* See Memorandum to Advertising Subcommittee No. 3-97 and SEC Rules Committee No. 2-97, dated Jan. 7, 1997.
January 31, 1997
TO: ADVERTISING SUBCOMMITTEE No. 6-97
SEC RULES COMMITTEE No. 12-97
RE: INSTITUTE COMMENT LETTERS ON NASDR RULE PROPOSAL ON REVIEW
OF CORRESPONDENCE
______________________________________________________________________________
NASD Regulation, Inc. has published for comment proposed amendments to its rules
governing the review of correspondence.* The proposed amendments are intended to
accommodate NASD members use of electronic communications and are in response to a
recent request by the Securities and Exchange Commission that the various self regulatory
organizations adapt their supervisory rules to accommodate member firms use of e-mail.
The Institute filed the attached comment letter on the proposed amendments with the
NASDR. The letter strongly supports the NASDRs proposal, which would allow member
firms flexibility in developing procedures for review of both written and electronic
communications. The letter recommends clarification: (1) that the proposed amendments
would apply only to correspondence that is distributed to customers or potential customers; (2)
that correspondence of employees of a member firms affiliate (e.g., a transfer agent or
investment adviser) would not be subject to the proposed amendments; and (3) that the
proposed amendments allow members to fulfill their education and training obligations in
conjunction with the NASDs continuing education requirements.
The Institute also filed a related comment letter with the SEC. A copy of the letter is
also attached. The SEC has proposed to amend Rule 17a-4 to require broker-dealers to preserve
books and records indicating that all outgoing communications have been approved by a
principal of the broker-dealer. The Institutes letter argues that this amendment would conflict
with the NASDRs proposed amendments, which would eliminate the requirement that
principals of member firms review all correspondence relating to the solicitation or execution of
a securities transaction. The letter recommends that the SEC revise its proposal to conform it to
the NASDRs proposal.
Alexander C. Gavis
Assistant Counsel
Attachment (in .pdf format)