[Federal Register Volume 62, Number 176 (Thursday, September 11, 1997)]
[Notices]
[Pages 47858-47862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24140]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39025; File No. SR-NASD-97-57]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by National Association of Securities Dealers, Inc. Relating to
the Electronic Delivery of Information Between Members and Their
Customers
September 5, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on July 30, 1997,\2\ the
National Association of Securities Dealers, Inc. (``NASD'' or
``Association'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by NASD
Regulation, Inc. (``NASD Regulation'' or ``NASDR'').\3\ The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ On August 27, 1997, the NASD Regulation amended its NTM
attached as Exhibit A to this notice. See letter from Mary N.
Revell, Associate General Counsel, NASD Regulation, Inc., to
Katherine A. England, Assistant Director, Division of Market
Regulation, SEC, dated August 26, 1997.
\3\ The Board of Governors reviewed the proposed rule change at
its meeting on August 7, 1997. See letter from Mary N. Revell,
Assistant General Counsel, NASD Regulation, Inc., to Katherine A.
England, Assistant Director, Division of Market Regulation, SEC,
dated August 11, 1997.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDR has filed a Notice to Members (``NTM'') setting forth the
policy of NASDR applicable to the electronic delivery of information
between members and their customers.
II. Self-Regulatory Organization's Statement of the Purpose of and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDR included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NASDR has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission, in Release Nos. 34-37182 \4\ and 33-723,\5\ set
forth guidelines establishing a framework under which broker-dealers
and others may use electronic media as an
[[Page 47859]]
alternative to paper-based media to satisfy delivery obligations under
federal securities laws. The Commission also indicated in the releases
that an electronic communication from a customer to a broker-dealer
generally would satisfy the requirements for written consent or
acknowledgment under these laws.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 37182, May 9, 1996;
61 FR 24644, May 15, 1996, (Commission's interpretation concerning
the delivery of the information through electronic media in
satisfaction of broker-dealer and transfer agent requirements to
deliver information under the Act and the rules thereunder) (``May
1996 Release'').
\5\ See Securities Act Release No. 7233, Oct. 6, 1995; 60 FR
53458, Oct. 13, 1995, (Commission's interpretation concerning the
use of electronic media as a means of delivering information
required to be disseminated pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934, and the Investment Company Act
of 1940).
---------------------------------------------------------------------------
The NTM, attached as Exhibit A, establishes NASD Regulation policy
regarding the use by members of electronic media to electronically
transmit documents that they are required or permitted to furnish to
customers under Association rules and to receive electronic
communications from customers.\6\ The Notice states that use of
electronic media is permitted provided members comply with the
standards contained in the Commission releases. The Notice summarizes
these standards, which address, among other things, notice, access,
evidence to show delivery, communication of personal financial
information, and consent.
---------------------------------------------------------------------------
\6\ In the May 1966 Release, the Commission stated that broker-
dealers should be cognizant of their responsibilities to prevent,
and the potential liability associated with, unauthorized
transactions when ``receiving'' or ``obtaining'' electronic
responses from their customers. The Commission therefore requests
comment on what types of security measures broker-dealers employ or
will employ to reasonably assure themselves that the responses they
receive electronically from customers are authentic. See, e.g., NASD
Rules 3110(g) (2) and (3), (requiring members to obtain written
customer authorization before obtaining a check drawn on a
customer's account), attached as Exhibit A.
---------------------------------------------------------------------------
The Notice also contains a list of current Association rules that
require or permit communications between members and their customers
for which electronic delivery may be used in accordance with the
standards contained in the Commission releases. The Notice states that
electronic delivery also may be used for a new rule or an amendment to
an existing Rule that requires or permits communications between
members and their customers unless NASDR specifies otherwise at the
time of adoption of the rule or amendment.
NASDR believes that use of electronic media to satisfy delivery
requirements under Association rules will be beneficial to both members
and their customers, particularly when conducted in accordance with
Commission standards.
2. Statutory Basis
The proposed rule change is consistent with the requirements of
Section 15A(b)(6).\7\ The NASDR believes that providing standards that
allow members to effectively and efficiently supply required documents
to customers is consistent with this requirement.
---------------------------------------------------------------------------
\7\ Section 15A(b)(6) requires that the rules of the Association
be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and,
in general, to protect investors and the public interest.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
NASDR does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received. The proposed
rule change was reviewed by the NASDR Executive and Membership
Committees. The members of these Committees were in favor of the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
NASD. All submissions should refer to the file number in the caption
above and should be submitted by October 2, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
Exhibit A--NASD Notice to Members
Electronic Delivery of Information Between Members and Their Customers
Executive Summary
This Notice sets forth the policy of NASD Regulation, Inc. (NASD
Regulation) applicable to electronic delivery of information between
members and their customers as required or permitted by National
Association of Securities Dealers (NASD) Rules.
Discussion
Background
On May 9, 1996, the Securities and Exchange Commission (SEC or
Commission) issued an interpretive release publishing its views on
the use of electronic media by broker-dealers for delivery of
information.\1\ The SEC stated that broker-dealers and others may
satisfy their delivery obligations under federal securities laws by
using electronic media as an alternative to paper-based media within
the framework established in its October 1995 interpretive release
on the use of electronic media for delivery purposes.\2\ The SEC
also indicated that an electronic communication from a customer to a
broker-dealer generally would satisfy the requirements for written
consent or acknowledgment under the federal securities laws.
---------------------------------------------------------------------------
\1\ See Securities Exchange Act Release No. 37182, May 9, 1996;
61 FR 24644 (May 15, 1996) (May 1996 Release). The release also
contained a list of current Rules to which broker-dealers apply the
guidance provided in the interpretation.
\2\ See Securities Act Release No. 7233, Oct. 6, 1995; 60 FR
53458 (October 13, 1995) (October 1995 Release).
---------------------------------------------------------------------------
NASD Regulation will permit members that wish to electronically
transmit documents that they are required or permitted to furnish to
customers under NASD Rules to do so, provided they adhere to the
standards contained in the SEC Releases summarized below. Members
also may receive electronic communications from customers. Members
are urged to review the May 1996 and October 1995 Releases in their
entirety to ensure they comply with all aspects of the SEC's
electronic delivery requirements.
SEC Releases
According to the standards established by the SEC, broker-
dealers may use electronic media to satisfy their delivery
obligations, provided the electronic communication satisfies the
following principles:
[[Page 47860]]
Notice: The electronic communication should provide timely and
adequate notice to customers that the information is available
electronically. If necessary, broker-dealers should consider
supplementing the electronic communication with another
communication that would provide notice similar to that provided by
delivery in paper through the postal mail that information has been
sent that the recipient may wish to review.
Access: Customers who are provided information through
electronic delivery should have access to that information
substantially equivalent to that which would be provided if the
information were delivered in paper form (i.e., the electronically
transmitted document must convey all material and required
information). For instance, if a paper document is required to
present information in a certain order, then the information
delivered electronically should be in substantially the same order.
The use of a particular electronic medium should not be so
burdensome that intended recipients cannot effectively access the
information provided. A recipient should have the opportunity to
retain the information through the selected medium or have ongoing
access equivalent to personal retention.\3\ Also, as a matter of
policy, the SEC believes that a person who has a right to receive a
document under the federal securities laws and chooses to receive it
electronically should be provided with a paper version of the
document if consent to receive documents electronically is revoked
or upon specific request.\4\
---------------------------------------------------------------------------
\3\ The SEC stated that the ability to download the document or
print from the electronic medium would be sufficient to satisfy this
need.
\4\ See May 1996 Release, n.17.
---------------------------------------------------------------------------
Evidence to Show Delivery: Broker-dealers must have reason to
believe that electronically delivered information will result in the
satisfaction of the delivery requirements under the federal security
laws. Broker-dealers should consider the need to establish
procedures to ensure that applicable delivery obligations are met,
and should take reasonable precautions to ensure that information
transmitted using either electronic or paper media is delivered as
intended. Broker-dealers may be able to evidence satisfaction of
delivery obligations, for example, by:
(1) Obtaining the intended recipient's informed consent \5\ to
delivery through a specified electronic medium, and ensuring that
the recipient has appropriate notice and access;
---------------------------------------------------------------------------
\5\ The SEC described an informed consent as one that specifies
the electronic medium or source through which the information will
be delivered and the period during which the consent will be
effective, and describes the information that will be delivered
using such means. Except where manual consent is required under the
Penny Stock Rules (see discussion infra), broker-dealers may obtain
consents either manually or electronically. See May 1996 Release,
n.23.
---------------------------------------------------------------------------
(2) Obtaining evidence that the intended recipient actually
received the information, such as by an electronic mail return-
receipt or by confirmation that the information was accessed,
downloaded, or printed; or
(3) Disseminating information through certain facsimile methods.
The SEC also made the following statements regarding the
communication of personal financial information (e.g., confirmations
and account statements).
Confidentiality and Security: Broker-dealers sending personal
financial information through electronic means or in paper form
should take reasonable precautions to ensure the integrity,
confidentiality, and security of that information. Broker-dealers
transmitting personal financial information electronically must
tailor those precautions to the medium used in order to ensure that
the information is reasonably secure from tampering or alteration.
Consent: Prior to delivering personal financial information
electronically, the broker-dealer must notify the intended recipient
that the information will be delivered electronically and obtain the
recipient's informed consent. The customer's consent may be made
either by a manual signature or by electronic means.
The SEC also stated that an electronic communication from a
customer to a broker-dealer will satisfy requirements under certain
Commission Rules to receive or obtain written customer consent or
acknowledgment.\6\ Further, the SEC reminded broker-dealers that
they must reasonably supervise firm personnel to prevent violations,
and suggested that firms should evaluate the need for systems and
procedures to deter or detect misconduct by firm personnel in
connection with the delivery of information, whether by electronic
or paper means.
---------------------------------------------------------------------------
\6\ The SEC, however, cautioned broker-dealers that they should
be aware of their responsibilities to prevent unauthorized
transactions. In this regard, the Commission stated its belief that
broker-dealers should have reasonable assurance that the response
received from a customer is authentic. The SEC also will continue to
require broker-dealers to obtain the manual signature of customers
on certain disclosure documents required under the Penny Stock
Rules. See May 1996 Release, nn.23, 29, & 50.
---------------------------------------------------------------------------
The SEC release stated that the above standards are intended to
permit broker-dealers to comply with their delivery obligations
under the federal securities laws when using electronic media. While
compliance with the guidelines is not mandatory for the electronic
delivery of non-required information that, in some cases, is being
provided voluntarily to customers, NASD Regulation believes
adherence to the guidelines should be considered, especially with
respect to documents furnished pursuant to agreements or other
specific arrangements with customers.
Conclusion
A list of current NASD Conduct Rules, Marketplace Rules, and
Procedural Rules that require or permit communications between
members and their customers for which electronic delivery may be
used in accordance with the standards set forth in the SEC May 1996
and October 1995 Releases is set forth below. The summary of
delivery obligations provided is intended for reference only, and is
not intended to be a statement of all requirements under the Rules
listed. NASD Regulation believes this list is complete. The
interpretation set forth in this Notice also will apply to a new
Rule or an amendment to an existing Rule that requires or permits
communications between members and their customers unless NASD
Regulation specifies otherwise at the time of adoption of the Rule
or amendment.
NASD Rules That Require or Permit Delivery of Information Between Firms
and Customers
Conduct Rules
Rule 2210(d)(2)(B) (i), (ii), and (iv) (Communications with the
Public; Standards Applicable to Communications with the Public;
Specific Standards; Recommendations) requires a member to disclose
certain ``conflicts of interest'' situations, if applicable, when
making a recommendation; requires a member to provide, or offer to
furnish upon request to the customer, available investment
information to support a recommendation; and allows a member to
offer to furnish a list of all recommendations made within the past
year or over longer periods of time.
Rule 2220(d)(2)(D)(i) (Options Communications with the Public;
Standards Applicable to Communications with the Public; Specific
Standards) requires a member to state in sales literature pertaining
to options that supporting documentation for any claims,
comparisons, recommendations, statistics, or other technical data
will be supplied upon request.
Rule 2230 (Confirmations) requires a member at or before the
completion of each transaction to give or send to a customer written
notification disclosing the member's role and other facts in
connection with the transaction. In addition, if the member was
acting as a broker for the customer, the member must disclose from
whom the security was purchased or to whom it was sold or the fact
that such information will be furnished upon request of the
customer.
IM-2230 (``Third Market'' Confirmations) requires a member that
acts as a broker for customers in listed securities in the ``third
market'' to provide certain disclosures in a legend on the
confirmation to the customer.
Rule 2240 (Disclosure of Control Relationship with Issuer)
requires a member who has a control relationship with the issuer of
the security being purchased or sold to provide written disclosure
of the relationship to the customer at or before the completion of
the transaction.
Rule 2250 (Disclosure of Participation or Interest in Primary or
Secondary Distribution) requires a member to provide written
disclosure to the customer at or before completion of a transaction
in a primary or secondary distribution of the security, if the
member is participating or has an interest in the distribution.
Rule 2260 (Forwarding of Proxy and Other Materials) requires a
member to forward proxy materials, annual reports, information
statements, and other material to each beneficial owner of shares of
a stock held by the member.
Rule 2270(a) (Disclosure of Financial Condition to Customers)
requires that, upon
[[Page 47861]]
request, a member must make available to inspection by any bona fide
regular customer financial condition information disclosed in its
most recent balance sheet.
Rule 2310 (a) and (b) (Recommendations to Customers
(Suitability)) requires a member to make a suitability determination
based on information disclosed by the customer as to his other
security holdings and his financial situation and need and requires
a member to make reasonable efforts to obtain specified information
concerning non-institutional customers.
IM-2310-2(e) (Fair Dealing with Customers with Regard to
Derivative Products or New Financial Products) requires a member to
make every effort to make customers aware of the pertinent
information regarding certain products. To meet this obligation,
members may deliver written documents to the customer under certain
circumstances.
Rule 2330(c) (Customers' Securities or Funds; Authorization to
Lend) requires a member to obtain from a customer a written
authorization permitting the lending of securities carried by the
member.
Rule 2330(f)(2) (D) and (G) (Customer's Securities or Funds;
Sharing in Accounts; Extent Permissible) requires that a
compensation arrangement to share profits in an account must be set
forth in a written agreement executed by the customer and the
member, and that the member must disclose to the customer all
material information relating to the arrangement, including the
method of compensation and potential conflicts of interest that may
result from the compensation formula.
Rule 2340(a) (Customer Account Statements) requires delivery of
a statement of account containing a description of any securities
positions, money balances, or account activity to each customer
whose account had a security position, money balance, or account
activity during the period since the last statement was sent to the
customer (See May 1996 Release which covers confirmations of
transactions pursuant to Securities Exchange Act Rule 10b-10).
Rule 2510(b) (Discretionary Accounts; Authorization and
Acceptance of Account) requires the customer's prior written
authorization before a member may exercise discretionary power in a
customer's account.
Rule 2510(d) (Discretionary Accounts; Exceptions) allows an
exception from the requirements of the rule under certain
circumstances for members utilizing negative response letters for
bulk exchanges of net asset value of money market mutual funds.
Rule 2710(c)(8)(A) (Corporate Financing Rule--Underwriting Terms
and Arrangements; Underwriting Compensation and Arrangements;
Conflicts of Interest) requires disclosure of conflicts of interest
and the name of the qualified independent underwriter assuming the
role of pricing the offering and conducting due diligence.
Rule 2720 (d) and (h) (Distributions of Securities of Members
and Affiliates--Conflicts of Interest; Disclosure and Periodic
Reports) requires a member to make certain disclosures in the
registration statement, offering circular, or similar document and
requires a member that makes a distribution to the public of its
securities pursuant to this Rule to send to each of its shareholders
or investors: (1) quarterly, a summary statement of its operations
and (2) annually, independently audited and certified financial
statements.
Rule 2720(k) (Distributions of Securities of Members and
Affiliates--Conflicts of Interest; Suitability) requires a member
underwriting an issue of securities where a conflict of interest
exists to make a suitability determination based on information
furnished concerning the customer's investment objectives, financial
situation, and needs.
Rule 2720(l) (Distributions of Securities of Members and
Affiliates--Conflicts of Interest; Discretionary Accounts) requires
specific written approval of the customer prior to execution in a
discretionary account of a transaction in securities issued by a
member or an affiliate of a member, or by a company with which a
member has a conflict of interest.
Rule 2730(b) (Securities Taken in Trade) defines the term
``taken in trade'' as a purchase by a member as principal, or as
agent for the account of another, of a security from a customer
pursuant to an agreement or understanding that the customer purchase
securities from the member which are part of a fixed price offering.
Rule 2810(b)(2) (Direct Participation Programs; Requirements;
Suitability) requires a member to obtain information from a
participant concerning his investment objectives, other investments,
financial situation, and needs before making a recommendation.
Rule 2810(b)(3)(D) (Direct Participation Programs; Requirements;
Disclosure) requires that prior to executing a purchase transaction
in a direct participation program, a member must inform the
prospective participant of all pertinent facts relating to the
liquidity and marketability of the program during the term of the
investment.
Rule 2830(n) (Investment Company Securities; Disclosure of
Deferred Sales Charges) requires, in addition to the disclosures
required by Rule 2230, additional disclosure on written
confirmations if the transaction involves the purchase of shares of
any investment company that imposes a deferred sales charge on
redemption. In addition, a specified legend on the confirmation is
required.
Rule 2845 (Discretionary Accounts) requires a customer's prior
written authorization for trading of warrants in a discretionary
account, pursuant to the requirements of Options Rule 2860(b)(18).
Rule 2848 (Communications with the Public and Customers
Concerning Index Warrants, Currency Index Warrants, and Currency
Warrants). The requirements of Rule 2220(d)(2)(D)(i) apply to
communications to the public and customers concerning warrants. Rule
2848, therefore, requires the member to state in its sales
literature that supporting documentation for any claims on behalf of
the warrants will be supplied upon request.
Rule 2860(b)(11) (Options; Requirements; Delivery of Current
Disclosure Document) requires delivery of the appropriate Options
Clearing Corporation disclosure document to each customer at or
prior to the time the customer's account is approved for options
trading. Thereafter, delivery must be made to each customer of
amendments or revisions to the disclosure document.
Rule 2860(b)(12) (Options; Requirements; Confirmations) requires
members to promptly furnish customers with a written confirmation of
each transaction in option contracts.
Rule 2860(b)(15) (Options; Requirements; Statements of Account)
requires a member to send monthly statements to options account
holders.
Rule 2860(b)(16)(A) (Options; Requirements; Opening of Accounts:
Approval Required) prohibits a member from accepting an options
order from a customer or from approving a customer's account for
options trading unless the broker-dealer has furnished to the
customer the appropriate options disclosure document(s).
Rule 2860(b)(16)(B) (Options; Requirements; Opening of Accounts;
Diligence in Opening Accounts) requires a member to exercise due
diligence to ascertain the essential facts relative to a customer
before approving a customer's account for options trading.
Rule 2860(b)(16)(C) (Options; Requirements; Opening of Accounts:
Verification of Customer Background and Financial Information)
requires that background and financial information on every new
options account natural person customer be sent to the customer for
verification within fifteen days after the account is approved for
options trading.
Rule 2860(b)(16)(D) (Options; Requirements; Opening of Accounts;
Account Agreement) requires a member to obtain from the customer a
written agreement that the customer is aware of and agrees to be
bound by the NASD Rules applicable to the trading of option
contracts within fifteen days after a customer's account has been
approved for trading of options contracts.
Rule 2860(b)(16)(E)(v) (Options; Requirements; Opening of
Accounts: Uncovered Short Option Contracts) requires that a short
written description of the risks inherent in writing uncovered short
option transactions must be furnished to applicable customers.
IM-2860-2 (Diligence in Opening Options Accounts)
Paragraph (a) requires members to seek to obtain certain
information at a minimum with respect to options customers who are
natural persons in order to fulfill their obligations under Rule
28860(b)(16)(b).
Paragraph (c) recommends that members consider utilizing a
standard account approval form so as to ensure the receipt of all
required information.
Paragraph (e) states that the requirements of Rule
2860(b)(16)(C), regarding initial and subsequent verification of
customer background and financial information, can be satisfied by
sending to the customer the information required in paragraphs
(a)(1) through (a)(6) of IM-2860-2 and providing the customer with
an opportunity to correct or complete the information.
Rule 2860(b)(18)(A) (Options; Requirements; Discretionary
Accounts;
[[Page 47862]]
Authorization and Approval) requires the written authorization of a
customer before a member may exercise any discretionary power with
respect to trading an options contract in a customer account.
Rule 2860(b)(19) (Options; Requirements; Suitability) prohibits
a member from recommending an options transaction unless the member
has reasonable grounds to believe based on the information furnished
by the customer that the recommended transaction is not unsuitable
for the customer.
Rule 2860(b)(23)(C)(i) (Options; Requirements; Tendering
Procedures for Exercise of Options; Allocation of Exercise
Assignment Notices) requires notification to customers of the method
used to allocate exercise notices to its customers' accounts.
Rule 3110(c) (Books and Records; Customer Account Information)
requires members to obtain specified customer information.
Rule 3110(f)(3) (Books and Records; Requirements when Using
Predispute Arbitration Agreements with Customers) requires that a
copy of the agreement containing a predispute arbitration clause
must be given to the customer, who must acknowledge receipt on the
agreement or on a separate document.
Rule 3110(g)(2) and (3) (Books and Records; Telemarketing
Requirements) requires members to obtain written customer
authorization before obtaining a check drawn on a customer's
account.
Rule 3230(d) (Clearing Agreements) requires notification upon
the opening of an account to each customer whose account is
introduced on a full disclosed basis of the existence of the
clearing or carrying agreement.
Marketplace Rules: The Nasdaq Stock Market Rules
Rule 4643 (Customer Confirmations) prohibits members from
effecting transactions in Nasdaq SmallCap Market securities unless,
at or before completion of the transaction, the member gives or
sends the customer written notification disclosing specified
information.
Procedural Rules: Compliants, Investigations and Sanctions
Rule 8110 (Availability to Customers of Certificate, By-Laws and
Rules) requires a member to provide customer access to copies of the
NASD Certificate of Incorporation, By-Laws, and Rules.
Procedural Rules: Uniform Practice Code
Rule 11860(a)(3) and (4) (Acceptance and Settlement of COD
Orders) requires a member to deliver to the customer a confirmation,
or all relevant data customarily contained in a confirmation not
later than the close of business on the next business day after any
such execution and to obtain an agreement from the customer to
furnish instructions regarding the receipt or delivery of the
securities involved in the transaction.
Rule 11870(c) (Customer Account Transfer Contracts; Transfer
Instructions): customers must be informed of the conditions for
account transfer and must authorize the transfer.
* * * * *
Questions concerning this Notice may be directed to Mary Revell,
Assistant General Counsel, NASD Regulation, at (202) 728-8203.
[FR Doc. 97-24140 Filed 9-10-97; 8:45 am]
BILLING CODE 8010-01-M