NASD Notice to Members 05-29 - April 2005

Guidance Regarding Rule 3012(a)(1) Requirement to Test and Verify a Member's Supervisory Policies and Procedures

Executive Summary

On September 30, 2004, the Securities and Exchange Commission (SEC) approved NASD's Supervisory Control Amendments in their final form. These amendments became effective on January 31, 2005. A fundamental element of the Supervisory Control Amendments is new Rule 3012 (Supervisory Control System). Rule 3012(a)(1) requires a member to designate one or more principals who will establish, maintain, and enforce a system of supervisory control policies and procedures that tests and verifies that a member's supervisory procedures are reasonably designed to comply with applicable securities laws and regulations, and with applicable NASD rules, and to amend those supervisory procedures when the testing and verification demonstrate a need to do so. In response to requests for guidance on the subject, NASD is issuing this Notice to provide members with guidelines members may use to comply with Rule 3012(a)(1).

 

Questions or comments concerning this Notice may be directed to Patricia Albrecht, Assistant General Counsel, Office of General Counsel, Regulatory Policy and Oversight, at (202) 728-8026.