Last Voting Date: September 25, 1995
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Executive Summary
The NASD® invites members to vote on proposed amendments to Article II, Section 4 of the NASD By-Laws that will conform the NASD's eligibility criteria to changes adopted by Congress in 1990 to the statutory disqualification provisions found in Sections 3(a)(39) and 15(b)(4) of the Securities Exchange Act of 1934 (the Act). The last voting date is September 25, 1995.
The text of the proposed amendments follows this Notice.
Background
Section 15(A)(g)(2) of the Act gives the NASD the authority to bar a person from becoming or remaining associated with an NASD member if the person is or becomes subject to a statutory disqualification as defined in Sections 3(a)(39) and 15(b)(4) of the Act. The NASD's eligibility criteria in Article II, Section 4 of the By-Laws have followed the statutory disqualification provisions in the Act. In November 1990, Congress amended the statutory disqualification provisions of the Act to include all felony convictions for 10 years from the date of the conviction and to include various foreign regulatory actions. The NASD, in the interest of uniformity and consistency, is proposing to amend Article II, Section 4 of the By-Laws to add the changes that were adopted by Congress in 1990.
Request For Vote
The NASD Board of Governors believes the proposed amendments will promote uniformity and consistency with existing Securities Exchange Act of 1934 provisions. Please mark the attached ballot according to your convictions and mail it in the enclosed, stamped envelope to The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware, 19801. Ballots must be postmarked no later than September 25, 1995.
Questions regarding this Notice may be directed to Craig L. Landauer, Associate General Counsel, Office of General Counsel, at (202) 728-8291.
For Member Vote—Text Of Proposed Amendments To Article II, Section 4 Of The By-Laws
(Note: New text is underlined; deletions are in brackets.)
ARTICLE II, SECTION 4
Definition of Disqualification
Sec. 4. A person is subject to a "disqualification" with respect to membership, or association with a member, if such person:
Commission and Self-Regulatory Organization Disciplinary Sanctions
(a) has been and is expelled or suspended from membership or participation in, or barred or suspended from being associated with a member of, any self-regulatory organization, foreign equivalent of a self-regulatory organization, foreign or international securities exchange, contract market or foreign equivalent designated pursuant to Section 5 of the Commodity Exchange Act, or futures association, registered under Section 17 of such Act, or any substantially equivalent foreign statute or regulation or futures association registered under Section 17 of such Act, or any substantial equivalent foreign statute or regulation, or has been and is denied trading privileges on any such contract market;
(b) [is subject to an order of the Commission or other appropriate regulatory agency denying, suspending for a period not exceeding twelve months, or revoking his registration as a broker, dealer, municipal securities dealer (including a bank or department or division of a bank), or government securities broker or dealer or barring or suspending him from being associated with a broker, dealer, or municipal securities dealer (including a bank or department or division of a bank), or is subject to an order of the Commodity Futures Trading Commission denying, suspending, or revoking his registration under the Commodity Exchange Act;]
is subject to:
(1) an order of the Commission, other appropriate regulatory agency, or foreign financial regulatory authority:
(i) denying, suspending for a period not exceeding twelve months, or revoking his registration as a broker, dealer, municipal securities dealer, government securities broker, or government securities dealer or limiting his activities as a foreign person performing a function substantially equivalent to any of the above; or
(ii) barring or suspending for a period not exceeding twelve months his being associated with a broker, dealer, municipal securities dealer, government securities broker, government securities dealer, or foreign person performing a function substantially equivalent to any of the above;
(2) an order of the Commodity Futures Trading Commission denying, suspending, or revoking his registration under the Commodity Exchange Act (7 U.S.C. 1 et seq.); or
(3) an order by a foreign financial regulatory authority denying, suspending, or revoking the person's authority to engage in transactions in contracts of sale of a commodity for future delivery or other instruments traded on or subject to the rules of a contract market, board of trade, or foreign equivalent thereof;
(c) by his conduct while associated with a broker, dealer, municipal securities dealer (including a bank or department or division of a bank), or government securities broker or dealer, or while associated with an entity or person required to be registered under the Commodity Exchange Act has been found to be a cause of any effective suspension, expulsion or order of the character described in subsections (a) or (b) of this Section; or
(d) by his conduct while associated with any broker, dealer, municipal securities dealer, government securities broker, government securities dealer, or any other entity engaged in transactions in securities, or while associated with an entity engaged in transactions in contracts of sale of a commodity for future delivery or other instruments traded on or subject to the rules of a contract market, board of trade, or foreign equivalent thereof, has been found to be a cause of any effective suspension, expulsion, or order by a foreign or international securities exchange or foreign financial regulatory authority empowered by a foreign government to administer or enforce its laws relating to financial transactions as described in subparagraph (a) or (b) of this paragraph;
[(d)](e) has associated with him any person who is known, or in the exercise of reasonable care should be known, to him to be a person described in subsections (a), (b), [or] (c), or (d) of this Section;
Misstatements
[(e)](f) has willfully made or caused to be made in any application for membership in a self-regulatory organization, or to become associated with a member of a self-regulatory organization, or in any report required to be filed with a self-regulatory organization, or in any proceeding before a self-regulatory organization, any statement which was at the time, and in light of the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such application, report, or proceeding any material fact which is required to be stated therein;
Convictions
[(f)](g) has been convicted within ten years preceding the filing of any application for membership in the Corporation, or to become associated with a member of the Corporation, or at any time thereafter, of any felony or misdemeanor which;
(1) involves the purchase or sale of any security, the taking of a false oath, the making of a false report, bribery, perjury, burglary, any substantially equivalent activity however denominated by the laws of the relevant foreign government, or conspiracy to commit any such offense;
(2) arises out of the conduct of the business of a broker, dealer, municipal securities dealer, or government securities broker or dealer, investment adviser, bank, insurance company, fiduciary, transfer agent, foreign person performing a function substantially equivalent to any of the above, or any entity or person required to be registered under the Commodity Exchange Act or any substantially equivalent foreign statute or regulation;
(3) involves the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds or securities; substantially equivalent activity however denominated by the laws of the relevant foreign government; or
(4) involves the violation of Sections 152, 1341, 1342 or 1343 or Chapters 25 or 47 of Title 18, United States Code [;], or a violation of a substantially equivalent foreign statute; or
(5) involves any other felony;
Injunctions
[(g)](h) is permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, underwriter, broker, dealer, or government securities broker or dealer, transfer agent, foreign person performing a function substantially equivalent to any of the above, (or) entity or person required to be registered under the Commodity Exchange Act, or any substantially equivalent foreign statute or regulation, municipal securities dealer (including a bank or department of division of a bank), or government securities broker or dealer or as an affiliated person or employee of any investment company, bank or insurance company, foreign entities substantially equivalent to any of the above, or from engaging in or continuing any conduct or practice in connection with any such activity, or in connection with the purchase or sale of any security.
