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2350. Broker/Dealer Conduct on the Premises of Financial Institutions
This rule is no longer applicable. NASD Rule 2350 has been superseded by FINRA Rule 3160. Please consult the appropriate FINRA Rule.
This section shall apply exclusively to those broker/dealer services conducted by members on the premises of a financial institution where retail deposits are taken. This section does not alter or abrogate members' obligations to comply with other applicable NASD rules, regulations, and requirements, nor those of other regulatory authorities that may govern members operating on the premises of financial institutions.
(1) For purposes of this section, the term "financial institution" shall mean federal and state-chartered banks, savings and loan associations, savings banks, credit unions, and the service corporations of such institutions required by law.
(2) "Networking arrangement" and "brokerage affiliate arrangement" shall mean a contractual or other arrangement between a member and a financial institution pursuant to which the member conducts broker/dealer services for customers of the financial institution and the general public on the premises of such financial institution where retail deposits are taken.
(3) "Affiliate" shall mean a company that controls, is controlled by, or is under common control with, a member as defined in Rule 2720.
(4) "Broker/Dealer services" shall mean the investment banking or securities business as defined in paragraph (p) of Article I of the By-Laws.
(c) Standards for Member Conduct
No member shall conduct broker/dealer services on the premises of a financial institution where retail deposits are taken unless the member complies initially and continuously with the following requirements:
Wherever practical, the member's broker/dealer services shall be conducted in a physical location distinct from the area in which the financial institution's retail deposits are taken. In all situations, members shall identify the member's broker/dealer services in a manner that is clearly distinguished from the financial institution's retail deposit-taking activities. The member's name shall be clearly displayed in the area in which the member conducts its broker/dealer services.
(2) Networking and Brokerage Affiliate Agreements
Networking and brokerage affiliate arrangements between a member and a financial institution must be governed by a written agreement that sets forth the responsibilities of the parties and the compensation arrangements. The member must ensure that the agreement stipulates that supervisory personnel of the member and representatives of the Securities and Exchange Commission and the Association will be permitted access to the financial institution's premises where the member conducts broker/dealer services in order to inspect the books and records and other relevant information maintained by the member with respect to its broker/dealer services.
(3) Customer Disclosure and Written Acknowledgment
At or prior to the time that a customer account is opened by a member on the premises of a financial institution where retail deposits are taken, the member shall:
(A) disclose, orally and in writing, that the securities products purchased or sold in a transaction with the member:
(i) are not insured by the Federal Deposit Insurance Corporation ("FDIC");
(ii) are not deposits or other obligations of the financial institution and are not guaranteed by the financial institution; and
(iii) are subject to investment risks, including possible loss of the principal invested; and
(B) make reasonable efforts to obtain from each customer during the account opening process a written acknowledgment of receipt of the disclosures required by paragraph (c)(3)(A).
(4) Communications with the Public
(A) All member confirmations and account statements must indicate clearly that the broker/dealer services are provided by the member.
(B) Advertisements and sales literature that announce the location of a financial institution where broker/dealer services are provided by the member or that are distributed by the member on the premises of a financial institution must disclose that securities products: are not insured by the FDIC; are not deposits or other obligations of the financial institution and are not guaranteed by the financial institution; and are subject to investment risks, including possible loss of the principal invested. The shorter, logo format described in paragraph (c)(4)(C) may be used to provide these disclosures.
(C) The following shorter, logo format disclosures may be used by members in advertisements and sales literature, including material published, or designed for use, in radio or television broadcasts, Automated Teller Machine ("ATM") screens, billboards, signs, posters, and brochures, to comply with the requirements of paragraph (c)(4)(B), provided that such disclosures are displayed in a conspicuous manner:
• Not FDIC Insured• No Bank Guarantee• May Lose Value
(D) As long as the omission of the disclosures required by paragraph (c)(4)(B) would not cause the advertisement or sales literature to be misleading in light of the context in which the material is presented, such disclosures are not required with respect to messages contained in:
• radio broadcasts of 30 seconds or less;• electronic signs, including billboard-type signs that are electronic, time, and temperature signs and ticker tape signs, but excluding messages contained in such media as television, on-line computer services, or ATMs; and• signs, such as banners and posters, when used only as location indicators.
(5) Notifications of Terminations
The member must promptly notify the financial institution if any associated person of the member who is employed by the financial institution is terminated for cause by the member.
|Adopted by SR-NASD-95-63 eff. Feb. 15, 1998.
Selected Notices: 94-94, 96-3, 97-26, 97-89.