NASD Notice to Members 02-66 - October 2002

SEC Approves NASD Rule 2315; Recommendations to Customers in OTC Equity Securities 649

Executive Summary

On August 22, 2002, the Securities and Exchange Commission (SEC) approved new NASD Rule 2315, Recommendations to Customers in OTC Equity Securities (Recommendation Rule). The Rule generally requires a member to review current financial statements and material business information before recommending transactions in low-priced over-the-counter equity securities. The Rule supplements the federal securities laws and existing NASD rules, including suitability obligations and the requirement that any recommendation to a customer have a reasonable basis. The Rule also exempts certain transactions.

 

The Notice provides a general overview of the Rule. Members should carefully read the text of the Rule (Attachment A). The SEC Approval Order also appears with this Notice (Attachment B).

 

Questions concerning this Notice should be directed to Philip Shaikun, Assistant General Counsel, Office of General Counsel, Regulatory Policy and Oversight, at (202) 728-8451.