Interpretive Letter to Joe Morkos-Doueihi, J.P. Morgan Securities, Inc.
July 18, 2001
J.P. Morgan Securities, Inc.
Level 26 Grosvenor Place,
225 George Street
Sydney, NSW 2000
Dear Mr. Morkos-Doueihi:
The purpose of this letter is to respond to questions raised in your e-mail dated April 30, 2001, and during our conversation of May 3, 2001. You asked what functions may be performed by a person registered with the NASD as a "Foreign Associate." In response to increased demand from Australian clients for U.S. market products, you stated that your firm desires to expand into the international equities business.
Pursuant to NASD Rule 1100, all persons associated with an NASD member firm who are designated as Foreign Associates are required to register with the NASD but are exempt from the requirement to pass a qualification examination. Foreign Associate designation is available to associated persons who are not:
- citizens, nationals, or residents of the United States or any of its territories or possessions;
- conducting any securities business in the United States; or
- engaging in any securities activities with or for any citizen, national, or resident of the United States.
In NASD Notice to Members 95-37, the NASD explains that Foreign Associates may act in any registered capacity on behalf of the member, consistent with the Foreign Associatedesignation. Foreign Associates may act as traders or registered persons responsible for servicing the accounts of foreign nationals.
Further, the staff of the Office of General Counsel, NASD Regulation (the "staff") believes that the limited supervisory functions that can be properly delegated to registered representatives also may be assigned to Foreign Associates, e.g., supervisors for non-OSJ branch offices. The staff, however, does not believe that NASD Rules permit Foreign Associates to perform the functions that require a principal registration, e.g. serving as the office supervisor for an OSJ, or approving new accounts and customer correspondence. Further, in all cases, ultimate supervisory responsibility for every registered and unregistered branch office must be assigned to one or more appropriately registered principals, not to a Foreign Associate.
Additionally, when contemplating expansion of your international equities business activities, you should consider whether the proposed expansion: (1) represents a material change in business operations as defined in NASD Rule 1011(i), thereby requiring an application for NASD Regulation approval of a change to your firm’s membership agreement; or (2) may be effected pursuant to the safe harbor provisions of IM-1011-1.
I hope this letter is responsive to your inquiries. Please note that the opinions expressed in this letter 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 you have raised based on the facts as you have described in your letter, and does not necessarily address any other rule or interpretation of the NASD or all the possible regulatory and legal issues involved.
Very truly yours,
Associate General Counsel