Interpretive Letter to Michael R. Miller, Esq., Kunkel Miller & Hament

May 31, 2000

Michael R. Miller, Esq.
Kunkel Miller & Hament
Magdalene Center Suite 202
15438 North Florida Avenue
Tampa, FL 33613

Re: The Cura Group, Inc.

Dear Mr. Miller:

This is in response to your letter dated March 28, 2000, as supplemented by conversations with NASD Regulation staff, in which you ask whether The Cura Group, Inc. ("Cura"), an employee leasing company, may enter into a business arrangement with an NASD member firm without violating NASD Rule 2420. Based upon your correspondence, we understand the pertinent facts to be as follows. The employee leasing services to be provided to the member by Cura will consist of advice regarding compliance with applicable employment laws, the provision of benefit services such as health insurance, life insurance, and pension plans, the provision of worker’s compensation benefits, and the provision of payroll processing services. This activity will be performed under the member’s control and supervision. Books and records relating to these services will be deemed property of the member and will be available for inspection by, among others, NASD Regulation.

Cura will receive payment from the member for salaries, wages, and commissions, which Cura will then pay to member personnel. Cura will impose a fee for its services by adding a profit margin to its costs based upon gross payroll. This fee will not be based upon brokerage commissions earned by either the employees of the member or the member itself. Moreover, Cura will not have discretion to determine the amount or frequency of payments that will be distributed to personnel of the member.

In addition, Cura will provide all health, life, disability, and other insurance coverage to the member’s employees. The insurance products that will be provided by Cura are traditional insurance products and, according to your letter, will not be "securities" as defined under the federal securities laws.

The member will maintain all supervisory control over its employees. In this regard, the member will be wholly responsible for the proper registration, training, and supervision of its employees. Your letter further states that Cura will not engage in any securities-related activities (other than with respect to securities of Cura).

All promotional activities, including any promotional material that Cura distributes, will relate solely to employee leasing services and will not in any way relate to brokerage activities. In addition, Cura will not identify or promote any member in its promotional activities or materials.

NASD Rule 2420, among other things, prohibits the payment of selling concessions, discounts, and other allowances to any registered broker/dealer that is a non-member of the NASD. Rule 2420 has also been interpreted to apply equally to entities that are not registered, but are required to be registered as broker/dealers under the Exchange Act of 1934 ("Exchange Act"). In this regard, Cura obtained a "no-action" letter from the staff of the Securities and Exchange Commission’s ("SEC") Division of Market Regulation stating that it will not recommend enforcement action to the SEC under Section 15(a) of the Exchange Act if Cura engages in the above-described employee leasing activities without registering as a broker/dealer under Section 15(b) of the Exchange Act. ¹

In view of the fact that Cura has obtained a no-action letter from SEC staff, the NASD Regulation Office of General Counsel takes the position that the proposed employee leasing activities of Cura, as described above, would not cause a member to violate Rule 2420. This position is contingent upon Cura performing the services in the manner as specified in the SEC no-action letter and the continuing validity of the SEC no-action letter. If, for example, Cura were to modify its activities such that the SEC’s no-action letter would no longer be valid, the Office of General Counsel would need to reconsider your request.

Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation. This letter responds only to the issues you have raised based on the facts as you have described them in your letters, and does not necessarily address any other rule or interpretation of the NASD or all the possible regulatory and legal issues involved.

Very truly yours,

Gary L. Goldsholle

1 See The Cura Group, Inc., SEC No-Action Letter, 1999 SEC No Act. LEXIS 191 (Feb. 1, 1999).