Notice to Members 00-45

NASD Announces Changes To SEC Rule 15c3-3 Extension Request Reason Codes (Correction: On p. 1, the 2nd para under Key Features should read: Under SEC Rule 15c3-3 Rule Type d2, d3 and h, entry of Issue Symbol or CUSIP is required)

Published Date:
Correction - On page 1, the second paragraph under subhead Key Features should read: Under SEC Rule 15c3-3 Rule Type d2, d3 and h, the entry of either Issue Symbol or CUSIP will be required.

Correction - On page 1, the second paragraph under subhead Key Features should read: Under SEC Rule 15c3-3 Rule Type d2, d3 and h, the entry of either Issue Symbol or CUSIP will be required.

INFORMATIONAL

SEC Rule 15c3-3 Reason Codes

Effective Date: July 10, 2000

SUGGESTED ROUTING

KEY TOPICS

Legal & Compliance
Operations
Senior Management

Reason Codes
SEC Rule 15c3-3


Executive Summary

The National Association of Securities Dealers, Inc. (NASD®) is enhancing its Extension Request Reason Codes regarding Securities and Exchange Commission (SEC) Rule 15c3-3 (the Rule). The changes to the reason codes will allow firms to request extensions of time pursuant to paragraphs (d)(2), (d)(3), and (h) of the Rule. The changes will take effect on July 10, 2000.

The chart in Attachment A outlines the current reason codes to be used for extension requests made pursuant to paragraph (m) of the Rule, i.e., reason codes 040 to 052, as well as the new reason codes 070 to 078, and 080 to be used for extension requests pursuant to paragraphs (d)(2), (d)(3), and (h).

Questions/Further Information

Questions regarding this Notice to Members may be directed to Susan DeMando, Director, Member Regulation, NASD Regulation, Inc. (NASD RegulationSM) at (202) 728-8411.

Background

Paragraph (m) of the Rule requires that if a security sold long by a customer has not been delivered within 10 business days after the settlement date, the broker/dealer must either buy the customer in or apply for and receive an extension from its designated examining authority.

Paragraph (d)(2) requires that when a broker/dealer has a possession and control requirement relative to a security, and the firm has failed to receive that security for more than 30 calendar days, that the broker/dealer must buy-in the security or obtain an extension. Paragraph (d)(3) requires a buy-in or extension for securities that are receivable due to a stock dividend receivable, stock split, or similar action for more than 45 calendar days. Finally, paragraph (h) requires that short security differences not resolved within 45 days of discovery be bought in or the broker/dealer must obtain an extension of time.

Key Features

Following are key features of the new reason codes:

  • Under the Rule, reason codes have been added to be applied with Rule Type d2, d3, and h. The reason codes 070, 071, 072, 073, 074, 075, 076, 077, 078, and 080 are to be used for Type d2, d3, and h extension requests. The reason codes will be effective starting July 10, 2000.


  • For Rule Type d2, d3, and h, the entry of both the Issue Symbol and CUSIP number will be mandatory.

Attachment A

SEC Rule 15c3-3 Extension Request Reason Codes
Reason Code Reason Text Extension Type Days Permitted Limit of 9 per Customer Limit per Reason Code Final Reason Code NASD Only Business Or Calendar Days
040 Security In Transit m 14 N 2 Y N C
041 Death Of Seller m 14 Y 2 Y N C
042 Can't Buy In, Sec Short Supply m 14 N 5 Y N C
043 Dividend Sold Before Payable Date m 14 Y 2 Y N C
044 Still In Foreign Deposit m 14 Y 2 Y N C
045 Sec Exchange Or Merger m 14 Y 2 Y N C
046 Strike Or Xmas m 14 N 0 N Y C
047 Coming From Another Broker m 14 Y 2 Y N C
048 Customer III Or Hospitalized m 14 Y 2 Y N C
049 Lost Certificate m 30 N 5 N N C
050 Other m 14 N 0 N Y C
051 Acts Of God m 14 N 0 N Y C
052 Foreign Settlements m 10 N 2 Y N C
070 Security In Transfer d2, d3, h 14 N/A 2 Y N C
071 Security In Mail d2, d3, h 7 N/A 1 Y N C
072 Buy-in Issued d2, d3, h 14 N/A 2 Y N C
073 Unable To Buy-in d2, d3, h 14 N/A 2 Y N C
074 Security At Foreign Depository d2, d3, h 14 N/A 2 Y N C
075 Merger, Exchange, Or Reorganization d2, d3, h 14 N/A 2 Y N C
076 Mutual Fund d2, d3, h 14 N/A 2 Y N C
077 SRO Halted Trading Or Buy-in Privilege d2, d2, h 14 N/A 5 Y N C
078 Lost Certificate d2, d3, h 30 N/A 5 Y N C
080 Other d2, d3 h 14 N/A 0 N Y C