Guidance

In March 2004, NASD convened a panel of industry experts and investor advocates to assess the challenges facing the corporate debt market and make recommendations for possible improvements. The objective of the Corporate Debt Market Panel was to review and make recommendations to the NASD Board of Governors regarding how to best ensure market integrity and investor protection in the corporate bond market.

NASD staff declines to extend tolling period to meet qualification requirements related to implementation of Title II of the Gramm-Leach-Bliley Act of 1999.

Variable annuity and variable life insurance products (collectively, “variable insurance products" or “variable products”) are being marketed and sold to a large number of investors. While variable insurance products may be appropriate investments for some investors, concerns have been raised about the sale of these products. This prompted the staffs of the Securities and Exchange Commission (“SEC” or “Commission”) and NASD (“Staff”) to conduct examinations of broker-dealers that sell variable insurance products. This report summarizes the findings of those examinations. 

Based on certain representations and compliance with the requirements of SEC Rule 17a-4(i), third party may provide recordkeeping services to its NASD member clients, such that the member clients would not be required to individually download and separately retain copies of documents required pursuant to Rule 2790(b).

In an effort to assist member firms' compliance efforts, NASD is issuing this regular communication, "Improving Examination Results." This document has two sections: "Examination Priorities" and "Frequently Found Violations," both of which relate to the Department of Member Regulation's routine examinations of firms. While each firm must establish its own compliance programs and supervisory procedures, we felt it may be helpful to share our overall priorities.

April 2004

Use of third parties to aid in compliance with NASD Rule 2790(b).

As part of its efforts to combat abusive market timing in mutual funds, the SEC intends to propose a mandatory redemption fee on short-term trades. On November 17, 2003, the SEC requested that NASD convene a working group of industry experts to consider how this initiative may be affected by the use of mutual fund omnibus accounts. This memorandum summarizes the views expressed by members of the Omnibus Account Task Force (Task Force) established by NASD.

Rule 2740 would not prohibit an underwriter in a fixed price offering from paying to another broker/dealer that is unable to participate in the underwriting syndicate an advisory fee or a referral fee to the extent that such payment does not directly or indirectly discount the fixed offering price for any purchaser in the offering.

Further interpretive advice to members concerning the sale of hedge funds.

Secondary market trading in Fidelity Nasdaq Composite Index Tracking Stock would be consistent with the requirements of NASD Rules 2110, 2420, 2830(c), (g), and (i), and Interpretive Material 2830-2.