveillance and Information Technology Enhancements (“INSITE”).

According to the NASD, INSITE will allow NASD Regulation to concentrate its examinations on the higher-risk segments of the industry; focus the content of each examination on higher-risk topics; streamline the examination process for the examiners and members; better coordinate regulatory findings with other NASD Regulation departments; and provide specialized training to enhance and maintain examiners’ competency levels.

The surveillance component of the INSITE program will produce reports that identify member “exceptions” based on historical and current comparisons of member data. The exceptions will trigger follow-up reviews and possible member examinations. In order for the surveillance component of INSITE to work, it is essential that clearing firms (both those that are self-clearing and those that clear for other firms) provide certain data to NASD Regulation on a daily basis.

The NASD expects to implement the reporting requirement in five phases, starting in the Fall of 2001. While the text of proposed Rule 3150 does not specify the data that must be reported to NASD Regulation, the NASD has indicated that it expects. to include items such as trade cancellations (T+1 forward) and as-of trades, aggregate net liquidating equity in each firm’s proprietary accounts, and unsecured customer debits.

The proposed rule change is available at the NASD web site, in PDF format, at

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.

Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | | Website | + posts

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 -, 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.