Proposed Amendment to Article I, Section (c) of the NASD By-Laws Relating to the Definition of the Term "Branch Office"

IMPORTANT MAIL VOTE

OFFICERS, PARTNERS, PROPRIETORS

TO: All NASD Members and Other Interested Persons

LAST VOTING DATE IS JULY 16, 1987.

EXECUTIVE SUMMARY

NASD members are invited to vote on a proposed amendment to Article I, Section (e) of the NASD By-Laws that would clarify that branch offices of NASD member firms located outside of the United States fall within the definition of "branch office." The amendment would delete the phrase "located in the United States" from the definition of "branch office" contained in Article I, Section (e) of the By-Laws.

A conforming change also has been approved by the NASD Board of Governors in the Explanation of the Board of Governors — "Distinction Between Branch Office and Office of Supervisory Jurisdiction; Appointment of Executive Representative; Standards for Determining Branch Offices," which follows Schedule C to the By-Laws.

The proposed amendment to Section (c) of Article I has been approved by the NASD Board of Governors and now requires membership approval. Prior to becoming effective, the proposed amendment must also be approved by the Securities and Exchange Commission.

The texts of both amendments are attached.

BACKGROUND AND SUMMARY OF PROPOSED AMENDMENTS

The NASD Board of Governors believes that the restrictive language now contained in the NASD By-Laws and Schedule C is inconsistent with the current environment of increasing internationalization of the securities markets and that such restrictive language serves no useful purpose. The Board of Governors has approved amendments to the By-Laws and Schedule C that delete the restrictive language, making the definition applicable to all branch offices, wherever located.

Under the proposed amendments, branch offices located outside the United States will be assigned to existing NASD districts for purposes of examinations, elections, and other district-level functions. The amendments would not affect the availability of the "foreign associate" category of registration for persons associated with foreign branch offices.

* * * * *

The Board of Governors believes that the clarifying amendment to Article I, Section (c) of the NASD By-Laws is necessary and appropriate and recommends that members vote their approval.

Please mark the attached ballot according to your convictions and return it in the enclosed, stamped envelope to "The Corporation Trust Company." Ballots must be postmarked no later than July 16, 1987.

Questions concerning this notice may be directed to Eugene Bleier, Attorney, NASD Office of General Counsel, at (202) 728-8287.

Sincerely,

Frank J. Wilson
Executive Vice President and General Counsel

Attachments

AMENDMENT TO NASD BY-LAWS*

ARTICLE I

Definitions

(c) "branch office" means an office [located in the United States] which is owned or controlled by a member, and which is engaged in the investment banking or securities business;

* * *

AMENDMENT TO SCHEDULE C TO THE BY-LAWS*

[This change has been approved by the NASD Board of Governors and is presented here for informational purposes only.]

• • • Explanation of the Board of Governors

Distinction Between Branch Office and Office of Supervisory Jurisdiction; Appointment of Executive Representative; Standards for Determining Branch Offices

. . . The term "branch office" defined in Article I of the By-Laws means any office, including a corporate subsidiary of a member, [located in the United States and] other than the main office which is owned or controlled by a member and engaged in the investment banking or securities business.

* Deleted language is bracketed.