Respondents in a settled disciplinary action may submit a Corrective Action Statement and/or a Mitigation Statement to NASD Regulation. This article clarifies the NASD policies regarding such Statements.
A Letter of Acceptance, Waiver and Consent (AWC) permits a respondent in an NASD Regulation disciplinary action to settle the matter prior to the filing of a formal complaint. A Corrective Action Statement may be attached to the AWC, which is filed with the SEC and available to the public, provided such statement is: (1) limited to demonstrable steps taken to correct a problem associated with the disciplinary action; (2) generally no longer than 2-3 pages; and (3) contains the following legend:
This Corrective Action Statement is submitted by the Respondent. It does not constitute factual or legal findings by NASD Regulation, Inc., nor does it reflect the views of NASD Regulation, Inc., or its staff.
Separately, respondents may submit a Mitigation Statement for consideration by NASD Regulation and the National Adjudicatory Council. Generally, such Statements are used to describe mitigating circumstances surrounding the violation for the decision maker to consider in its review of the terms of a settlement. Unlike Corrective Action Statements, Mitigation Statements are not attached to the AWC or public order.
Respondents may also settle a matter after the complaint is filed by submitting an Offer of Settlement. While both Corrective Action and Mitigation Statements may be submitted to NASD Regulation in connection with Offers of Settlements, these Statements are not attached to the final Order Accepting the Offer of Settlement, which is filed with the SEC and available to the public.
NASD Regulation will not accept Corrective Action or Mitigation Statements that deny the allegations or are inconsistent with the findings in the settlement.
Questions about this article may be directed to Katherine A. Malfa, Director, Enforcement, NASD Regulation, Inc., at (202) 728-2853.
On October 19, 1998, the NASD announced an agreement-in-principle with EDS Corporation to create a strategic alliance, called the NasTech Alliance, to provide state-of-the-art technology services to NASD Regulation and to the NASD. The new alliance will provide the NASD and NASD Regulation with a technology capability to maintain a leadership role in the rapidly expanding securities marketplace, but will not manage the operations and technology of The Nasdaq Stock Market.
NasTech will be responsible for applications development and maintenance, Internet and intranet development, Web hosting, and distributed systems support, among other programs. In addition, NasTech will manage the NASD's ongoing vendor relationships. Over the next several months the NASD and EDS will evaluate the viability and the extent of the partnership, targeting a launch in the first quarter of 1999.
Combining the NASD's unique industry position and strategic technology vision with EDS's extensive reach and operational expertise, the NasTech Alliance will be one of the largest such alliances in the securities industry and the first in the exchange marketplace, realizing significant cost efficiencies in future years.
Recently, the U.S. Department of the Treasury (Treasury) allowed interested parties to register for the following two new mailing list notification pages via the Public Debt's Web Site:
Government Securities Market Regulation Area
In the government securities market regulation area, anyone signing up for the Auction Rule (Uniform Offering Circular) Amendments and Interpretations mailing list will receive an e-mail notification when Treasury issues any rule amendments or interpretations specifically related to 31 CFR Part 356. Those registering for the Government Securities Act Rule Amendments Interpretations and Exemptions mailing list will receive an e-mail whenever there are any new notices specifically related to 17 CFR Chapter IV.
Persons registering for the Notification of Calls for Large Position Reports mailing list will be notified by e-mail any time Treasury announces a call (test or actual) for large position reports. Large position notifications are for entities that may potentially have a reportable position of $2 billion or more in a particular Treasury security. Treasury advises market participants not to rely solely on their inclusion in this mailing list for notice of a call. As in the past, whenever Treasury announces a call, it will continue to issue a press release and a Federal Register notice, post information on its Web Site, and ask industry groups and regulators to notify their members.
The sign-up page for these regulatory issuances can be found at:
This page may also be accessed by going to the Public Debt's Web Site, selecting the "Government Securities Market Regulation" image, then choosing the "Sign up for our Government Securities Market Regulation mailing lists" option.
Treasury Securities Auction Area
Persons registering for the Auction Announcement Press Releases, Auction Results Press Releases, and Inflation-Indexed Security CPI Press Release mailing lists will receive an e-mail whenever a new related press release is issued. The sign-up page for these auction-related press releases is located at:
This same page may be accessed by going to the Public Debt's Web Site, selecting "auction information" in the paragraph of text relating to "T-bills, Notes and Bonds," then choosing the "Sign up for our Treasury Marketable Securities mailing lists" option.
Questions regarding the government securities market regulation mailing lists may be directed to the U.S. Department of Treasury, Government Securities Regulations staff, at (202) 219-3632. Questions regarding the auction information mailing lists may be directed to the U.S. Department of Treasury, Office of Financing, at (202) 219-3350.
NASD Regulation reminds all members to file Schedule I of Form X17A-5 by Wednesday, January 27, 1999, electronically via PC FOCUS. Members are required to make this filing regardless of their fiscal year end. Firms that engage in municipal securities activities must disclose income from such activities under the NASD Miscellaneous Information section on PC FOCUS.
Members encountering difficulty filing FOCUS reports electronically may refer to Appendix A—Error Messages and Appendix B—Troubleshooting in the PC FOCUS User Guide (Version 2.01). In addition, Appendix E—Schedule I of the Informational Guide contains information on common errors and error resolution for Schedule I specifically.
Questions regarding the information filed on Schedule I may be directed to the appropriate District Office. Questions concerning software, hardware, or the transmission of FOCUS filings may be directed to the NASD toll-free hotline at (800) 321-NASD.
On September 24, 1998, staff of the Market Regulation Department (Market Regulation) of NASD Regulation began making available quantitative reports for each member firm. The reports address compliance with trade reporting, firm quote, and best execution rules and regulations. The reports are provided to firms as a compliance aid to assist firms in ensuring that they are submitting transaction reports in a timely manner, handling SelectNet liability orders in compliance with the firm quote rule, providing best execution to customers, and, if necessary, taking appropriate measures to improve performance in these areas. Each report contains information for the previous calendar month and is available on the 24th of each month or the first business day after the 24th if that day falls on a weekend or holiday. The reports are available to view at www.nasdaqtrader.com. However, given the proprietary nature of the firm-specific reports,a firm must subscribe to the Proprietary Trading Data section of the Site to access any of the reports. For a detailed description of each of the reports and subscription information, please call Nasdaq Subscriber Services at (800) 777-5606. Although these reports are designed and intended to be a preventive compliance tool, the information contained in these reports may indicate the existence of rule violations that may be pursued by NASD Regulation staff.
Questions concerning the Trade Reporting report card may be directed to Patricia Casimates, Market Regulation, NASD Regulation, Inc., at (301) 590-6447. Questions concerning the Firm Quote Compliance or Best Execution report cards may be directed to Joe McDonald, Market Regulation, NASD Regulation, Inc., at (301) 212-3835.
The NASD Ombudsman Office provides a forum for member firms and their associated persons, public investors, staff members of the NASD and its subsidiaries, and issuers on The Nasdaq Stock Market and the Bulletin Board (collectively constituents) to voice their concerns of unfair practices or disparate treatment. The objective of the Ombudsman Office, as an independent, neutral, and confidential source of assistance, is to receive and address concerns and complaints from any source concerning the operations, enforcement, or other activities of the NASD, NASD Regulation, and Nasdaq. Where a structured dispute resolution and/or appellate process currently exists, the Ombudsman's role is limited to informing persons of the existence of the appropriate process for resolution and, if necessary, to monitor the outcome. The Ombudsman will assist all parties in identifying and evaluating options for positive actions, and will remain neutral in doing so. The Office reports to the NASD Board of Governors Audit Committee and to the NASD Chief Executive Officer and Chief Operating Officer.
The Ombudsman Office was created in response to a recommendation from the NASD Select Committee on Structure and Governance and ratified by the NASD Board of Governors Audit Committee. It has unrestricted access to all company functions, records, and personnel. The Ombudsman Office does not have direct authority over NASD personnel or the departments it reviews.
The Ombudsman Office, as designated neutral, has the responsibility of maintaining strict confidentiality concerning matters that are brought to its attention unless given permission to do otherwise. The only exception, at the sole discretion of the Ombudsman, is where a threat of serious physical harm to individuals appears imminent or a critical breach of security is probable. The Ombudsman will take all reasonable steps to protect any records and files pertaining to confidential discussions from inspection by all other persons, including management.
For more information, contact the NASD Ombudsman Office at:
1390 Piccard Drive
Rockville, MD 20850
Phone: (301) 212-2515
Toll-Free Number: (888) 700-0028
You may also find out about and contact the NASD Ombudsman Office via its Web Pages on the NASD's various Web Sites: www.nasd.com; www.nasdr.com.
NASD Regulation has extended the comment period to January 15, 1999, on whether some rules should be repealed as obsolete or amended to provide institutional customer exceptions. See NASD Notices to Members 98-81 for details.
Beginning January 1999, the primary method of publishing the Regulatory & Compliance Alert and Notices to Members will be via the Internet. To read these newsletters on-line, please visit the NASDR Web Site on a regular basis.
To place your name on an e-mail list that will alert you to new issues of these publications, go to the NASDR Web Site and click on the button on the Home Page that says "Subscribe To Our E-Mail Notifications." For those who still want a hard-copy edition, each Executive Representative will be eligible for one subscription to a hard-copy version of Notices to Members at cost, $15 per year. Each branch office will be eligible for one subscription to the hard-copy version of the Regulatory & Compliance Alert at cost, also $15 per year. Hard-copy versions of these publications can be purchased by calling NASD MediaSourceSM at (240) 386-4200.
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