Source NTM

Type of Business

Summary Description

The NASD and SEC have determined that the sale of existing variable insurance contract to third parties (life/viatical settlements) is a securities activity. The purpose of this NtM is to remind BDs and registered persons of their obligations to their clients with regard to suitability and pricing of these third-party sales.  RETURN TO SEPTEMBER NEWSLETTER HOME

Regulatory transaction fees are collected by the NASD from its members under Schedule A, Section 3 of the NASD’s By-Laws. Reporting of some transactions, such as odd lots and OTC option exercises, has traditionally been done manually. The NASD has now implemented automated reporting for these transactions.   The automated reporting begins December 1, 2006. RETURN TO SEPTEMBER NEWSLETTER HOME

The Financial Crimes Enforcement Network (FinCEN) has implemented new rules regarding the Latvian bank VEF Banka and its subsidiaries and the Commercial Bank of Syria and its subsidiaries. These banks have been identified as primary sources for money launderers. Firms are prohibited from opening Correspondent Accounts by the specified banks and must establish procedures for preventing correspondent accounts being opened to facilitate indirect access by the banks. Firms that permit the opening of Correspondent Accounts by Foreign Banks should review their procedures to ensure they are adequate for detecting potential access by these banks.  RETURN TO SEPTEMBER NEWSLETTER HOME

The NASD has amended Rule 2211, which deal with Correspondence and Institutional Sales Materials, to require principal pre-review of correspondence sent to 25 or more existing retail customers within a 30 day period if the correspondence includes financial or investment recommendation or promotes a product or service offered by the member. The rule change is effective December 1, 2006.  RETURN TO SEPTEMBER NEWSLETTER HOME

The Pilot Program that was launched March 30, 2005 by amendments to Rule 2860 regarding Option Positions and Exercise Limits have been extended to March 1, 2007. This Pilot Program was scheduled to expire on September 1, 2006.  RETURN TO SEPTEMBER NEWSLETTER HOME

This NtM announces the effectiveness of new Rule 2441 regarding Net Trading Requirements. The rule was approved by the SEC in June and will be effective October 2, 2006. The new Rule requires that firm engaging in net transactions with its client must pre-notify the client and obtain their consent prior to executing such a transaction. Consent for non-institutional customers must be written and must be obtained on an order by order basis. The consent must clearly show the customer’s understanding of the terms and conditions of the order.  For institutional customers consent may be obtained on an order-by-order basis or via negative response letter, subject to certain requirements. RETURN TO SEPTEMBER NEWSLETTER HOME

Effective April 1, 2007, firms that created Non-Money Market Mutual Fund Sales Materials containing performance information will be required to disclose fees and expenses. The SEC approved the changes to NASD Rules 2210 and 2211 on July 5 which will require members creating or using such materials to ensure that it prominently discloses 1)  the standardized performance as required under SEC Rules 482 and 34b-1; and 2) where applicable, the maximum front-end or back-end sales load and annual operating expense ratio. This information cannot be relegated to a disclosure footnote and must appear in a text box in printed materials. RETURN TO SEPTEMBER NEWSLETTER HOME

This NtM reminds firms of their obligation to provide complete and truthful information to services providers who are reporting trading volume and interest to subscribers or the marketplace. Firm typically utilize such services to inform other market participants that it is active in a particular security to attract order flow, underwriting activity or other business. RETURN TO SEPTEMBER NEWSLETTER HOME

Amendments to Rule 2860 relating to Option Exercise Procedures will be effective October 12, 2006. The changes are designed to simply the submission of a Contrary Exercise Advice (CEA), extend the cutoff time for filing the CEA by one hour, add procedures for exercising standardized equity option when the close of trading has been changed, and consolidate existing procedures  from Rule 11850 into Rule 2860(b)(23).  RETURN TO SEPTEMBER NEWSLETTER HOME

This NtM is soliciting comments from members on proposed amendments to