NASD Notice to Members 01-31 - May 2001

SEC Approves NASD Rule Proposal Requiring Delivery of Margin Disclosure Statement to Non-Institutional Customers

Executive Summary

On April 26, 2001, the Securities and Exchange Commission (SEC) approved National Association of Securities Dealers, Inc. (NASD®) Rule 2341, which requires all NASD members to deliver to non-institutional customers a specified disclosure statement that discusses the operation of margin accounts and the risks associated with trading on margin (the "rule change"). The rule change requires that the margin disclosure statement be provided to margin customers in a separate document prior to or at the opening of a margin account. The rule change also requires that the margin disclosure statement or an abbreviated version of the disclosure statement be provided to margin customers on an annual basis, either in a separate document or as part of other account documentation. Members are permitted to develop an alternative margin disclosure statement, provided that the alternative disclosure statement is substantially similar to the mandated statement and incorporates all of the relevant concepts.

 

Questions concerning this Notice may be directed to Stephanie M. Dumont, Associate General Counsel, Office of General Counsel, NASD Regulation, Inc. (NASD Regulation), at (202) 728-8176, or Susan DeMando, Director, Financial Operations, Member Regulation, NASD Regulation, at (202) 728-8411.