The question of whether a particular person is required to obtain a series 63 license is a specific facts and circumstances analysis, and ultimately would be answered by state law or regulations of each individual state involved.


February 4, 1998

 

Regular Mail and Facsimile (513-792-0300)

 

Mr. Larry M. Kohn
President
L.M. Kohn & Company
9810 Montgomery Road
Cincinnati, Ohio 45242-7730

 

Re: Commission Overrides; Series 63 License

 

Dear Mr. Kohn:

 

We are in receipt of your letter address to Ms. Goerin, Regional Attorney, Cleveland District office, NASD Regulation, Inc., dated December 11, 1997 which was referred to our office for a response. Specifically, you asked whether a registered person who receives commission overrides from sales by other registered persons in other states would be required to have a series 63 license.

 

According to our Membership Department, the question of whether a particular person is required to obtain a series 63 license is a specific facts and circumstances analysis, and ultimately, under your circumstances, would be answered by state law or regulations of each individual state involved. Accordingly, we would suggest that you present your particular issue to the North American Securities Administrators Association, Inc. (NASSA) at (202) 737-0900, or alternatively, discuss the issue directly with each individual state securities administrator or regulator.

 

As to the broader issue of commission overrides, NASD rules do not prohibit or specifically regulate this practice. However, we note that particular payment arrangements could raise sales practice and related supervision issues that would need to be taken into account in structuring supervision of the arrangement. For example, the receipt of commission overrides by a supervisor or other registered person could create incentives that would affect the nature or type of supervision that is necessary for the recipient of the overrides and the individual whose transactions generate the overrides.

 

I trust that this information is helpful. Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation, Inc. This letter responds only to the issues that you have raised based on the facts as you have described them, and does not address any other rule or interpretation of the Association or all the possible regulatory and legal issues.

If you have any questions, please contact me at (202) 728-8071.

 

Sincerely,

 

David A. Spotts
Office of General Counsel

cc: Ms. Goerin