Notice to Members 01-36
NASD Regulation Requests Comment on Proposed Interpretive Material IM-2110-7 Regarding Actions That Interfere With The Transfer of Customer Accounts
NASD Regulation, Inc. (NASD Regulation) is requesting comment from members, associated persons, investors, and other interested parties on a proposal to adopt Interpretive Material related to Rule 2110, which would provide that it is inconsistent with just and equitable principles of trade for a member or person associated with a member to take any action that interferes with the ability of a customer to transfer his or her account. The proposed Interpretive Material would not prohibit a firm from seeking to enforce employment agreements with their former representatives. Nor would it affect the operation of National Association of Securities Dealers, Inc. (NASD®) rules governing account transfers, and therefore would not, for example, restrict the ability of a member to reject or delay an account transfer pursuant to Rule 11870 when the transfer request is inadequate to identify the account to be transferred.
NASD Regulation is aware that some members are seeking court orders that have the effect of preventing customers from transferring their accounts to follow a registered representative to his or her new employer. NASD Regulation believes that, as a matter of policy, customers should have the freedom to choose the registered representatives and firms that service their brokerage accounts. Further, NASD Regulation is concerned that customers whose account transfer requests have been delayed in this manner could be deprived of brokerage services and access to their accounts while their registered representative and his or her former firm attempt to resolve an employment dispute.
Questions regarding this Notice may be directed to Sarah J. Williams, Assistant General Counsel, Office of General Counsel, NASD Regulation, Inc., at (202) 728-8083.