NASD Notice to Members 97-25 - May 1997

NASD Interpretive Position--NASD Rule 3050--Transactions for or by Associated Persons

Executive Summary

The Office of General Counsel, NASD Regulation, Inc. (NASD RegulationSM) is issuing this Notice to provide interpretive guidance to members regarding NASD Rule 3050 and, in particular, paragraph (d) of the Rule.  Rule 3050 was designed to obligate members to use reasonable diligence in determining whether executed transactions in the accounts of associated persons of another member firm, or accounts in which the associated person has discretionary authority, will adversely affect the interests of the employer member.

 

Paragraph (d) of the Rule sets forth requirements of associated persons that maintain accounts with nonmembers.  As to paragraph (d), the staff has provided interpretive guidance to make clear that accounts of associated persons, or accounts in which associated persons maintain discretionary authority, held with nonmember foreign broker/dealers, are subject to this paragraph.  Therefore, associated persons are obligated to follow the provisions of paragraph (d) and provide written notification of such accounts to their employer member firm, and assure that the organization maintaining the accounts will provide the employer member the specific information as set forth in paragraph (d)(2) of the Rule.