Broker-Dealer and Agent Renewals for 1988-89; Status of CRD Phase II Implementation

*These are suggested departments only. Others may be appropriate for your firm.

EXECUTIVE SUMMARY

The 1988-89 NASD broker-dealer and agent registration renewal cycle will begin in early November. This program allows for simplification of the renewal process through the payment of one invoice amount that will include fees for NASD personnel assessments, NASD branch office fees, New York Stock Exchanges (NYSE) and American Stock Exchange (Amex) maintenance fees, state agent renewal fees, and state broker-dealer renewal fees. Members are urged to read the following Notice and the instruction materials included in the forthcoming invoice package to ensure continued eligibility to do business in the relevant states effective January 1, 1989.

The implementation date for Phase II of CRD, the processing of Form BD on behalf of the system's regulatory participants, is February 1, 1989.

INITIAL RENEWAL INVOICES

On or around November 10, 1988, initial renewal invoices will be mailed to all member firms. The invoices will include fees for NASD personnel assessments, NASD branch office fees, New York Stock Exchange (NYSE) and American Stock Exchange (Amex) maintenance fees, state agent renewal fees, and state broker-dealer renewal fees. Full payment of the November invoice must be received by the NASD no later than December 16, 1988.

This year's NASD personnel assessment will cost $10 per person with a 50 percent discount resulting in a $5 fee per registered person. NASD branch office fees remain $50 per branch office. All NASD branch offices listed as active on Schedule E of a firm's Form BD as of September 30, 1988, will be assessed.

Agent renewal fees for NYSE, Amex, and state affiliations will be listed in a table enclosed with each invoice. The table includes a list of state broker-dealer renewal fees for states that are participating in this year's broker-dealer renewal program. NYSE and Amex maintenance fees—collected by the NASD for firms that are registered with NYSE/Amex as well as the NASD — are based on the number of NYSE and Amex registered personnel employed by the member.

If a state is not participating in this year's broker-dealer renewal program, members registered in that state directly to assure compliance with renewal requirements. In addition, some participating states may require steps beyond the payment of renewal fees to complete the broker-dealer renewal process. Members should contact states directly for further information on state renewal requirements.

Payment of the initial invoice should be in the form of a check drawn on the member firm's bank account. Please submit the check with the top portion of the invoice and mail it in the return envelope provided with the invoice. To ensure prompt processing, the renewal invoice payment should not be included with other forms or fee submissions. Members should be aware that failure to return payment to the NASD by December 16, 1988, will mean a loss of eligibility to do business in the relevant states effective January 1, 1989.

FILING FORM U5

Members may wish to avoid unwanted renewals by filing Form U5 for agent terminations in one or more affiliations. Because of the increased convenience and flexibility reported by members who used predated Form U5 for last year's renewal, the NASD will process predated agent terminations again this year. From November 1 to December 16, the NASD will accept and process Forms U5 (both partial and full terminations) with predated dates of termination. Under this procedure, if the Form U5 indicates a termination date of December 31,1988, an agent may continue doing business in a jurisdiction until the end of the calendar year without being assessed renewal fees for that jurisdiction. Please ensure that Forms U5 are filed by the renewal deadline date of December 16,1988. Also, predated Forms U5 cannot be processed if the date of termination indicated is January 1,1989, or thereafter.

Members should exercise care when submitting predated Forms U5. The NASD will process these forms as they are received, but cannot withdraw a predated termination once processed. To withdraw a predated termination, a member would have to file a new Form U4 subsequent to the termination date. Members would still be obligated to update the Form U5 with any disciplinary information received subsequent to the filing of the Form U5.

FILING FORM BDW

Procedures regarding the filing for Form BDW to terminate broker-dealer registration in one or more affiliations will differ slightly from past years. Although the Central Registration Depository (CRD) Phase II program is not yet implemented, firms requesting terminations (either full or state only) will be able to file their Form BDW with the CRD in order to avoid the assessment of renewal fees in those states that are designated on the Form BDW. To effect termination in those designated states, firms also will have to comply with state requirements and file the Form BDW directly with the state, unless the state has instructed otherwise.

The deadline for receipt of Forms BDW by the CRD for firms desiring to terminate in a state before year end 1988 is December 16, 1988. Predated Form BDW will be accepted and processed in the same manner as predated Form U5.

REMOVING OPEN REGISTRATIONS

For the second year, the NASD will include in the initial invoice package a roster of firm agents whose NASD registration is either terminated or purged but who have approved registrations with states. This roster should aid in the reconciliation of personnel registrations prior to year's end. Firms may terminate obsolete state registrations through the submission of a Form U5 or reinstate NASD licenses through the filing of a Page 1 of Form U4. No roster will be included if a firm does not have agents within this category.

BILLING CODE BREAKDOWN

This year's final invoice package will again include a breakdown of fees assessed by billing code for firms that use billing codes in the registration process. This breakdown will aid the firm in its internal research and allocation of fees.

FINAL ADJUSTED INVOICES

On or about January 13, 1989, the NASD will mail final adjusted invoices to members. These invoices will reflect the final status of firm and agent registrations as of December 31,1988. Any adjustments in fees owed, as a result of registration terminations or approvals subsequent to the initial invoice mailing, will be made in this final reconciled invoice. If a member has more agents registered at year end than on the November invoice date, additional fees will be assessed. If a member has fewer registered personnel at year end than in November, a credit will be issued.

Included with this adjusted invoice will be the member renewal rosters, which will list all renewed personnel registered with the NASD, NYSE, Amex, and each state. Personnel whose registration is approved in any of these jurisdictions during November and December will automatically be included in this roster, while registrations that are pending approval or are deficient at year end will not be included in the renewal process. Firms also will receive an NASD branch office roster that lists all branches for which they have been assessed.

Firms then will have a two-month period in which to reconcile any discrepancies on the rosters. All jurisdictions should be contacted directly in writing. Specific information and instructions concerning the final adjusted invoice package will appear in the January 1989 Notices to Members, as well as on the inside cover of the renewal roster.

STATUS OF CRD PHASE II

Phase II of CRD, the processing of Form BD on behalf of the system's regulatory participants, originally was targeted for implementation on November 1, 1988. However, because of industry recommendations, the date for system implementation has been postponed until February 1, 1989.

During the Fall Conference of the North American Securities Administrators Association (NASAA), held October 8-13, 1988, industry representatives voiced concern over the proposed November start-up date for Phase II. The concern centered around the short notice provided to the industry of the revised filing requirements and the implementation of a new program during the year-end renewal period. NASAA was receptive to the industry comments and has postponed the implementation date until February 1,1989. It chose this date to avoid conflicts with the annual renewal process and to give all parties adequate time to prepare.

During this interim period, the system will continue to operate in a pilot phase that provides Form BD data to the states. Notice will be provided regarding the revised filing requirements for the participating states in advance of the February 1, 1989, implementation date.

Questions concerning this notice may be directed to NASD Information Services at (301) 738-6500.