(a)
/01 Applicability
Compliance with Rule 409(a) and the accuracy of statements of accounts thereunder is the responsibility of the member organization carrying the customer account for which the statement is required, unless such responsibility has been allocated to a non-member registered broker-dealer carrying organization pursuant to an Exchange approved agreement under Rule 382.
/02 Information to be Disclosed
Statements of accounts to customers must clearly and prominently disclose on the front of the statement:
1. the identity of the introducing and carrying organization and their respective phone numbers for service1;
2. that the carrying organization is a member of SIPC;
3. the opening and closing balances for the account.
/03 Use of Third Party Agents
Prior to utilizing a "third party agent" to prepare and/or transmit statements of accounts to customers, a member organization shall represent/undertake in writing to the Exchange that:
1. The third party is acting as agent for the member organization;
2. the member organization retains responsibility for compliance with Rule 409(a);
3. the member organization has developed procedures/controls for reviewing and testing the accuracy of statements of accounts prepared and/or transmitted by the third party agent;
4. the member organization will retain copies of statements of accounts prepared and/or transmitted by the third party agent in accordance with applicable books and records requirements.
Allocation of responsibilities for preparation and/or transmissions of statements to any person other than a carrying organization pursuant to an agreement approved by the Exchange in accordance with Rule 382 (Carrying Agreements) shall be deemed to be utilization of a "third party agent."
An introducing organization that is a provider of services included in a member organization's statements of accounts may not function as a "third party agent" and may not itself prepare and/or transmit such statements.
/04 Assets Externally Held and Included on Statements Solely as a Service to Customers
Where a statement of account includes assets as to which the member organization does not have fiduciary responsibility, does not have access to and which are not included on the member organization's books and records, such assets must be clearly and distinguishably separated on the statement. It must be clearly indicated on the statement that such externally held assets: are included on the statement solely as a courtesy to the customer, information (including valuation) is derived from the customer or other external source for which the member organization is not responsible, and are not covered by SIPC.
/05 Use of Logos, Trademarks, etc.
Where the logo, trademark or other similar identification of a person (other than the carrying or introducing organization) appears on a customer account statement, the identity of such person(s) and the relationship to the introducing, carrying or other organization included on the statement must be provided and may not be utilized in a manner which is misleading or causes customer confusion.
/06 Use of Summary Statements
Where a member organization carrying a customer's account and another person(s) who separately offers financial related products/services to the same customer (e.g. mutual fund sales/custodial services, banking products/services, insurance products/services, securities products/services, etc.) seek to jointly formulate and/or distribute their respective customer account statements together with a statement summarizing or combing assets held in different accounts ("summary statement"), the Exchange will require:
1. That the summary statement:
a. indicate that the "summary statement" is provided for informational purposes and includes assets held at different entities;
b. identify each entity from which information is provided or assets being held are included, their relationship with each other (e.g., parent, subsidiary or affiliated organization), and their respective functions (introducing/carrying brokerage firms, fund distributor, banking/insurance product providers, etc.);
c. clearly distinguish between assets held by each entity by use of columns, coloring or other distinct form of demarcation;
d. identify the customer's account number at each entity2;
e. provide a telephone number for customer service at each entity2
f. disclose which entity carries each of the different assets or categories of assets included on the summary;
g. identify each entity that is a member of SIPC.3
2. To the extent that the summary statement aggregates the values of the various accounts summarized or portions thereof, such aggregation shall be recognizable as having been arithmetically derived from the separately stated totals or their components.
3. That the beginning and end of each separate statement (e.g., summary, brokerage, mutual fund, banking, insurance, etc.) be clearly distinguishable by color, pagination or other distinct form of demarcation.
4. That there be a written agreement between the carrying organization and each other person jointly formulating and/or distributing its respective customer account statements attesting that each such person has developed procedures/controls for reviewing and testing the accuracy of the information included on its respective statements.
5. That the summary statement shall comply with Rule 409T and all interpretations thereof.
(b)
/01 Standards For Holding Mail For Foreign Customers - Rule 409(b)(2) Waivers
The Exchange will consider written requests from member organizations for the implementation of policies and procedures for the holding of confirmations, statements and broker-dealer financial statements ("communications") for foreign customers. Requests for waivers under Rule 409(b) must include the following representations:
1. that the member organization will obtain not less frequently than annually and will retain (in accordance with SEA Rule 17a-4(b)) a written statement from the customer who has requested such waiver, that it is not feasible for such customer to make alternative arrangements for the regular receipt of these communications and that by reason of inefficient local mail services or unstable political climates, the customer requests that such material temporarily be held on behalf of such customer at the premises of the member organization; and
2. that the member organization has written procedures in place for the holding of mail that include, at a minimum, that:
a. frequent supervisory review be conducted of any account for which waivers for transmissions of communications have been obtained, with special attention given to discretionary accounts.
b. an annual review of the organization's system shall be conducted by the compliance/internal audit department or by the person(s) assigned or delegated such responsibility pursuant to Exchange Rule 342 (independent of the branch office) - such review should encompass a reasonable sampling of account documentation and account activity,
c. a log of such communications will be maintained at the branch or (principal) sales office servicing the account, which will note the date of direct transmittal of such communications to the customer and where sent, and
d. the member organization will endeavor to promptly communicate (orally) the substance of the communications directly to the customer and that a written record is kept of all meetings and conversations, etc., with the customer. Communications will be furnished to the customer at the earliest possible meeting.
Each foreign customer for whom mail is held is required to state, in writing, that it is not feasible to make alternative arrangements for the regular receipt of the mail. In this regard, member organizations shall represent to the Exchange that it will take steps to determine that the foreign customer has no other U.S. location reasonably available for receipt of the communications. In making that determination, member organizations may rely on the customer's statement unless the member or member organization is on notice of facts to the contrary.
Foreign customer accounts for which mail is held require frequent supervisory review by the member organization, i.e., a higher level of supervision and monitoring than is accorded other accounts. Additionally, the annual review conducted by the compliance/internal audit department (or other person(s) delegated such responsibility) must include a determination as to whether all the foreign customer communications are retained pursuant to written customer instructions.
The foreign customer communications held in accordance with a waiver under 409(b)(2) shall be made available to the customer for review at all times and at no special cost.
