FINRA Manual: Contents
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89-49 SEC Approval of Amendment to Schedule C of NASD By-Laws to Require Members To Submit Applications for and Maintain the Registration of Only Such Persons Who Intend to Engage or Are Engaged in the Investment Banking or Securities Business For the Member
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The Securities and Exchange Commission has approved amendments to Parts II and III of Schedule C of the NASD By-Laws that will require a member to submit applications for and maintain the registrations of only such persons who intend to engage or are engaged in the investment banking or securities business for the member. These amendments apply to both principal and representative registration categories.
BACKGROUND AND SUMMARY
In response to certain recommendations of the NASD Regulatory Review Task Force, the Qualifications Committee of the NASD Board of Governors reviewed the NASD qualification system to consider additional means to maintain an appropriate level of knowledge and professionalism for persons associated with NASD members.
This review not only addressed the adequacy of existing NASD qualifications standards, but also considered issues relating to the need to provide the investing public reasonable assurance that registered persons remain knowledgeable about products and services available to investors, as well as applicable rules, regulations, and policies governing the investment banking and securities business.
The Securities and Exchange Commission has approved an amendment to Part II, Section (l)(a) and Part III, Section (l)(a) of Schedule C to the NASD By-Laws to require that members register only persons who are engaged or will engage in the investment banking or securities business on behalf of the member in the capacities of principal and representative.
The amendments specifically prohibit members from maintaining registrations for persons who no longer function as principals or representatives of the firm and who no longer are active in the member's investment banking or securities business, or who wish to avoid the re-examination requirement applicable to persons who are not registered for more than two years.
Members are also prohibited from sponsoring an application for registration where there is no intent to maintain the applicant's employment with the member after examination. The NASD believes this amendment is fully consistent with the historic intent of the qualification and registration program and that the proposed rule change is necessary to prevent such unacceptable practices as "parking" registrations and using NASD membership to gain a competitive advantage in operating a commercial training business.
The amendments also allow a member to maintain or make application for the registration of those persons who are engaged in the investment banking securities business of a foreign securities affiliate or subsidiary.
Questions concerning this notice should be directed to Craig L. Landauer, Senior Attorney, Office of General Counsel, at (202) 728-8291.
AMENDMENT TO PARTS II AND III, SCHEDULE C OF THE NASD BY-LAWS
(Note: New text is underlined; deleted text is in brackets.)
REGISTRATION OF PRINCIPALS
REGISTRATION OF REPRESENTATIVES