By-Law Amendment: Prohibition of Concurrent Registration Under Schedule C; Last Date for Comment: August 1, 1988
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REQUEST FOR COMMENTS
EXECUTIVE SUMMARY
The NASD requests comment on a proposed amendment to Schedule C to the NASD By-Laws that would prohibit a person associated with a member from being registered concurrently in any capacity with any other member. The amendment would exempt from the prohibition those associated persons registered concurrently with affiliated members. The text of the proposed amendment follows this notice.
BACKGROUND
Neither the NASD By-Laws, the Schedules to the By-Laws, nor the NASD Rules of Fair Practice prohibit associated persons from registering concurrently with more than one member firm. Concurrent registration is, however, prohibited by a number of states. The NASD has observed that concurrent registration may give rise to confusion among public investors as to which employer-member is responsible for supervising the various sales efforts undertaken by a concurrently registered person and may also present opportunities for the registered person to engage in activities of which neither employer is aware.
Further, concurrent registration can result in a failure to supervise certain activities because each employer is of the belief that the other employer is supervising the registered person. The NASD believes that these difficulties may well outweigh any benefits that may attach to concurrent registration and that they may not be remediable by adopting additional supervisory rules. Therefore, the NASD Board of Governors has determined to seek member comment as to whether concurrent registration should be prohibited, with an exemption provided for concurrent registration with affiliated members. For purposes of the proposed amendment, affiliation would exist when one member controls, is controlled by, or is under common control with another member.
The NASD believes that the exemptive provision for affiliated members is appropriate because the confusion among the investing public and concurrent employers is less likely to occur in affiliate arrangements. For example, many affiliates utilize common or substantially similar names, which reduces the likelihood of investor confusion. The exemption also recognizes that some members have formed separate broker-dealers to offer a variety of products.
PROPOSED AMENDMENTS
New paragraph (l)(f) of Part n of Schedule C to the NASD By-Laws would prohibit concurrent registration of registered principals, with the above-described exemptive provision for concurrent registrations with affiliated members.
New paragraph (l)(d) of Part HI would prohibit concurrent registration of registered representatives, with the above-described exemptive provision for concurrent registrations with affiliated members.
The NASD encourages all members and interested persons to comment on the proposed amendments. Comments should be directed to:
Mr. LynnNellius
Secretary
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006-1506
Comments must be received no later than August 1,1988. Comments received by this date will be considered by the NASD Board of Governors. If approved by the NASD Board, the proposal must be filed with and approved by the SEC before becoming effective.
Questions concerning this notice can be directed to either Frank J. McAuliffe, Vice President, NASD Qualifications at (301) 738-6694, or Jacqueline D. Whelan, Senior Attorney, NASD Office of the General Counsel, at (202) 728-8270.
PROPOSED AMENDMENTS TO SCHEDULE C TO THE NASD BY-LAWS
II REGISTRATION OF PRINCIPALS
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III REGISTRATION OF REPRESENTATIVES
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