finra

FINRA

FOR RELEASE:
CONTACTS:
Wednesday, June 4, 2003
Nancy A. Condon 202-728-8379
Michael Shokouhi 202-728-8304



 

NASD Proposes Joint CEO/Chief Compliance Officer Certification

Washington, DC — NASD today announced that it is requesting comment on proposed rule amendments that would require the Chief Executive Officer (CEO) and Chief Compliance Officer of each member firm to jointly certify annually that the member firm has adequate compliance and supervisory policies and procedures in place. If necessary, the firm would designate a Chief Compliance Officer. Implementation of the CEO/Chief Compliance Officer certification would require approval from the Securities and Exchange Commission.

The proposed certification is intended to enhance investor protection by ensuring that senior management focuses increased attention on their firm's compliance and supervisory systems and by fostering regular interaction between business and compliance officers.

 

"NASD is proposing these integral changes to ensure that investor interests are given the highest priority by senior executives by having them focus directly on the compliance function of their firms," said Robert R. Glauber, NASD Chairman and CEO. "By elevating the status of the Chief Compliance Officer and by compelling significant consultation between senior business and compliance officers, this certification will greatly strengthen the ethical culture of compliance within firms."

 

In addition, NASD has proposed further interpretive material that both describes the purpose behind the proposed rule, and clarifies the obligations and liabilities associated with the certification requirement. In particular, the interpretive material makes these noteworthy interpretations regarding the certification:

  • Certification is meant to foster ongoing attention by firm senior management to its compliance and supervisory systems and increase interaction between senior business officers and compliance and legal officers.
  • The CEO and Chief Compliance Officer will be certifying as to the adequacy of the compliance and supervisory system, but not necessarily the implementation of that system in each instance.
  • No liability will accrue to the signatories, provided that when they sign they have a reasonable basis for doing so, and do so consistent with high standards of commercial honor and just and equitable principles of trade.

The intent of this proposal is not to make the CEO and Chief Compliance Officer personally liable for every compliance or supervisory failure a firm might experience. Rather, the proposal seeks to promote an enduring compliance culture within firms by elevating the status of the Chief Compliance Officer and by compelling periodic and significant consultation between senior business and compliance personnel.

 

The text of the certification and the detail of the proposal are available in a Notice to Members.

 

NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web Site at www.nasd.com.