FINRA Manual: Contents
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Year 2000 Update (December)
SEC—Year 2000 Recordkeeping Rule
Effective August 31, 1999, the Securities and Exchange Commission (SEC) adopted SEC Rule 17a-9T (the Rule) relative to Year 2000. The Rule, which was originally proposed in March 1999, is intended to assist broker/dealers, the SEC, self-regulatory organizations (SROs), and the Securities Investor Protection Corporation (SIPC) in identifying all securities positions carried by a broker/dealer and the location of the securities in the event that a broker/dealer experiences Year 2000 problems.
Following are the key components of the Rule:
- It applies to all registered broker/dealers that carry customer accounts and that have a minimum net capital requirement of $250,000.
- The Rule requires that before January 1, 2000, all subject broker/dealers must make certain records for the three-day period from Wednesday, December 29, 1999, through Friday, December 31, 1999, as follows:
- The records generated pursuant to the Rule must be maintained for not less than one year and can be maintained in any medium acceptable under SEC Rule 17a-4(f).
The importance of these records is paramount in the event of Year 2000 problems. All potentially subject firms should review the Rule immediately and take any internal steps necessary to make sure that the recordkeeping requirements of the Rule can be complied with in the time allotted.
|To The Members: Thank You|
|The National Association of Securities Dealers, Inc. (NASD®) Year 2000 Program Office, and the NASD and its subsidiaries, would like to convey to the entire membership our thanks for your efforts and hard work in meeting the requirements administered by the SEC, NASD, and other SROs. In every aspect, you have done an outstanding job. We particularly feel that your work in preparing for the Year 2000 transition has been critical to the industry's readiness efforts. Again thank you for your efforts and participation. We wish you a wonderful holiday season and successful new year.|
NASD Regulation To Require Certain Firms To File FOCUS Reports And Reg T Extension Requests Manually In The Event Of Year 2000 Problems
NASD RegulationSM and its broker/dealer members have separately developed comprehensive Year 2000 Business Continuity Plans designed to provide, among other things, alternative ways for NASD Regulation and members to perform critical business functions in the event that normal methods have been disabled by Year 2000-induced disruptions or events. As part of this effort, the Member Regulation Department of NASD Regulation has developed plans to accept manually filed December 1999 FOCUS Reports (due to be filed on or before January 26, 2000) from specifically designated firms. The designated firms and the manual process are described below. In addition, all members should be prepared to file Reg T extension requests manually if Year 2000 problems prevent electronic transmission. Details on both of these contingencies follow.
December FOCUS Reports
The SEC is requiring that certain broker/dealers submit completed Millennium Transition Questionnaires (MTQ) to their designated examining authority. Approximately 220 NASD member firms will be required to submit MTQs to the NASD during the period of December 29, 1999 through January 7, 2000. The information provided on MTQs will be reported to the SEC and used by NASD Regulation to supplement normal regulatory information for the purpose of identifying and assisting firms that may encounter financial or operational problems resulting from Year 2000-related events and to most effectively protect the investing public.
The FOCUS report is an essential part of Member Regulation's financial monitoring program. As such, it is important to ensure that Member Regulation receive these reports even in the event that Year 2000 problems prevent electronic transmission. Accordingly, Member Regulation will require all member firms subject to MTQ reporting to manually file the December 1999 FOCUS Report if: a) the firm encounters system or operational problems that prevent it from making a timely electronic filing; or b) the NASD notifies the firm or makes a general announcement (via the NASD or NASD Regulation Web Sites or otherwise) that Year 2000-related problems have impacted the NASD's ability to receive and process this data electronically. The manual filing, if required, will be due under the normal time frames specified in SEC Rule 17a-5. Any required manual FOCUS filing will be submitted to the local District Office and Member Regulation's Systems Support, Attention: Eleanor Sabalbaro, 1399 Piccard Drive, 3rd floor, Rockville, Maryland 20850.
Reg T Extension Requests
Regulation T of the Federal Reserve Board allows, with certain limitations, a broker/dealer to request an extension of time for payment to enable a customer to meet his/her obligation in either a cash or margin account.
Member Regulation will require all member firms that need to file for an extension of time under Regulation T of the Federal Reserve Board to file manually with the local District Office in the event that: a) the firm encounters system or operational problems that prevent it from making a timely electronic filing; or b) the NASD notifies the firm or makes a general announcement (via the NASD or NASD Regulation Web Sites or otherwise) that Year 2000-related problems have impacted the NASD's ability to receive and process these requests electronically.
If not already included in Year 2000 contingency plans, member firms are encouraged to take steps now to ensure that they are able to comply with any manual filing requirements that may be necessary. Among other precautions, we suggest that members print paper versions of both the FOCUS report and the Regulation T extension request form from the NASD Regulation Web Site.
Any questions regarding FOCUS or Regulation T filings may be directed to Sam Luque (202-728-8472) or Susan DeMando (202-728-8411) in the Member Regulation Department.
Testing And Continuing Education
NASD Regulation has taken exceptional steps to ensure the Year 2000 integrity of its processes, software, and systems. One area that is recognized as critically important is the certification of registered persons. NASD Regulation is confident that all appropriate steps have been taken to ensure, to the greatest extent possible, that the NASD Regulation PROCTOR® System, which is responsible for the administration of testing and continuing education to the securities industry, will not be adversely impacted by Year 2000 disruptions.
To prepare for unexpected Year 2000-related events, NASD Regulation has developed contingency plans to handle matters outside of its control. It is possible that isolated problems may occur in some delivery locations. We cannot rule out more extensive Year 2000 disruptions to the infrastructure. To prepare for such possibilities, however remote, NASD Regulation has conferredwith Sylvan Prometric, its test delivery contractor, to review alternatives.
If, as the result of Year 2000-related problems experienced by NASD Regulation or Sylvan, a candidate is not able to schedule or take a qualifications examination or continuing education session, the candidate's expiration date will be automatically extended. The candidate will need to contact Sylvan Prometric to reschedule his/her session after January 15th and complete that session within 60 days of his/her initial expiration date. Paper and pencil versions of a limited subset of certification tests will be pre-staged by NASD Regulation. In the event of a critical need, these will be distributed to selected Sylvan Testing Centers for delivery.
Please direct any questions concerning qualifications examinations to Lee Hays (301-590-6003) and continuing education inquires to John Linnehan (301-208- 2932) in the Member Regulation Department.
Members that are unable to file their advertisements and sale literature with the NASD Advertising Regulation Department or that are unable to perform their compliance activities as a result of Year 2000-related problems, are required to communicate their situation to the Department. The Department staff will work with members in seeking alternative ways to review sales materialinternally and submit required filings.
If members have any questions they should contact Thomas A. Pappas, Director, Advertising/Investment Companies Regulation Department at (202) 728-8330.