Interpretive Letter to Karin Wolman, Esq., Wilders & Weinberg, P.C. (Research Personnel)
January 27, 1999
VIA FACSIMILE AND FIRST-CLASS MAIL
Karin Wolman, Esquire
Wildes & Weinberg, P.C.
515 Madison Avenue
New York, New York 10022
Dear Ms. Wolman:
I am responding to your letter of January 15, 1999, in which you ask about NASD licensing requirements, particularly for research personnel. I have enclosed NASD Rules 1021 through 1060, which generally set forth registration requirements.
Any associated person who is engaged in an investment banking or securities business for a member is required to be registered. The registration determination does not depend on the individual's title, but rather on the functions that he or she performs. Functions performed by representatives include, but are not limited to, communicating with members of the public to determine their interest in making investments, discussing the nature or details of particular securities or investment vehicles, recommending the purchase or sale of securities, and accepting or executing orders for the purchase or sale of securities.
Research activity, by itself, does not require registration. However, to the extent that research personnel are regularly involved in written or oral business communications with customers, either alone or accompanied by registered sales personnel, then such research personnel are required to be registered because their conduct is part of the general sales effort of the member firm. The concept of communicating with customers extends to the issuance and distribution of research reports where the author is identified by name.
Another factor that should be considered in determining whether research personnel should be registered is the nature of their compensation. Any compensation that depends upon the sale of securities, the volume of sales, the success of a solicitation or referral, or the execution of a transaction is an indicator that the recipient should register with the NASD. Conversely, payment of a straight salary is often consistent with responsibilities that do not involve sales or solicitation.
I hope that this letter is responsive to your inquiry. Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation, Inc. This letter responds only to the issues that you have raised based on the facts as described, and does not address any other rule or interpretation of the Association, or all the possible regulatory and legal issues involved.
If you have any further questions, please call me at 202-728-8332.
Very truly yours,
Mary M. Dunbar
Assistant General Counsel