1 Release No. 34-38009 (Dec. 2, 1996); 61 Fed. Reg. 65625 (Dec. 13, 1996).
December 23, 1996
TO: COMPLIANCE ADVISORY COMMITTEE No. 37-96
DIRECT MARKETING COMMITTEE No. 38-96
SALES FORCE MARKETING COMMITTEE No. 47-96
SEC RULES MEMBERS No. 85-96
UNIT INVESTMENT TRUST COMMITTEE No. 49-96
RE: SEC APPROVES NASD TELEMARKETING RULE CHANGES
______________________________________________________________________________
The Securities and Exchange Commission recently approved a proposal by the NASD to
amend its telemarketing rules. A copy of the adopting release1 is attached and the changes are
summarized below. The rule changes became effective on December 2, 1996.
New NASD Conduct Rule 2211(a) prohibits an NASD member, or person associated
with a member, from making outbound telephone calls to any residence for the purpose of
soliciting sales of securities or related services at any time other than between 8 a.m. and 9 p.m.
at the called persons location, without that persons prior consent. In addition, subparagraph
(b) of the rule provides that when making any outbound telemarketing call, a member or
associated person must disclose the identity of the caller and the member firm, the telephone
number or address at which the caller may be contacted, and that the purpose of the call is to
solicit the purchase of securities or related services. Calls to "existing customers" are exempted
from the time-of-day and disclosure requirements under certain circumstances, as are calls to a
broker or dealer.
In addition, NASD Conduct Rule 3110 is amended to prohibit a member or person
associated with a member from obtaining from a customer or submitting for payment a check,
draft or other form of negotiable paper drawn on a customers checking, savings, share or
similar account ("demand draft") without that persons express written authorization. In its
comment letter on the proposal, the Institute expressed concern that this provision
unintentionally could prohibit certain electronic or telephonic mutual fund transactions, such
as telephone exchanges (which entail oral instructions to redeem shares of one fund and
purchase shares of another fund). We are pleased to report that, as the Institute requested,
NASD Regulation, Inc. has clarified that "electronic or telephonic mutual fund transfers
initiated by existing mutual fund shareholders do not involve telemarketing and, therefore,
Rule 3110 does not apply" to them.
2The foregoing rule changes will be the subject of an NASD Notice to Members in
January. The text of the rules, which does not appear in the attached SEC release, will be
included in the Notice to Members. We will circulate the Notice to you when it becomes
available.
Frances M. Stadler
Associate Counsel
Attachment
Note: Not all recipients of this memo will receive an attachment. If you wish to obtain a copy
of the attachment referred to in this memo, please call the Institute’s Information Resource
Center at (202)326-8304, and ask for this memo’s attachment number: 8493.