Supervisory And Other Obligations Related To Use Of Electronic Media
NASD Regulation, Inc. (NASD Regulation) recently has observed a correlation between sharp increases in the volume of electronic messages relating to certain low-priced securities and dramatic increases in the price, volatility, and volume of these securities. Often, these messages are sent without attribution to a large, undifferentiated universe of Internet or on-line subscribers and contain unverified or unverifiable information concerning the merits of particular securities. This development, along with the potential that associated persons may use the Internet or other electronic media to communicate messages concerning particular securities to the investing public, raises important regulatory issues.
While NASD Regulation is not concerned about member use of the Internet or other electronic media for legitimate purposes, we are issuing this Notice to Members to emphasize to members their supervisory and regulatory responsibilities, as well as their obligations to customers, when dealing with stocks promoted on the Internet or other electronic media, and their supervisory obligations with respect to the use of such media by their associated persons. In addition, this Notice to Members solicits comment on current practices in the use of electronic media to communicate with customers and the investing public generally concerning the merits of particular securities, with a view to determining the need for further specific guidance concerning supervisory responsibilities or regulatory action.
Questions or comments concerning this Notice may be directed to Mary Revell, Assistant General Counsel, NASD Regulation, at (202) 728-8203.