Author Archive
NASD’s Order Audit Trail System Reporting Requirements
Earlier this week, NASD issued Notice to Members (NTM) 06-70 to inform NASD member firms that: (1) the SEC has approved amendments to NASD’s Order Audit Trail System (OATS) Rules that expand the OATS reporting requirements to over-the-counter (OTC) equity securities; and (2) a new version of the OATS Reporting Technical Specifications (Technical Specifications) has been published to reflect these amendments and other technical enhancements required to support OTC equity security reporting to OATS. The effective date of the amendments to the OATS Rules, Technical Specifications, and OATS Production Environment is June 11, 2007. However, the enhanced OATS reporting systems will be accessible to NASD member firms in the OATS Testing Environment on April 30, 2007.
NASD Issues Guidance on Gifts and Gratuities
On December 4, 2006, NASD issued a notice reminding member firms of existing interpretive guidance, and also providing new guidance, regarding gifts and gratuities under Rule 3060. In Notice to Members (NTM) 06-69, NASD indicated that it was providing the guidance based on a recent review of member firms’ gift and gratuity practices. Specifically, NTM 06-69 provides guidance on the following issues: (1) the personal gifts exclusion, (2) the nominal value (de minimis) and promotional items exclusion, (3) aggregation of gifts, (4) valuation of gifts, (5) gifts incidental to business entertainment, and (6) supervision and recordkeeping.
NYSE Proposes to Eliminate Discretionary Broker Voting for Director Elections
The NYSE has proposed a rule change to the SEC to eliminate broker discretionary voting for board of director elections. The proposal follows recommendations of the roxy Working Group (PWG), which was created in April 2005 by the NYSE to review the proxy voting process. The proposed amendment would apply to shareholder meetings held on or after January 1, 2008, except to the extent that a meeting was originally scheduled to be held in 2007 but was adjourned to 2008.
Congress Passes Financial Services Regulatory Relief Act, Timetable for Enactment of Final Rules Under Gramm-Leach-Bliley Act
On September 30, 2006, Congress passed the Financial Services Regulatory Relief Act of 2006 (the Act). The President is expected to sign the legislation into law. The Act largely affects the activities of banking institutions and, in several respects, affects banks that engage in certain types of securities business,
NASD Issues Notice to Members Regarding Amendments to Best Execution Obligations
Today, NASD issued Notice to Members (NTM) 0658 announcing amendments and interpretive material to Rule 2320(a), NASD’s “Best Execution Rule.” The amendments to Rule 2320(a) clarify that best execution obligations generally apply to any customer of another brokerdealer as well as to the member’s own customers. In addition, the amendments modify certain terminology and provisions under Rule 2320(a) to reflect current market structure and practice. NASD also has adopted IM2320, which codifies previous interpretive guidance regarding the application of Rule 2320(a). The amendments and interpretive material become effective on November 8, 2006.
Congress Passes Financial Services Regulatory Relief Act, Timetable for Enactment of Final Rules Under Gramm-Leach-Bliley Act
On September 30, 2006, Congress passed the Financial Services Regulatory Relief Act of 2006 (the Act). The President is expected to sign the legislation into law. The Act largely affects the activities of banking institutions and, in several respects, affects banks that engage in certain types of securities business,
NASD Issues Interpretive Guidance Regarding Recent Amendments to NASD Rules Governing Communications with the Public Relating to Mutual Fund Performance
On September 1, 2006, NASD issued Notice to Members 06-48 to provide guidance on the new “text box” amendments to NASD Rules 2210 and 2211. The new amendments impose certain disclosure and presentation requirements for communications with the public, other than institutional sales material and public appearances, regarding performance data for mutual funds other than money market funds (performance sales material). The new requirements will apply to performance sales material used on or after April 1, 2007.
NASD and NYSE Issue Joint Release on Section 311 of the Patriot Act
On August 14, 2006, NASD and NYSE issued a joint release reminding member organizations that, effective August 14, 2006, the Financial Crimes Enforcement Network (FinCEN) has imposed a special measure pursuant to Section 311 of the USA PATRIOT Act against the Latvian bank, VEF Banka, and its subsidiaries, including Veiksmes lizings. A comparable special measure was imposed against the Commercial Bank of Syria and its subsidiaries, including Syrian Lebanese Commercial Bank effective April 14, 2006. FinCEN imposed special measures against these entities and their subsidiaries (the Specified Banks) based on findings that they are financial institutions of primary money laundering concern. As a result of the special measures imposed against the Specified Banks, NASD and NYSE member organizations, as well as other “covered financial institutions,” are (1) prohibited from facilitating the direct use of correspondent accounts by the Specified Banks and (2) required to undertake due diligence to prevent the indirect use of correspondent accounts by the Specified Banks.
SEC Issues Letter to NYSE Regulation, Inc. Regarding Statutory Disqualifications: No-Action Letter and Interpretive Guidance
On August 1, 2006, the SEC’s Division of Market Regulation (Staff) issued a letter to NYSE Regulation, Inc. (NYSE) providing interpretive guidance and no-action relief on the filing of statutory disqualification notices. Section 6(c)(2) of the Exchange Act and Rule 19h-1 thereunder generally require NYSE to file a notice with the SEC regarding any person subject to a statutory disqualification that NYSE proposes to admit to or continue in membership or association with a member organization. Rule 19h-1 provides exceptions to the notice filing requirements in certain circumstances.
NASD and NYSE Issue Joint Interpretive Guidance on Fixed Income Research
On July 31, 2006, NASD and NYSE issued joint interpretive guidance on fixed income research. In particular, NASD and NYSE described the results of their review of compliance with the Bond Market Association’s "Guiding Principles" on fixed-income research, which were issued in May 2004. The guidance followed a December 2005 joint report by NASD and NYSE on the effectiveness of their research analyst conflicts of interest rules, which apply only to equity research reports. In the December 2005 report, NASD and NYSE indicated that they would monitor member firms’ compliance with the Guiding Principles to determine the necessity of adopting definitive rules relating to fixed-income research.
SEC Proposes to Narrow Exceptions to Regulation SHO’s Close-Out Requirements
On July 14, 2006, the SEC issued a proposal to amend Regulation SHO under the Securities Exchange Act of 1934, which governs short selling of securities. The proposed amendments would narrow the exceptions to the "close-out" requirements of Regulation SHO for options market makers and for grandfathered positions.
SEC Issues Extension of Relief Granted to Broker-Dealers Allowing Reliance on Investment Advisers to Perform Customer Identification and Verification
On July 11, 2006, the SEC issued a letter to the Securities Industry Association extending no-action relief allowing broker-dealers to fully rely on SEC registered investment advisers to perform some or all of their Customer Identification Program obligations.