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Notice To Members 93-37

NASD<sup>®</sup> Expands the Public Disclosure Program

Published Date:


Senior Management
Legal & Compliance
Mutual Fund

Executive Summary

On January 18, 1993, the NASD's Board amended its Public Disclosure Program to make additional regulatory information on its members and associated persons available to the public. The Board's action will expand this program to include civil judgments and NASD arbitration decisions involving securities matters, pending regulatory actions, and criminal indictments and informations. Previously, only criminal convictions and final disciplinary actions taken by self-regulatory organizations (SROs) and federal or state securities agencies were available. Implementation of the disclosure program enhancements will be in two stages with the first stage scheduled for July 1, 1993. The public disclosure hotline may be reached toll-free at (800) 289-9999.


On May 3, 1988, the NASD® established a Public Disclosure Program that permits certain types of disciplinary information on NASD member firms and associated persons to be available to the public. This program provides investors with access to information on an NASD member or any of the member's associated persons with whom the customer might transact business. At startup, the program allowed for the release of final disciplinary action(s) taken by SROs or federal or state securities agencies that relate to securities or commodities transactions; as well as criminal convictions. The information was released to the public upon receipt of a written request.

On October 1, 1991, the NASD made further improvements to the program when it established a toll-free number for investors to use when requesting this information.

Public Disclosure of Arbitration Awards

In May 1989, as a result of an SEC requirement, the NASD implemented a program separate from the Public Disclosure Program that made final NASD arbitration decisions (awards) issued after that date in public customer cases publicly available.

Enhancement of the Public Disclosure Program

As a result of recent action by the NASD Board, the Public Disclosure Program will now include civil judgments and NASD arbitration decisions involving securities matters; pending formal disciplinary proceedings initiated by the NASD, SEC, state securities administrators, and other SROs; and criminal indictments and informations. The NASD will link the data bases that contain disciplinary actions and NASD arbitration awards to ensure proper disclosure of such data on industry forms as well as to facilitate public access to all disclosable information through a single toll-free number. Member firms should inform their associated persons of the expansion of the Public Disclosure Program to make them aware of the information available to the public regarding their background and their disciplinary record in the industry. This notification is especially important since the program is gaining more public awareness. Information relating to the NASD's Public Disclosure Program was widely circulated in a press release on January 19, 1993, and has since been the subject of a number of newspaper and magazine articles. Also, with the adoption of Rule 15g-2 under "The Penny Stock Reform Act," certain member firms are required to make available a risk disclosure document, describing the availability of the toll-free telephone number, to all their investors and prospective investors.

Implementation Schedule

NASD arbitration awards for the period of May 10, 1989, to August 6, 1990, will not be available in the first implementation phase beginning July 1, 1993. This information is now being gathered and will be available for disclosure on September 1, 1993.

The Public Disclosure Program service is free to investors. However, the program charges $30 per inquiry for law firms, banks, and any other commercial callers. Member firms can receive the Public Disclosure Program information through the Firm Access Query System (FAQS) by using the "PREHIRE" command.

For questions relating to this Notice, call the Member Services Phone Center at (301) 590-6500.