Amendments to Association By-Laws
TO: All NASD Members And Interested Persons
Attached are amended By-Laws of the Association which are being published at this time for comment by members and interested persons. The proposal is the product of the Association's Committee on Rule and By-Law Amendments which is reviewing and revising all of the Association's By-Laws, Rules and Interpretations. The initial step in the Committee's review was adoption by the Board of Governors of a revised Code of Procedure for Handling Trade Practice Complaints which is currently on file with the Securities and Exchange Commission for approval. The enclosed revision of the By-Laws is the second step in the Committee's review and it has been approved by the Association's Board of Governors for submission to the membership for comment.
After the comment period expires, the amended By-Laws and the comment letters received will be submitted to the Committee for review and, thereafter, the By-Laws as may be further amended as a result of the comments received, will be resubmitted to the Board of Governors. If the By-Laws are approved by the Board, they will be submitted to the membership for a vote. If approved by the membership, the proposed amendments will be filed with the Securities and Exchange Commission for approval.
The proposed By-Law amendments are primarily designed to conform the language to certain statutory changes, codify existing Board interpretations, clarify the application of certain provisions and generally to update and modernize the By-Laws. Where appropriate, an explanation of the change follows each section. Some of the more significant changes are:
Article I defines the terms "municipal securities" and "municipal securities dealer" to parallel the statutory definitions thereof. The term "registered broker, dealer or municipal securities dealer" is defined to reflect the present statutory framework under which only brokers and dealers registered with the SEC are eligible for membership in the Association. The definition of "person associated with a member" has been revised to clarify that the Association's jurisdiction extends to all persons associated with a member although a person may not be engaged in the investment banking or securities business on behalf of the member.
Article II is a complete redrafting of the qualification requirements for members and associated persons. Section 1 thereof provides that any registered broker-dealer shall be eligible for admission to membership and any person shall be eligible to become an associated person of a member except those which are excluded under other provisions of the Article. Section 2 authorizes the Board of Governors to adopt examination and other qualification requirements for members and their associated persons. Section 3 provides that members and associated persons who fail to meet the qualification requirements or who are subject to bars or other disqualifications are not eligible for membership or association. It also establishes a procedure for seeking relief from such ineligibility. Section 4 contains a revised definition of "disqualification" consistent with the statutory definition of the term. It is broader than the Association's present definition because the statute has expanded the types of misconduct constituting disqualifications.
Article VII, Section 2, containing the general powers of the Board of Governors has been expanded by incorporating authority presently appearing in other By-Law provisions. Specifically, the authority to require members to use clearing agencies has been moved from existing Article XVII and the authority to organize automated systems has been transferred from present Article XVI. Article VII, Sections 21, 23 and 24 incorporate a recent Board of Governors' resolution that Nominating Committees should be composed of a majority of persons who have previously served on the District Committee and/or the Board of Governors.
Article X, Section 2 codifies the Association's authority to impose disciplinary sanctions based upon a refusal to submit a dispute to arbitration when required by the Association's Code of Arbitration Procedure and for failure to abide by any rulings of the Board of Governors or Uniform Practice Committee under the Association's Uniform Practice Code.
The Association encourages members and other interested persons to comment on the amended By-Laws. All comments should be directed to:
S. William Broka, Secretary
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006
Comments must be received no later than March 4, 1983. Any questions should be directed to John F. Mylod, Jr., Assistant General Counsel, at (202) 728-8288.
Frank J. Wilson
Executive Vice President
Legal and Compliance