1 See Memorandum to Bank Investment Management Members No. 39-94, SEC
Rules Committee No. 133-94, Subcommittee on Advertising No. 25-94, dated
December 19, 1994.
January 25, 1995
TO: BANK INVESTMENT MANAGEMENT MEMBERS No. 4-95
SEC RULES COMMITTEE No. 11-95
SUBCOMMITTEE ON ADVERTISING No. 1-95
RE: DRAFT INSTITUTE COMMENT LETTER ON NASD’S PROPOSED BANK
BROKER-DEALER RULES
______________________________________________________________________________
As we previously informed you, the National Association of Securities Dealers, Inc.
recently published a Notice to Members proposing rules concerning broker-dealer sales
activities on bank premises.1 The Institute has prepared the attached draft comment letter on
the proposal.
The Institute’s comment letter states that the NASD’s proposal contains various
provisions that would benefit investors and that the Institute generally supports NASD
rulemaking in this area. Nevertheless, the letter states that the Institute has serious concerns
with several provisions of the NASD’s proposal.
In particular, the Institute urges the NASD to withdraw the proposed prohibitions on
the payment of referral fees and the use of confidential customer information, each of which is
already well-regulated under NASD rules and the federal banking laws. The Institute also
recommends clarification of the scope of the proposal, to include only broker-dealer sales
activities occurring on bank premises. Finally, the Institute urges modification of various
provisions dealing with the supervision of bank activities, physical separation of deposit and
brokerage activities, joint advertising and account statements, registration of branch offices,
and disclosure. These modifications are necessary in order to better define the scope of the
requirements in a manner consistent with the existing and legitimate practices of banks and
NASD members.
The comment period on the proposal ends on February 15, 1995. Please provide your
comments on the draft letter to the undersigned (202/326-5819) by Wednesday, February 8,
1995.
Thomas M. Selman
Associate Counsel
Attachment