NASD Notice to Members 04-07 - June 2004

NASD Requests Comment on Proposed Amendments to Rules 2710 (Corporate Financing) and 2810 (Direct Participation Programs); Comment Period Expires March 12, 2004

Executive Summary

This Notice addresses the regulation of certain pooled investment vehicles under NASD Rule 2710 (the Corporate Financing Rule)1 and NASD Rule 2810 (the Direct Participation Programs Rule or DPP Rule). These pooled investment vehicles include publicly offered limited partnership securities, real estate investment trusts (REITs), and closed-end investment companies. This Notice proposes amendments to the Corporate Financing Rule and DPP Rule (together, the Rules), and describes policies in the Corporate Financing Department’s Public Offering Review program that will clarify the Rules’ application to these products. This Notice:

  • Requests comment on the rescission of an NASD interpretive policy regarding trail commissions charged by commodity DPPs;
  • Requests comment on proposed amendments to prohibit sales loads on reinvested dividends in REITs, DPPs, and closed-end funds;
  • Requests comment on proposed amendments to the non-cash compensation provisions in the Rules regarding the “appropriate location” for training and education meetings;
  • Requests comment on proposed amendments to the non-cash compensation provisions in the Rules to include “equal weighting” and “total production” limitations for internal sales contests;
  • Addresses due diligence practices and disclosure in connection with DPP and REIT programs; and
  • Addresses the allocation of compensation and organization and offering expenses in the review of DPP and REIT programs by NASD’s Corporate Financing Department (Department).

Questions concerning this Notice should be directed to Joseph E. Price, Vice President, or Minh Le, Assistant Supervisor, Corporate Financing Department, NASD, at (240) 386-4623.

View Full Notice PDF 75 KB

The views, expressions, findings and opinions expressed in the comments on this Web page are solely those of the author(s) and FINRA accepts no responsibility for the content of the comments.

Comments By Date Received
Polar Investment Counsel, Inc. (PDF 82 KB) 2/20/2004
Bob Cornish (PDF 25 KB) 2/25/2004
Michael P. Pacult (PDF 41 KB) 3/4/2004
Shira Del Pacult (PDF 41 KB) 3/4/2004
Direct Participation Broker Dealer Association (PDF 76 KB) 3/5/2004
Steben & Company, Inc. (PDF 227 KB) 3/5/2004
Futures Investment Company (PDF 41 KB) 3/9/2004
Cambridge Investment Research (PDF 68 KB) 3/10/2004
Beacon Management Corporation (PDF 53 KB) 3/11/2004
Wells Real Estate Funds (PDF 157 KB) 3/11/2004
The Retzer Group of Polar Investment Counsel, Inc. (PDF 60 KB) 3/11/2004
Geneos Wealth Management, Inc. (PDF 68 KB) 3/11/2004
Hines Real Estate Securities, Inc. (PDF 214 KB) 3/11/2004
Pacific West (PDF 124 KB) 3/11/2004
Campbell & Company (PDF 203 KB) 3/12/2004
The Investment Program Association (PDF 125 KB) 3/12/2004
Futures Industry Association (PDF 27 KB) 3/12/2004
VSR Financial Services, Inc. (PDF 142 KB) 3/12/2004
The Association of the Bar of the City of New York (PDF 162 KB) 3/12/2004
Ferris, Baker Watts, Inc. (PDF 79 KB) 3/12/2004
Steven Porter (PDF 68 KB) 3/12/2004
CNL Securities Corp. (PDF 154 KB) 3/12/2004
North American Securities Administrators Association, Inc. (PDF 60 KB) 3/12/2004
Managed Funds Association (PDF 103 KB) 3/12/2004
Citigroup Alternative Investments, LLC (PDF 237 KB) 3/12/2004
Morgan Keegan & Company, Inc. (PDF 111 KB) 3/12/2004
Campbell & Company (PDF 235 KB) 3/12/2004
CIS Investments, Inc. (PDF 76 KB) 3/12/2004
Wachovia Securities, LLC (PDF 78 KB) 3/12/2004
National Futures Association (PDF 75 KB) 3/12/2004
Mewbourne Securities, Inc. (PDF 77 KB) 3/16/2004
Capital Analysts Incorporated (PDF 93 KB) 3/16/2004
A.G. Edwards & Sons, Inc. (PDF 84 KB) 3/17/2004
The Massachusetts Securities Division (PDF 73 KB) 3/18/2004
Quadriga (PDF 149 KB) 4/2/2004
Duane Morris (PDF 127 KB) 4/14/2004