Guidance

Relief granted to banks to facilitate an orderly and efficient transition of employees from a bank into a broker/dealer to comply with the Financial Modernization Act of 1999.

Application of Rule 2320(g) and Rule 3110(b) to quotations displayed in the Electronic Quotation Service (prior to the adoption of proposed Rule 6630).

A member firm may pay continuing commissions to a former registered representative who is no longer in the securities business provided the conditions of NASD IM-2420-2 are satisfied, and further, that such payments are made in compliance with SEC "no-action" letters addressing the permissibility of those payments under Section 15(a) of the Securities Exchange Act of 1934.

Applicability of Rule 3230 to a three-party clearing agreement.

Letter addresses circumstances under which persons must report events involving a fixed annuity insurance product.

All Letters of Caution represent a determination that a violation has occurred, either of an NASD rule or a rule of the Securities and Exchange Commission over which NASD Regulation has jurisdiction to enforce. A Letter of Caution that results from a finding in a disciplinary proceeding initiated under the Rule 9200 Series of the NASD Code of Procedure is a sanction within the meaning of Procedural Rule 8310(a)(6), but a staff-issued Letter of Caution is not a sanction within the meaning of Procedural Rule 8310(a)(6).

Permissible activities of a foreign associate.

Permissibility of electronic signatures under NASD Rules 3010(d) and 3110(c)(1)(C).

Proposed employee leasing arrangement does not violate Rule 2420.

Payments by an investment adviser to broker-dealers in the form of rights to receive cash compensation upon the occurrence of specific corporate events (e.g., initial public offering of shares of the adviser) do not constitute "non-cash compensation" under NASD Rule 2830(l).

The limited supervisory functions that can be properly delegated to registered representatives also may be assigned to persons registered as Foreign Associates under NASD Rule 1100. Foreign Associates, however, may not perform the functions that require a principal registration.

A broker/dealer cannot pay continuing commissions to a former registered representative who is no longer in the securities industry, unless such payments are made in reliance on an SEC no-action position addressing the permissibility of those payments under Section 15(a) of the Securities Exchange Act of 1934; under the facts presented, NASD IM-2420-2 did not apply.

May 9, 2001

Mr. John W. Marcus
Chairman
PIBC Securities LLC
640 Fifth Avenue
New York, NY 10019

Re: Exemption Request from Fidelity Bonding Requirements

Dear Mr. Marcus:

Application of NASD Rules 3370(b)(1) and 3370(b)(2)(A) to orders received by a Nasdaq market maker from other registered broker/dealers.

NASD Rule 3060(a) does not apply to reimbursements by a registered representative of his or her client's expenses when the reimbursement is unrelated to the business of the client's employer.

Rebate of SEC Rule 12b-1 fees and commissions to non-member retirement plan and its participants will not violate NASD Rule 2420 if the SEC determines that the rebate recipients are not required to register as broker/dealers.