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88-95 SEC Approval of Amendment to NASD Rules of Fair Practice Re: Prompt Payment for Investment Company Shares — Effective Date: January 1, 1988
*These are suggested departments only. Others may be appropriate for your firm.
The Securities and Exchange Commission recently approved an amendment to Article III, Section 26 of the NASD Rules of Fair Practice. This amendment, which replaces the Interpretation of the Board of Governors Relating to Prompt Payment by members for shares of investment companies, establishes time frames within which members must transfer payment for investment company shares to investment companies or their agents. The text of the amendment follows this notice.
On October 31, 1988, the SEC approved a proposed rule change providing for a new paragraph (m) to Article III, Section 26 of the NASD Rules of Fair Practice. Since 1955, prompt payment by NASD members for investment company shares that they had sold to customers has been governed by the NASD Board of Governors Prompt Payment Interpretation. That interpretation did not, however, include a definition of the term "prompt payment." That interpretation has been rescinded and replaced by the new paragraph (m) to Section 26. The amendment, as approved by the Commission, was adopted pursuant to member vote, which was solicited in Notice to Members 87-44.
EXPLANATION OF AMENDMENT
New Section 26(m) defines the term "prompt payment" in two sets of circumstances.
In order to facilitate changes in internal firm procedures that will be required by this rule, the NASD has determined that the rule will become effective January 1, 1989. The text of the new rule is attached. Questions concerning this notice can be directed to A. John Taylor, Vice President, Investment Companies/Variable Contracts, NASD, at (202) 728-8328.
AMENDMENT TO NASD RULES OF FAIR PRACTICE
Prompt Payment for Investment Company Shares