SEC Approves NASD Rule Requiring Principal Pre-Use Approval of Retail Correspondence

©2006 Investment Company Institute. All rights reserved. Information may be abridged and therefore incomplete. Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice. [20351] September 6, 2006 TO: SEC RULES COMMITTEE No. 39-06 SMALL FUNDS COMMITTEE No. 23-06 ADVERTISING COMPLIANCE ADVISORY COMMITTEE No. 5-06 UNIT INVESTMENT TRUST COMMITTEE No. 5-06 RE: SEC APPROVES NASD RULE REQUIRING PRINCIPAL PRE-USE APPROVAL OF RETAIL CORRESPONDENCE The SEC has approved amendments to NASD Rule 2211 to require a registered principal to pre-approve correspondence sent to 25 or more existing retail customers within a 30- calendar day period if the correspondence makes any financial or investment recommendation or otherwise promotes a product or service of the member.1 The Institute filed comment letters with both NASD2 and the SEC3 in support of the proposal. The rule change becomes effective on December 1, 2006. Mara Shreck Assistant Counsel 1 See SEC Approves Amendments to NASD Rule 2211 to Require Principal Pre-Use Approval of Certain member Correspondence Sent to 25 or More Existing Retail Customers within a 30 Calendar-Day Period, NASD Notice 06-45. The Notice, along with the text of the rule amendments, is available at http://www.nasd.com/RulesRegulation/NoticestoMembers/2006NoticestoMembers/NASDW_017264. 2 See Institute Memoranda to SEC Rules Members No. 72-05, Small Funds Members No. 52-05, Unit Investment Trust Members No. 13-05 [18903], dated May 27, 2005. 3 See Institute Memoranda to SEC Rules Committee No. 12-06, Small Funds Committee No. 7-06, Advertising Compliance Advisory Committee No. 2-06, Unit Investment Trust Committee No. 3-06 [19796], dated March 3, 2006.