Notice to Members 97-51

NASD Regulation Grants Two Conditional Exemptions Under MSRB Rule G-37

Under SEC approved procedures, NASD Regulation, Inc. (NASD RegulationSM) reviews member request for exemption from the two-year prohibition of municipal securities underwriting business contained in Rule G-37 (Rule) of the Municipal Securities Rulemaking Board (MSRB). Recently, NASD Regulation granted two conditional exemptions under exemption paragraph (i) of the Rule. The two conditional exemptions were granted in light of the highly unusual facts and ircumstances of the particular cases, and reflect the MSRB’s expressed intent that dealers would not routinely request exemptions and that NASD Regulation would grant exemptions only in very limited circumstances.

The two conditional exemptions and NASD Regulation’s rationale for its determinations are summarized in this Notice. These exemptions should not be viewed as recedents for other requests. Rather, NASD Regulation has determined to provide notice of its responses to selected exemption requests in order to highlight the procedures that all members should institute to avoid triggering the two year business prohibition under the Rule. Members should be aware that future requests for exemptions under the Rule will be reviewed on an individual basis and granted only in limited cases. Dealers should continue to ensure that their compliance procedures are reasonably designed and implemented to avoid triggering the two-year prohibition.