Notice To Members 90-13

Proposed Technical Amendment to Pending Prompt Receipt Rule; Last Voting Date: April 5, 1990

Published Date:
Last Voting Date: April 5, 1990

SUGGESTED ROUTING*

Senior Management
Legal & Compliance
Trading
Training

*These are suggested departments only. Others may be appropriate for your firm.

MAIL VOTE

EXECUTIVE SUMMARY

The membership is requested to vote on an amendment to a Rule of Fair Practice that the membership voted to approve last year (Notice to Members 89-20). The amendment makes a technical change relating to partial deliveries of securities.

PROMPT RECEIPT AND DELIVERY RULE AMENDMENT

The membership has previously approved a new section under Article III of the NASD Rules of Fair Practice that codifies the Board of Governors' Interpretation with respect to Prompt Receipt and Delivery of Securities ("Interpretation"), presently appearing in the NASD Manual under Section 1 of Article III of the Rules of Fair Practice. The new section has not yet been approved by the Securities and Exchange Commission. The section codifies the Interpretation's requirement that a member ascertain that a purchasing customer agrees to receive a partial execution of the order.

The amendment you are asked to vote on at this time would establish an exception to this requirement for purchase orders of less than a single unit of trading. The provision would be substituted for the exception in the previously approved section that covers purchase orders of a single unit of trading or less. It is believed that the exception should more properly relate to orders for less than a single trading unit with orders of a single trading unit or more being covered by the requirement.

The approved new section to the NASD Rules of Fair Practice, with the amendment being voted on here, will become effective upon SEC approval.1

Please mark the enclosed ballot according to your convictions and return it in the enclosed, stamped envelope to The Corporation Trust Company. Ballots must be postmarked no later than April 5, 1990.

(Note: New language is underlined; deleted language is in brackets.)

PROPOSED AMENDMENT TO NASD RULES OF FAIR PRACTICE

ARTICLE III

Prompt Receipt and Delivery of Securities Sec. [C]2

(a) Purchases. No member or person associated with a member shall accept a customer's purchase order for any security, for [more than] a single unit of trading or more unless it has first ascertained that the customer placing the order or its agent agrees to receive securities against payment in an amount equal to any execution, even though such an execution may represent the purchase of only a part of a larger order.

1The new Rule of Fair Practice previously approved was part of a package of new rules and amendments upon which a vote by NASD members was solicited in NASD Notice to Members 89-20 (Feb. 17,1989).

2The following is the text of subsection (a) of new Section [C] as approved by the membership last year. The new rule was designated Section [C] in the submission for member vote made in NASD Notice to Members 89-20 (Feb. 17,1989). Upon SEC approval, a section number will be substituted for the letter designation.