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86-9 Amendments to Article III of the NASD Rules of Fair Practice
TO: All NASD Members and Other Interested Persons
LAST DATE FOR COMMENT: MARCH 26, 1986
The amended NASD Rules of Fair Practice, proposed by the NASD's Ad Hoc Committee on Rule and By-Law Amendments, which reviews and revises the NASD's By-Laws, rules and interpretations, are attached for comment by members and other interested persons.
The Committee's review began with adoption by the NASD Board of Governors of a revised Code of Procedure and revisions to the NASD's By-Laws, which were recently approved by the Securities and Exchange Commission. The enclosed revision of the Rules of Fair Practice is part of the Committee's review and has been approved by the NASD Board of Governors.
After March 26, 1986, the Committee will review the comments and re-submit the Rules of Fair Practice, as may be further amended, to the NASD Board of Governors. If the Rule? of Fair Practice are approved by the Board, they will be submitted to the membership for a vote. If approved by the membership, the proposed amendments will be filed with the Securities and Exchange Commission for approval.
The proposed amendments to the Rules of Fair Practice are primarily designed to conform the language to certain statutory changes, codify existing Board interpretations to rules, clarify the application of certain provisions and generally update and modernise the Rules of Fair Practice. This notice contains the current Text of each rule followed by any proposed new text. Where appropriate, an explanation of the proposed change is included. To assist commentators, the proposed rules have been designated alphabetically. When the revisions are finalized, all rules of fair practice will be numbered.
The proposed amendments are limited to Article III, Sections 1 through 28 of the Rules of Fair Prfictice. Sections 29 through 4] have been adopted in recent years and generally appear adequate. In oeses where appendices are attached to these rules, it is proposed to leave the provisions intact. Those sections appear in the NASD Manual beginning at page 2109-8.
In reviewing the Rules of Fair Practice, Article I and Article II, dealing with "Adoption and Application" and "Definitions," respectively, required no revision other than the possible substitution of citations to revised sections of the NASD By-Laws. Likewise, no amendments are proposed for Articles IV and V. In Article III, the revisions are limited to Sections 1 through 28, the various interpretations, statements of policy and other matters contained therein.
The enclosed recodification proposes the deletion of a number of interpretations, resolutions, explanations and policy statements by the Board which had accompanied a number of sections of the rules. The Committee on Rule and By-Law Amendments believed that, while these statements are no longer necessary or appropriate for inclusion in the NASD Manual, it may be appropriate to retain certain of these items for reference by members. It is, therefore, anticipated that upon ultimate adoption of the rule recodification and approval by the SEC, an "omnibus" notice to members will be issued setting forth the deleted materials that are deemed appropriate for retention by members. These cases are noted in the accompanying proposal. The NASD is studying the feasibility of publishing a manual of interpretative notices that would be updated on a regular basis and could contain such an "omnibus" notice.
In the case of numerous sections (and the various articles noted above), no change is being proposed. Commentators are encouraged to study those provisions, however, and to offer any suggestions for change.
Members and other interested persons are encouraged to comment on the Rules of Fair Practice. All comments should be directed to:
Mr. James M. Cangiano, Secretary
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D. C. 20006
Comments should be received no later than March 26, 1986.
Any questions concerning this notice should be directed to Dennis C. Hensley, Vice President and Deputy General Counsel, at (202) 728-8245, or John P. Mylod, Assistant General Counsel, at (202) 728-8294.
Frank J. Wilson
Executive Vice President and General Counsel