August 2, 1990
TO: SEC RULES MEMBERS NO. 58-90
BROKER/DEALER ADVISORY COMMITTEE NO. 27-90
BROKER/DEALER ASSOCIATE MEMBERS NO. 3-90
RE: SEC APPROVES NASD PROPOSAL CONCERNING CUSTOMER ACCOUNT
INFORMATION
__________________________________________________________
As we previously informed you, the NASD has proposed
amendments to its Rules of Fair Practice to require a member to
obtain additional information pertaining to customer accounts.
(See Memorandum to SEC Rules Members No. 19-90 and Broker/Dealer
Advisory Committee No. 9-90, dated March 5, 1990.) The SEC
recently approved those amendments, which will apply to accounts
opened, and recommendations made, after January 1, 1990. A copy
of the final amendments is attached.
Specifically, the amendments will require NASD members who
make recommendations to non-institutional clients to make
reasonable efforts to obtain information concerning the
customer's financial status, tax status, investment objectives,
and such other information used or considered to be reasonable
and necessary in making recommendations to customers. In
addition, section 21(c) of the Rules of Fair Practice was amended
to require members to maintain customer accounts in such form and
manner as to show certain specified information and, with respect
to non-institutional accounts, to obtain certain information in
addition to the information already required under that section
prior to the settlement of the initial transaction in that
account.
Both amendments exclude transactions and accounts in which
investments are limited to money market funds.
Amy B. Rosenblum
Assistant General Counsel
Attachment