July 5, 1989
TO: SEC RULES MEMBERS NO. 31-89
UNIT INVESTMENT TRUST MEMBERS NO. 33-89
BROKER/DEALER ADVISORY COMMITTEE NO. 30-89
CLOSED-END FUND MEMBERS NO. 27-89
RE: NASD SUPERVISORY PROCEDURES
__________________________________________________________
The Institute has received several inquiries concerning the
recent amendments by the National Association of Securities
Dealers, Inc. to its rules on supervision. For your information,
a general discussion of the amended rules is set forth below.
The general purpose of the amended rules, which are
attached, is to ensure that persons associated with NASD members
are subject to adequate on-going supervision. At a minimum, an
NASD member must establish a supervisory system that includes:
1) written procedures, including the information
specified in paragraph (b) of the rules, to supervise the
business in which it is engaged and the activities of its
registered representatives and associated persons engaging in
that business;
2) the designation of appropriately registered
principal(s) to supervise each of the member's activities for
which registration is required;
3) the designation as an office of supervisory
jurisdiction (OSJ) each location that meets the definition of
paragraph (f) in the rules. The definition of OSJ has been
expanded to include any business location at which certain
functions are performed such as final approval of advertising or
sales literature;
4) the designation of appropriately registered
persons in each OSJ and non-OSJ branch office to carry out the
supervisory responsibilities and activities assigned to that
office by the member;
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5) the assignment of each registered person to an
appropriately registered representative and/or principal to
supervise that person's activities;
6) reasonable efforts to ensure that supervisory
personnel are properly qualified;
7) annual review of registered representatives by
persons designated by the member at which relevant compliance
matters are discussed;
8) the designation and identification to the NASD
of a principal(s) to review the supervisory system and perform
other related functions; and
9) establishment of a schedule to review the
businesses in which the member engages and the activities of each
office and to inspect each branch office.
Amy B. Rosenblum
Assistant General Counsel
Attachment