RCA - June 1997 - NASD Permits Broader Use Of Non-Member Names In Members' Communications

NASD Regulation will permit the names of non-member entities to be used in member communications with the public, regardless of whether such entity conducts a securities business only. NASD Regulation has determined to allow greater flexibility regarding the use of non-member names in member communications with the public.

To respond to concerns that investors may be confused by certain member communications that include non-member names without adequately disclosing the member name, Rule 2210(1) requires that the NASD member name be shown clearly and prominently. It also requires that the relationship between the member and any non-member identified in the communication be clear and not confusing. If different products are offered by the member and non-member, it must be easy to determine which products are offered by each. Since registered individuals are often identified in communications, the rule requires that the relationship between the registered individual and each of the firms named be clear.

In a December 1992 NASD Regulatory & Compliance Alert article, NASD Regulation interpreted the rule to prohibit the use of non-member names to identify branch offices when only a securities-related business was conducted at that location. Since that time, NASD Regulation has determined that members should have the flexibility to use non-member names in communications, consistent with Rule 2210(0, regardless of whether a non-securities business is conducted at the location identified in the communication.