April 19, 2001
Mr. Thomas W. Hands
Chief Supervisory Officer
TradePortal Securities, Inc.
245 North Ocean Blvd.
Deerfield Beach, Florida 33441
Re: Series 55 Registration Requirement
Dear Mr. Hands:
I am writing in response to our phone conversations, and your letter dated January 31, 2001. You have asked for guidance as to whether certain individuals working at TradePortal Securities, Inc. need to register as equity traders.
TradePortal Securities does not provide investment advice. Generally, the firm's customers electronically submit orders to the firm for execution, indicating the desired path and method of trade execution. At TradePortal's home office, these orders are forwarded (after conversion) to The Nasdaq Stock Market, an Electronic Communication Network or the floor of a stock exchange for execution. TradePortal Securities registered Series 55 equity traders ("Equity Traders") generally do not review customer orders until after trades have been executed.
TradePortal Securities permits customers to place orders over the phone. Currently, these orders only are accepted by Equity Traders. The firm anticipates that there will be an increase in the number of phone orders. Accordingly, the firm would like to use Series 7 registered representatives to act essentially in a clerical capacity. The Series 7 representatives would enter customer phone orders into the same system that customers could enter orders electronically. The Series 7 representatives would not provide any advice to the customers, including advice on possible paths or methods of execution. Orders submitted over the phone would be routed in the same fashion as orders submitted electronically. The orders would be executed by Equity Traders.
On April 1, 1998, NASD Regulation implemented amendments to NASD Registration Rules, creating Rule 1032(f). This new rule establishes the qualification requirements for representatives who trade equity securities in The Nasdaq Stock Market and/or over-the-counter markets. Rule 1032(f) established the Series 55 registration category and qualification examination for equity traders. The Rule requires a representative to register as a "Limited Representative—Equity Trader" if the representative is engaged in proprietary trading or in the execution of transactions on an agency basis in equity, preferred, or convertible debt securities. The Rule also applies to persons who directly supervise those who are engaged in such activities.
Based on the facts that you have described, the staff of NASD Regulation's Office of General Counsel believes that the proposed activities of the Series 7 representatives would not trigger equity trader registration requirements. Rather, it appears that these representatives would be merely acting in a clerical capacity as order processors.
I hope this letter is responsive to your inquiry. Please note that the opinions expressed in this letter are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation. This letter responds only to the issues you have raised based on the facts as you have described them, and does not necessarily address any other rule or interpretation of the NASD or all the possible regulatory and legal issues involved.
Very truly yours,
Eric J. Moss
Associate General Counsel
|cc:||Alan M. Wolper, District Director
NASD Regulation, District 7