Sanction Guidelines and the formation of the Office of Member Relations

An Important Message from Mary Schapiro, NASD Chairman and CEO


As you may know, I became NASD's Chairman and CEO on September 1. I am both honored and excited to have been chosen to lead NASD at a time of such rapid and profound change in the securities industry. NASD has an important job to do. Our role as the pre-eminent securities regulator is vital to maintaining investor confidence, and we are firmly committed to our mission of protecting investors and maintaining market integrity.

That said, I believe there are ways that we can do our job more effectively. As I have traveled the country over the last six months, meeting with CEOs of NASD member firms—both large and small—it has become clear to me that one of NASD's greatest challenges is to communicate more effectively with you. I am committed to much greater transparency from NASD, ensuring that we explain what we hope to accomplish with the regulatory actions we take—whether we are proposing rules, developing new tools to aid compliance, or conducting examination sweeps or investigations—and that we seek your input and active participation in our processes.

For example, one of the things that I heard from many of you on my recent "listening tour" was concern about NASD's Sanctions Guidelines and how fines are determined. I wanted to let you know that, based on this feedback, we have taken a second look at the guidelines and the effect that sanctions can have on smaller firms in particular. As you may have seen, on September 26, 2006, we issued Notice to Members 06-55 announcing our decision to revise the Sanctions Guidelines. This was done in order to clarify that a firm's size and resources should be considered when sanctions are imposed for misconduct.

As I stated in the press release we issued on the same subject, NASD is committed to being a vigorous regulator, but we are equally committed to fairness in the way sanctions are levied—and, at a higher level, in the way that we communicate and interact with all of the firms we regulate.

To ensure focus on this commitment, I have established an Office of Member Relations, reporting jointly to me and Doug Shulman, NASD Vice Chairman. Under the direction of Chip Jones, this new office will be responsible for maintaining open communication with member firms through industry meetings, NASD Committees and outreach to individual firms—with the primary goals of ensuring that senior management and all departments of NASD are aware of industry issues and ensuring that the industry understands NASD's initiatives. Chip can be reached at or (240) 386-4797.

As I look ahead at the work we have to do, I hope I can count on your feedback. In particular, please reach out to us to let us know how we can help you comply with applicable rules, and whether there are additional tools or programs you would like to see NASD develop. One of my top priorities is to make myself and NASD senior staff available, and to reach out to you and members of your staff who interact frequently with us. While NASD has regulatory obligations to meet—and you have a business to run—I am confident that we can have a working relationship that allows both of us to succeed.


Mary L. Schapiro
Chairman and CEO, NASD