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88-56 Revisions to Form BD; State Pilot for Broker-Dealer Phase of CRD
Legal & Compliance
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The Securities and Exchange Commission (SEC) recently approved two revisions to Form BD, the Uniform Registration Application for Broker-Dealers, under the Securities Exchange Act of 1934. These revisions, which are effective August 1, 1988, include an additional paragraph on the execution page of Form BD providing for an explicit consent to service of process for actions brought by the SEC, self-regulatory organizations (SROs), or the Securities Investors Protection Corporation (SIPC), as well as a requirement for disclosure of the broker-dealer's fiscal year.
Members are not required to submit a special amendment filing of the new version of the form (Form BD, revised 7/88) as a result of these changes. All future filings, however, must be made on the revised form.
In preparation for state entry into the broker-dealer phase of the Central Registration Depository (CRD), the NASD is introducing amended system software on a pilot basis. The focus of this pilot software is directed to state users of the system. However, NASD members will notice minor revisions to their CRD status reports.
The SEC recently adopted an amendment to Form BD, the uniform registration application that is filed by a broker-dealer to become registered or to amend an existing application, under the Securities Exchange Act of 1934. The amendment provides for consent from the applicant that service of any civil action brought by or notice of any proceeding before the SEC or any self-regulatory organization, or application for protective decree filed by SIPC, may be given to the applicant's contact employee at the applicant's main address as identified in Items 1G and IE on Form BD.
This revision addresses the SEC's concern for consent language relating to the SEC and SROs, as well as SIPC's difficulties in obtaining adequate service of process in applications for protective decrees for broker-dealers that failed financially.
A second revision to Form BD incorporates a request from the North American Securities Administrators Association (NASAA). At its spring meeting in April 1988, the NASAA membership approved an amendment to Form BD requiring fiscal-year disclosure. Many states require information concerning an applicant's fiscal year and it was believed that Form BD is the most effective means of obtaining this information. To address state needs, the SEC is also amending Item 3 on Form BD to require an applicant to disclose its fiscal year-end.
The SEC adoption of these amendments is further detailed in SEC Release No. 34-25806.
Neither the SEC nor the NASD will require existing broker-dealers to file amendments to their Form BDs as a result of these changes. Members will be required to provide the consent and fiscal year-end only when Form BD is next amended for some other reason.
A copy of the revised (7/88) Form BD is included with this notice. Members are urged to replace existing supplies of Form BD with the new version to avoid use of the obsolete form. Supplies of the revised Form BD may be ordered through NASD Information Services at (301) 738-6500.
BROKER-DEALER PHASE OF CRD
In preparation for state participation in the broker-dealer phase of CRD, the NASD is introducing new system software on a pilot basis to assist states in training prior to the full implementation of this phase of the system.
Phase I of the system, begun in 1981, provided for the centralized processing of Forms U-4 and U-5 for associated persons of NASD member firms. Phase II, which will begin in September 1988, will enable the NASD to centrally process
Form BD, amendments to Form BD, and Form BDW, the uniform document used to terminate the registration of a broker-dealer.
The introduction of this pilot program, which will be implemented in early August, will result in only minor changes to the broker-dealer status reports generated by the system.
The most significant change will be the introduction of new edits for branch offices. Status reports indicating these edits will be generated when the following conditions are present: the branch office address or effective date is missing or incomplete; the branch manager is not properly registered; the manager does not maintain an active registration in the state where the branch is located; or, the firm is not registered in the state where the branch is located.
The NASD has maintained the broker-dealer data base since January 1986, so the implementation of the broker-dealer phase of the system will not result in additional filing requirements; but it will reduce the volume of amendment mailings due to the centralized filing with the CRD on behalf of the NASD and the states.
Additional information regarding state participation in the September implementation of the broker-dealer phase of CRD will be published as it develops.
Questions concerning this notice can be directed to either Chris Goodwin, Assistant Director, or Maudese King, Manager, NASD Member Firm Registration Services, at (301) 738-6717.