| Thursday, September 23, 2004
Nancy Condon 202-728-8379
Herb Perone 202-728-8464
SEC Approves NASD Rule on Designating CCOs, CEO Certification of Compliance Processes
Washington, D.C. - The Securities and Exchange Commission (SEC) has approved a new NASD rule that will bolster securities firms' focus on their compliance programs and mandate periodic meetings between a firm's senior management and top compliance officer.
NASD Rule 3013 requires for the first time that regulated firms designate a chief compliance officer. It further requires that a firm's chief executive officer certify annually that the firm has in place processes to establish, maintain, review, test and modify written supervisory procedures. Those processes must be spelled out in a report that is submitted to the firm's board of directors and audit committee.
The CEO also must certify to having met with the CCO at least once in the preceding year to discuss the firm's processes and to identify and address any significant compliance problems or emerging issues.
The new rule 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.
"Securities firms must build a culture of compliance to deal with the regulatory challenges evident over recent years. It starts with a clear commitment at the top from the CEO and requires purposeful discussions between business and compliance officers throughout the firm," said Robert R. Glauber, NASD Chairman and CEO. "This rule will be an important step in building this necessary culture of compliance."
NASD will publish a Notice to Members regarding the new certification rule no later than November 9. The effective date of the rule will be 30 days following publication of that Notice to Members. Firms must designate a chief compliance officer by the effective date. CEOs of regulated firms must execute their first certifications within one year of that effective date.
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 registered firms. For more information, please visit our Web Site at www.nasd.com.