NASD Announces SEC Approval of Proposed Code of Procedure and New Membership Rules
Nancy A. Condon - (202) 728-8379
Washington, D.C.-- The National Association of Securities Dealers, Inc. (NASDâ) today announced that the Securities and Exchange Commission (SEC) has approved the NASD’s new Code of Procedure and rules governing the admission to membership of broker/dealer firms.
The new Code, almost all of which goes into effect immediately, revamps the organization’s disciplinary process by adding professional hearing officers who will conduct all disciplinary hearings, draft decisions, and lead the three-member hearing panels. The new Code also allows NASD Regulation’s Enforcement Department to authorize all complaints, includes procedural safeguards (such as rules governing ex parte communications), and grants the Enforcement Department the right to appeal decisions by the initial hearing panel to the National Business Conduct Committee (NBCC).
The 11 District Committees and the Market Regulation Committee previously authorized complaints. Implementation of the new disciplinary structure was called for in the NASD’s settlement with the SEC to ensure the fair and evenhanded application of the NASD’s disciplinary process to brokerage firms and their associated persons.
The Office of Hearing Officers, which is staffed by seven professional hearing officers and a Chief and Deputy Chief Hearing Officer, will begin hearing cases immediately. The hearing officers are responsible for case administration and drafting a hearing panel’s final opinion. Each hearing panel is comprised of a hearing officer and two other members, who will be drawn from the District Committees and other sources in the securities industry. Each panel member will have one vote.
The District Committees are comprised of elected representatives of the securities industry. Members serve a three-year term and are elected by the member firms in that district.
"Adding professional hearing officers to the mix of decision makers ensures that all of our disciplinary hearings will run efficiently and protect investors by applying our rules evenly," said Frank G. Zarb, Chairman, Chief Executive Officer, and President of the NASD.
Under the new membership rules, the NASD will respond to prospective and current members who apply for membership, or want to change their membership status (such as a change in ownership, control, or operations) within a specific time period. The new rules also clearly state the information necessary to be considered for membership. These new rules also go into effect immediately.
NASD Regulation’s Member Regulation Department will evaluate the membership applications and have the authority to eliminate or reduce previously imposed restrictions on a brokerage firm’s business.
These new rules will be published on the NASD Regulation Web Site.
The National Association of Securities Dealers is the largest securities-industry self-regulatory organization in the United States. Through its subsidiaries, NASD Regulation, Inc., and The Nasdaq Stock Market, Inc., the NASD develops rules and regulations, provides a dispute resolution forum, conducts regulatory reviews of members activities and designs, operates and regulates securities markets all for the benefit and protection of the investor.