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92-10 Approval of Amendments to Article III, Section 3 of the NASD By-Laws Regarding NASD Member Requirement to Appoint One Executive Representative Responsible For Voting and Acting for the Member in All Affairs Relating to the NASD
On December 16, 1991, the SEC approved an NASD rule change to Article III, Section 3 of the NASD By-Laws that changes who is eligible for designation as the NASD member's executive representative. The executive representative is responsible for voting and acting for the member in all affairs of the NASD. As amended, Section 3 requires that only a person who is a member of the firm's senior management and registered as a principal may be designated as the firm's executive representative to the NASD. An interpretation of this rule change as it applies to insurance company members is provided in this Notice. Also included in this Notice is an Executive Representative Form to be completed by all members and filed with the Qualifications and Membership Department of the NASD prior to April 15, 1992. The text of the amendments follows this Notice.
Article III, Section 3 of the NASD By-Laws requires members to appoint one "executive representative" who is responsible for voting and acting for the member in all affairs of the NASD. Currently, the executive representative designated by a member is also identified as the firm's "contact person" in the Form BD and in the Central Registration Depository (CRD). The current designation requirements to be an "executive representative" are both broad and optional, and have, in the past, led to the designation of persons who have limited authority in their firms. Since all important membership communications are directed to executive representatives, who have the authority to cast votes for their respective firms, the NASD is concerned that important matters may not be directed to the most appropriate person at each member.
As amended, Section 3 requires that only a person who is a member of the firm's senior management and a registered principal may be designated as the firm's executive representative to the NASD.
Applicability of Section 3 to insurance company members
The NASD is aware that where an insurance company is a member, there may be circumstances where the most appropriate person to be designated "executive representative" is in the middle management of the insurance company but is acting as senior management of the company's securities operations. The NASD believes that it is an appropriate interpretation of the proposed rule that, upon review, the NASD may permit an insurance company member to appoint as executive representative the most appropriate employee, registered as a principal, who is in an equivalent position to senior management in charge of the insurance company's securities operations. To request an NASD interpretative review regarding designation of an executive representative, an insurance company member should contact Steve Parsons, Membership Department, at (301) 590-6716.
New Executive Representative Form
In order to distinguish between the role of the executive representative and the member's contact person, who may be different from the executive representative, the NASD plans to maintain the executive representative list separately from the firm contact list in the CRD. This additional administrative procedure will assure that the executive representative will receive all important NASD communications and that routine CRD notices will be directed to the most appropriate person at the member.
For purposes of implementing the new executive representative list, all members must complete the following Executive Representative Form designating their executive representative and file this form with the Qualifications and Membership Department of the NASD before April 15, 1992. Members are required to amend and refile the Executive Representative Form with the Qualifications and Membership Department of the NASD upon the occurrence of all changes affecting the information contained in the Executive Representative Form.
In order to provide time for firms to designate a new executive representative where necessary and for filing of the attached Executive Representative Form, this rule change will become effective April 15, 1992.
Questions concerning this Notice may be directed to John Vaughn, Membership Department at (301)590-6865.
(Note: New language is underlined; deletions are in brackets.)
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Sec. 3. Each member shall appoint and certify to the Secretary of the Corporation one "executive representative" who shall represent, vote and act for the member in all the affairs of the Corporation, except that other executives of a member may also hold office in the Corporation, serve on the Board of Governors or committees of the Corporation, or otherwise take part in the affairs of the Corporation. A member may change its executive representative upon giving written notice thereof to the Secretary, or may, when necessary, appoint, by written notice to the Secretary, a substitute for its executive representative. An executive representative of a member or a substitute shall [preferably] be a[n executive officer] member of senior management and registered principal of the member[,]. [if a corporation, a partner in case of a partnership, and the member himself if an individual, but he may be an employee of the member, if given authority to act for the member in the course of the Corporation's activities.]
EXECUTIVE REPRESENTATIVE FORM
(To be completed by all members and filed before April 15, 1992)
NASD Member Firm:__________________________________
The above NASD Member Firm designates______________________________________,
Social Security #_________________, CRD #_________________, as Executive Representative to the NASD as of (date)_________________. This person is a member of the firm's senior management and is a registered principal.
Name of person preparing this form:_________________
Telephone number: _________________
Return this form to:
Stephen D. Hickman, Corporate Secretary
Executive Representative Program
c/o Qualifications and Membership Department
National Association of Securities Dealers, Inc.
9513 Key West Avenue
Rockville, Maryland 20850
(Note: Form may be photocopied.)