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Feb 4 2013 - Jan 8 2017Jan 9 2017 onwards

2213. Requirements for the Use of Bond Mutual Fund Volatility Ratings

(a) Definition of Bond Mutual Fund Volatility Ratings
For purposes of this Rule and any interpretation thereof, the term "bond mutual fund volatility rating" is a description issued by an independent third party relating to the sensitivity of the net asset value of a portfolio of an open-end management investment company that invests in debt securities to changes in market conditions and the general economy, and is based on an evaluation of objective factors, including the credit quality of the fund's individual portfolio holdings, the market price volatility of the portfolio, the fund's performance, and specific risks, such as interest rate risk, prepayment risk, and currency risk.
(b) Prohibitions on Use
Members and persons associated with a member may distribute a retail communication that includes a bond mutual fund volatility rating only when the following requirements are satisfied:
(1) The rating does not identify or describe volatility as a "risk" rating.
(2) The retail communication incorporates the most recently available rating and reflects information that, at a minimum, is current to the most recently completed calendar quarter ended prior to use.
(3) The criteria and methodology used to determine the rating must be based exclusively on objective, quantifiable factors. The rating and the disclosure that accompanies the rating must be clear, concise, and understandable.
(4) The retail communication conforms to the disclosure requirements described in paragraph (c).
(5) The entity that issued the rating provides detailed disclosure on its rating methodology to investors through a toll-free telephone number, a website, or both.
(c) Disclosure Requirements
(1) The following disclosures shall be provided with respect to each bond mutual fund volatility rating:
(A) the name of the entity that issued the rating;
(B) the most current rating and date of the current rating;
(C) a link to, or website address for, a website that includes the criteria and methodologies used to determine the rating;
(D) a description of the rating in narrative form, containing the following disclosures:
(i) a statement that there is no standard method for assigning ratings;
(ii) whether consideration was paid in connection with obtaining the issuance of the rating;
(iii) a description of the types of risks the rating measures (e.g., short-term volatility); and
(iv) a statement that there is no guarantee that the fund will continue to have the same rating or perform in the future as rated.
Amended by SR-FINRA-2016-018 eff. Jan. 9, 2017.
Amended by SR-FINRA-2011-035 eff. Feb. 4, 2013.
Amended by SR-NASD-2005-117 eff. Dec. 27, 2005.
Amended by SR-NASD-2005-104 eff. Aug. 31, 2005.
Amended by SR-NASD-2003-126 eff. Aug. 31, 2003.
Amended by SR-NASD-2001-49 eff. August 10, 2001.
Adopted by SR-NASD-97-89 eff. Feb. 29, 2000.

Selected Notices: 96-84, 00-17, 00-23, 12-29, 16-41.

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