Notice To Members 90-1

Proposed Amendment to Schedule C to the NASD By-Laws Re: Fees Charged by Members to Applicants for Registration

Published Date:

SUGGESTED ROUTING*

Legal & Compliance
Operations
Registration
Training

*These are suggested departments only. Others may be appropriate for your firm.

REQUEST FOR COMMENTS

EXECUTIVE SUMMARY

The NASD requests comments on proposed amendments to Schedule C to the NASD By-Laws that will require members to disclose to applicants for registration the specific purpose of any fees collected from such applicants for registration or licensing purposes and that will require members to refund the unused portion of such fees in the event the applicant withdraws from the registration process.

BACKGROUND

Many member firms require applicants to pay, in advance, a portion or the entire cost of the qualification, training, and registration process. The NASD Board of Governors is concerned that, although this practice may serve a motivational purpose, there is a potential for abuse by member firms. The NASD has received a number of complaints from persons who were required to pay to member firms substantial amounts in advance of the initiation of the registration process and, when such persons withdrew from the process prior to registration, none of the fees collected were returned.

PROPOSED AMENDMENT

The Board of Governors believes that the decision on whether the applicant or the member pays training and registration costs should be left to each member firm. The Board feels, however, that an amendment to Schedule C of the By-Laws should be adopted that would require a member firm, which requires applicants for registration to pay some or all of such fees, to provide the applicant with an itemized accounting of the costs incurred. In addition, the amendment would require the member firm to refund any unused portion of the fees collected if the applicant withdraws from the registration process for any reason.

An example of the application of this proposal would be a situation in which a member firm collects monies from an applicant to cover an examination training course, NASD registration and examination fees, a testing fee for the Series 63 Uniform Securities Agent State Law Examination, and licensing fees for three states. Under the proposed amendment, the member must give the applicant an itemized accounting of these expected costs at the time the applicant pays. If the applicant completes the training courses after the firm applies for the NASD examination and registration but withdraws from registration before the member commits the state registration fees, the applicant must receive an itemized refund of anticipated but unspent state fees.

The Board of Governors asks all members and interested persons to comment on this proposed amendment. Comments should be directed to:

Mr. Lynn Nellius, Secretary
National Association of
Securities Dealers, Inc.
1735 K Street, NW
Washington, DC 20006.

Questions concerning this notice may be directed to Craig Landauer, Senior Attorney, at (202) 728-8291, or to David Uthe, Senior Qualifications Analyst, at (301) 590-6695.

Comments must be received no later than February 20, 1990. Changes to Schedule C to the NASD By-Laws must be approved by the Board of Governors and filed with and approved by the SEC before becoming effective.

PROPOSED NEW PART IN SCHEDULE C TO THE BY-LAWS

(Note: New text is underlined.)

VIII

Fees Collected From Applicants

(1) No member may require its applicants for registration to pay any portion of the costs of registration or licensure with the NASD, other securities industry self-regulatory organizations, or state securities administrators unless such applicants are provided with an itemized accounting of the costs to be incurred and the member makes provision for the refund to the applicant of any unspent portion of the amounts collected in the event the applicant withdraws for any reason from the registration process.
(2) For purposes of this rule, the term "costs of registration or licensure" shall mean such amounts required to meet the registration, testing, and licensing fees of the NASD, other securities industry self-regulatory organizations or state securities administrators; the costs of training applicants for registration to meet all applicable regulatory qualification requirements and any member training requirements; and overhead costs incurred by the member in the recruitment, hiring, and training of applicants for registration.

Subsequent parts to be renumbered consecutively.