NASD Notice to Members 96-18 - March 1996

Compliance Desk Will Help Members Report Free-Riding and Withholding Information to NASD; Workshops Scheduled for Late April, Early May

Executive Summary

To help members comply with the Free-Riding and Withholding Interpretation of the NASD Board of Governors (Free-Riding Interpretation), on May 13, 1996, the NASD will initiate a new regulatory service called "Compliance Desk." The NASD believes that Compliance Desk will give members timely notification of hot issues that are subject to NASD regulatory review, and give members adequate time to correct inadvertent errors and/or prohibited sales to restricted persons or accounts, and redistribute the security to nonrestricted persons or accounts at the public-offering price in accordance with the Interpretation.

 

Compliance Desk, which was developed jointly by the NASD and CommScan, Inc., will permit the NASD to advise new-issue distribution participants by the close of business on the day secondary market trading begins (trade date), that the NASD has determined that the offering is a hot issue. Compliance Desk will permit the NASD to transmit data to members through a pre-existing electronic communications system, and members will transmit distribution-related information back to the NASD's Free-Riding Regulatory Database through a related system, known as NASDesk. The electronic exchange of information will increase the accuracy and the efficiency of member reporting of hot-issue information to the NASD. Compliance Desk will also aid members that want to take advantage of the cancellation and reallocation provision of the Free-Riding Interpretation and avoid potential violations caused by inadvertent sales of new-issue securiti es to restricted persons or accounts. To familiarize NASD members with Compliance Desk and give them the opportunity to ask questions about its operation, the NASD Corporate Financing Department and CommScan, Inc., will hold a series of workshops throughout the country during the weeks of April 22 and May 6, 1996.

 

Questions about the Free-Riding Interpretation should be directed to Craig Landauer, Associate General Counsel, NASD Office of General Counsel, at (202) 728-8953. Questions regarding the electronic data communications of Free-Riding information and the planned workshops should be directed to Carl Sperapani, LaNita Tyler, or Kemba Walker, NASD Corporate Financing Department, at (301) 208-2700.