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May 31 2007 - Apr 10 2016Apr 11 2016 onwards

2340. Customer Account Statements

Past version: effective from May 31 2007 - Apr 10 2016.
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(a) General
Except as otherwise provided by paragraph (b), each general securities member shall, with a frequency of not less than once every calendar quarter, send a statement of account ("account statement") containing a description of any securities positions, money balances, or account activity to each customer whose account had a security position, money balance, or account activity during the period since the last such statement was sent to the customer. In addition, each general securities member shall include in the account statement a statement that advises the customer to report promptly any inaccuracy or discrepancy in that person's account to his or her brokerage firm. (In cases where the customer's account is serviced by both an introducing and clearing firm, each general securities member must include in the advisory a reference that such reports be made to both firms.) Such statement also shall advise the customer that any oral communications should be re-confirmed in writing to further protect the customer's rights, including rights under the Securities Investor Protection Act (SIPA).
(b) Delivery Versus Payment/Receive Versus Payment (DVP/RVP) Accounts
Quarterly account statements need not be sent to a customer pursuant to paragraph (a) of this Rule if:
(1) the customer's account is carried solely for the purpose of execution on a DVP/RVP basis;
(2) all transactions effected for the account are done on a DVP/RVP basis in conformity with Rule 11860;
(3) the account does not show security or money positions at the end of the quarter (provided, however that positions of a temporary nature, such as those arising from fails to receive or deliver, errors, questioned trades, dividend or bond interest entries and other similar transactions, shall not be deemed security or money positions for the purpose of this paragraph (b));
(4) the customer consents to the suspension of such statements in writing. The member must maintain such consents in a manner consistent with Rule 3110 and SEC Rule 17a-4;
(5) the member undertakes to provide any particular statement or statements to the customer promptly upon request; and
(6) the member undertakes to promptly reinstate the delivery of such statements to the customer upon request.
Nothing in this Rule shall be seen to qualify or condition the obligations of a member under SEC Rule 15c3-2 concerning quarterly notices of free credit balances on statements.
(c) DPP/REIT Securities
(1)(A) Voluntary Estimated Value
A general securities member may provide a per share estimated value for a direct participation program ("DPP") or real estate investment trust ("REIT") security on an account statement, provided the member meets the conditions of paragraphs (b)(2) and (3) below.
(B) Mandatory Estimated Value
If the annual report of a DPP or REIT includes a per share estimated value for a DPP or REIT security that is held in the customer's account or included on the customer's account statement, a general securities member must include an estimated value from the annual report, an independent valuation service, or any other source, in the first account statement issued by the member thereafter, provided that the member meets the conditions of paragraphs (b)(2) and (3) below.
(2) A member may only provide a per share estimated value for a DPP or REIT security on an account statement if the estimated value has been developed from data that is as of a date no more than 18 months prior to the date that the statement is issued.
(3) If an account statement provides an estimated value for a DPP or REIT security, it must include:
(A) a brief description of the estimated value, its source, and the method by which it was developed; and
(B) disclosure that DPP or REIT securities are generally illiquid, and that the estimated value may not be realized when the investor seeks to liquidate the security.
(4) Notwithstanding the requirement in paragraph (b)(1)(B), a member must refrain from including a per share estimated value for a DPP or REIT security on an account statement if the member can demonstrate the value was inaccurate as of the date of the valuation or is no longer accurate as a result of a material change in the operations or assets of the program or trust.
(5) If an account statement does not provide an estimated value for a DPP or REIT security, it must include disclosure that:
(A) DPP or REIT securities are generally illiquid;
(B) the value of the security will be different than its purchase price; and
(C) if applicable, that accurate valuation information is not available.
(d) Definitions
For purposes of this Rule, the following terms will have the stated meanings:
(1) "account activity" includes, but is not limited to, purchases, sales, interest credits or debits, charges or credits, dividend payments, transfer activity, securities receipts or deliveries, and/or journal entries relating to securities or funds in the possession or control of the member.
(2) a "general securities member" refers to any member that conducts a general securities business and is required to calculate its net capital pursuant to the provisions of SEC Rule 15c3-1(a). Notwithstanding the foregoing definition, a member that does not carry customer accounts and does not hold customer funds or securities is exempt from the provisions of this section.
(3) "direct participation program" or "direct participation program security" refers to the publicly issued equity securities of a direct participation program as defined in Rule 2810 (including limited liability companies), but does not include securities on deposit in a registered securities depository and settled regular way, securities listed on a national securities exchange, or any program registered as a commodity pool with the Commodities Futures Trading Commission.
(4) "real estate investment trust" or "real estate investment trust security" refers to the publicly issued equity securities of a real estate investment trust as defined in Section 856 of the Internal Revenue Code, but does not include securities on deposit in a registered securities depository and settled regular way or securities listed on a national securities exchange.
(5) "annual report" means the most recent annual report of the DPP or REIT distributed to investors pursuant Section 13(a) of the Act.
(6) a "DVP/RVP account" is an arrangement whereby payment for securities purchased is made to the selling customer's agent and/or delivery of securities sold is made to the buying customer's agent in exchange for payment at time of settlement, usually in the form of cash.
(e) Exemptions
Pursuant to the Rule 9600 Series, NASD may exempt any member from the provisions of this Rule for good cause shown.
Amended by SR-NASD-2004-171 eff. May 31, 2007.
Amended by SR-NASD-2006-128 eff. Dec. 5, 2006.
Amended by SR-NASD-2006-066 eff. Nov. 22, 2006.
Amended by SR-NASD-2005-087 eff. Aug. 1, 2006.
Amended by SR-NASD-2003-36 eff. March 12, 2003.
Amended by SR-NASD-2000-13 eff. April 16, 2001.
Adopted by SR-NASD-92-29 eff. Jan. 31, 1993.

Selected Notices: 92-30, 92-60, 94-96, 97-14, 01-08, 06-60, 06-68, 06-72.

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