[18013]
September 17, 2004
TO: CLOSED-END INVESTMENT COMPANY MEMBERS No. 63-04
COMPLIANCE ADVISORY COMMITTEE No. 88-04
INTERNAL AUDIT ADVISORY COMMITTEE No. 11-04
OPERATIONS MEMBERS No. 32-04
SEC RULES MEMBERS No. 134-04
SMALL FUNDS MEMBERS No. 100-04
TECHNOLOGY ADVISORY COMMITTEE No. 24-04
UNIT INVESTMENT TRUST MEMBERS No. 37-04
RE: NASD SAMPLE BUSINESS CONTINUITY PLANNING DISCLOSURE
As we previously informed you, the SEC recently approved NASD Rule 3510, which
requires each NASD member to create and maintain a written business continuity plan (BCP).1
Rule 3510 also requires that each member provide its customers a disclosure statement that
summarizes how its business continuity plan addresses the possibility of a future significant
business disruption and how the member plans to respond to events of varying scope. At a
minimum, such disclosure must be made in writing to customers at account opening, posted on
the member’s website (if the member maintains a website), and mailed to customers upon
request.
To assist introducing firms in fulfilling their disclosure obligations to customers under
Rule 3510, the NASD recently published a sample disclosure statement.2 The sample disclosure
cautions that NASD members must tailor their disclosure to reflect the member’s particular
situation and that Rule 3510’s requirements may not be fulfilled through a “one-size-fits-all”
disclosure document such as the sample disclosure document. It further cautions that using the
sample “does not guarantee compliance with or create any safe harbor with respect to NASD
1 See Institute Memorandum to Closed-End Investment Company Members No. 29-04, Compliance Advisory
Committee No. 46-04, Internal Audit Advisory Committee No. 5-04, Operations Members No. 21-04, SEC Rules
Members No. 48-04, Small Funds Members No. 48-04, Technology Advisory Committee No. 11-04, and Unit
Investment Trust Members No. 18-04 [No. 17455], dated May 3, 2004. See also NASD Notice to Members 04-37 (May
2004), which discusses Rule 3510 and which is available on the NASD’s website at: http://www.nasdr.com/pdf-
text/0437ntm.pdf.
2 The sample disclosure was created as an update to the NASD’s “Business Continuity Template for Small
Introducing Firms.” The sample disclosure is available on the NASD’s website at: http://www.nasdr.com/pdf-
text/bcp_template_attachment.doc. The Business Continuity Template is available on the NASD’s website at:
http://www.nasdr.com/pdf-text/bcp_template.doc.
2
rules, other self-regulatory organization rules, the federal securities laws, or state laws.” With
these caveats as a backdrop, the sample may provide helpful guidance to NASD members,
including members other than introducing firms, as to the type of disclosure the NASD would
expect to see under Rule 3510.
Tamara K. Salmon
Senior Associate Counsel