NASD Notice to Members 00-23 - April 2000

SEC Approves New Rules Relating to Bond Mutual Fund Volatility Ratings

Executive Summary

On February 29, 2000, the Securities and Exchange Commission (SEC) approved a National Association of Securities Dealers, Inc. (NASD®) rule change relating to bond mutual fund volatility ratings. New NASD Rule IM-2210-5 permits members and associated persons to include bond mutual fund volatility ratings in supplemental sales literature for an 18-month pilot period. Previously, NASD rules prohibited the use of bond fund volatility ratings. The rules are effective immediately and the pilot program will expire on August 31, 2001, unless extended or permanently approved by the NASD at or before such date.


The new rule permits the use of bond fund volatility ratings subject to certain conditions and disclosure requirements. In addition, NASD Rule 2210 regarding communications with the public was amended by adding new subparagraph (c)(3) to require supplemental sales literature containing bond mutual fund volatility ratings to be filed with the Advertising/Investment Companies Regulation Department (the Department) for review and approval at least 10 days prior to use.


Questions or comments concerning this Notice may be directed to Thomas M. Selman, Vice President, Investment Companies/Corporate Financing, NASD Regulation, Inc. (NASD RegulationSM) at (202) 728-8330; Thomas A. Pappas, Director, Advertising/Investment Companies Regulation, NASD Regulation, at (202) 728-8330; or Robert J. Smith, Assistant General Counsel, Office of General Counsel, NASD Regulation, at (202) 728-8451.