NASD Notice to Members 97-79 - November 1997

NASD Regulation Requests Comment on Proposed Amendment to Rule Governing Clearing Agreements; Comment Period Expires December 1, 1997

Executive Summary

At its September 1997 meeting, the NASD Regulation, Inc., Board of Directors (Board) approved a proposed amendment to the National Association of Securities Dealers, Inc. (NASD®) rule governing clearing agreements (Rule 3230) in response to problems that occurred recently with certain failed introducing firms.  The problems that the amendment is designed to address relate to the lack of a regulatory early warning of trouble at the introducing firms, gaps in the introducing firms’ supervisory procedures, and potential risks associated with introducing firm check writing privileges.  The proposed amendment would: (1) establish standards for the disposition of written customer complaints about member introducing firms relating to their functions and responsibilities under the clearing agreements received by their clearing firms; (2) govern how exception reports are made available to introducing firms and retained by clearing firms; and (3) permit introducing firms to write checks on their clearing firm’s account.

 

Questions regarding this Request For Comment may be directed to Elliott R. Curzon, Assistant General Counsel, Office of General Counsel, NASD RegulationSM, at (202) 728-8451, or Robert J. Smith, Senior Attorney, Office of General Counsel, NASD Regulation, at (202) 728-8176.