Notice to Members 02-05

Changes to FOCUS Resulting from Certain Disclosure and Asset Recognition Requirements Under FASB 140

The National Association of Securities Dealers, Inc. (NASD®) has modified the FOCUS Report to include disclosure, pursuant to Financial Accounting Standards Board Statement 140 (Statement 140), of amounts of inventory pledged, non-cash collateral received in secured financing transactions, and residual interests carried as a result of asset-collateralized securitizations.

Members should initially direct any questions on the applicability of the disclosure requirements of Statement 140 to their outside auditors. Questions concerning the disclosure reported on the FOCUS Statement of Financial Condition ("Balance Sheet") may be directed to Andrew Labadie, Member Regulation, NASD Regulation, at (202) 728-8397.