NASD, NYSE Regulation, and NASAA Applaud SEC Approval of New, Uniform Definition of "Branch Office" and Centralized Registration System
Washington DC and New York — New York Stock Exchange (NYSE) Regulation, NASD and the North American Securities Administrators Association (NASAA) today applauded the U.S. Securities and Exchange Commission (SEC) for approving a common definition of "branch office" in the securities industry, as well as a new, centralized branch office registration system through the Central Registration Depository (CRD®).
To facilitate that system's development, the SEC has approved a new Form BR that will replace the current NYSE Branch Office Application Form, Schedule E of Form BD and certain state branch office forms. Form BR will enable firms to register branch offices and file notice of branch office openings and closings electronically with NYSE Regulation, NASD and the states via a single filing through the CRD system.
The SEC's action is the result of a joint regulatory initiative by NASD, NYSE Regulation and NASAA.
Historically, various regulatory bodies have defined the term "branch office" differently. Those disparate definitions resulted in conflicting requirements that created significant redundancies for securities firms-such as the need to file different application forms with multiple regulatory organizations to register or renew the registration of branch office locations, as well as having to coordinate multiple registration and notification filing deadlines.
The new SEC-approved changes will alleviate these redundancies by standardizing the criteria for determining whether a business location requires registration as a branch office. The new branch office definition became immediately effective with NYSE Regulation and will become effective on May 1, 2006 with NASD. Each state has its own timetable for making the new definition effective.
On October 31, the securities industry will make the transition to a centralized, CRD-based branch office application system that will allow firms, via the new form BR, to submit a single filing to simultaneously fulfill the branch office registration/approval requirements of NASD, NYSE Regulation and most states. Firms will also benefit from on-line broker licensing work queues, electronic notifications and other features available through the CRD system.
NASD's nearly 5,200 registered firms operate more than 104,000 branch offices with more than 660,000 registered representatives. New York Stock Exchange member firms operate over 20,000 branch offices, employ 144,000 registered representatives and carry 98 million customer accounts. NASAA's membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, the provinces and territories of Canada, and Mexico.
"While our focus upon investor protection and compliance with NYSE Rules and federal securities laws is greater than ever, we are mindful of the burden that duplicative and sometimes contradictory rules by various regulatory bodies place on our member firms," said Richard G. Ketchum, chief regulatory officer, the New York Stock Exchange. "A common definition of a broker-dealer's 'branch office' subscribed to by NYSE Regulation, NASD and state regulators, and a centralized registration system, builds upon the progress we've already made in reducing regulatory duplication."
"The branch office-related changes we are announcing today are part of NASD's rule modernization initiative, which is aimed at streamlining and updating NASD Rules while preserving investor protection," said NASD Vice Chairman Mary L. Schapiro. "Regulators will be able to identify registered representatives with specific office locations, and that will allow regulators to more effectively examine those locations. In addition, these changes will provide significant relief to NASD-registered firms. The central registration system will establish a broader national standard and reduce inconsistencies among regulators, which will provide substantial economies and efficiencies for firms."
"The new branch-office definition demonstrates that regulators can respond positively to changes in industry business practices while remaining true to the underlying principle of investor protection," said Patricia D. Struck, NASAA President and Administrator of the Wisconsin Division of Securities. "This updated and uniform definition, which can be delivered and monitored through CRD, will not only facilitate the continued effectiveness of our uniform system of registration, it also will allow firms to more easily put necessary protective measures into effect, and enable regulators to better monitor compliance."