[14700]
May 6, 2002
TO: OPERATIONS COMMITTEE No. 8-02
SEC RULES COMMITTEE No. 37-02
SMALL FUNDS COMMITTEE No. 6-02
TECHNOLOGY ADVISORY COMMITTEE No. 5-02
RE: DRAFT COMMENT LETTER ON NASD PROPOSED BUSINESS CONTINUITY PLAN
RULE
As we previously informed you, the National Association of Securities Dealers recently
issued a notice seeking comments on proposed rules that would require NASD members to
establish business continuity plans and to provide additional information to the NASD that
could assist the NASD in the event of future significant business disruptions.1 Attached for
your review is a draft of the Institute’s comment letter on the proposal.
Comments on the NASD’s proposal must be filed by May 13, 2002. Please provide any
comments on the attached draft letter to Peter Salmon (202/326-5869 or salmon@ici.org) or
Frances Stadler (202/326-5822 or frances@ici.org) by Thursday, May 9th.
The draft comment letter expresses general support for the NASD’s proposal but
recommends certain modifications to better accommodate the diverse circumstances of NASD
member firms. The letter focuses on the application of the proposed rules to broker-dealers that
underwrite securities issued by registered investment companies (“funds”). It notes that
proposed Rule 3510 list eight items that “must, at a minimum” be addressed in each business
continuity plan, and points out that some of the required items (e.g., alternate communications
between customers and the firm) are not applicable to fund underwriters. The draft letter thus
recommends that the proposed rule be revised to clarify that business continuity plans must
cover the specified areas “to the extent applicable.”
It further recommends that the NASD clarify that a member firm will be deemed to
comply with the rule if its operations are covered by a plan that addresses the relevant specified
areas, even if it does not have its own, separate plan. This could be the case where, for example,
a fund complex or larger financial services organization has a single business continuity plan
that covers more than one corporate entity.
1 See Memorandum to Operations Committee No. 5-02, SEC Rules Committee No. 33-02, Small Funds Committee No.
3-02 and Technology Advisory Committee No. 4-02, dated April 22, 2002.
2
Finally, the letter points out that certain additional information that the NASD proposes
to request on the Member Firm Contact Questionnaire (e.g., clearance and settlement
information) would not be relevant to fund underwriters. It therefore recommends (similar to
the earlier comments) that the NASD clarify that such information must be supplied “to the
extent applicable.”
Peter Salmon
Director - Operations/Technology
Frances M. Stadler
Deputy Senior Counsel
Attachment (in .pdf format)