NASD Submits Proposal on Nonelectronic Public Correspondence

Washington, DC, September 3, 1998 - The Securities and Exchange Commission recently published for comment a proposed amendment to NASD Rule 3010 relating to incoming nonelectronic correspondence. In April 1998, NASD Regulation, Inc. adopted other amendments to Rule 3010 regarding the supervision and review of correspondence. However, NASDR delayed the effectiveness of a provision that would have required review of all incoming nonelectronic correspondence at that time and again in July 1998. This proposal is intended to supplant the delayed provision. Comments on this proposal are due to the SEC no later than Thursday, September 24, 1998

The proposal would require NASD member firms to develop supervisory procedures that include review of incoming nonelectronic correspondence directed to registered representatives for purposes of properly identifying and handling customer complaints and funds. Under this proposal, where a member's office structure permits review of all incoming nonelectronic correspondence directed to registered representatives, members would be expected to designate a registered or associated person to open and review such correspondence. The designated person would not be supervised or under the control of the registered person whose correspondence is opened and reviewed.

When a member's office does not permit this arrangement, firms would have to employ alternative procedures reasonably designed to assure adequate handling of complaints and checks. Such procedures could include forwarding correspondence to another member office for weekly review, maintenance of a separate log for checks received and products sold that is forwarded weekly to the supervising branch, communications to clients that indicate that complaints may be sent directly to the member's compliance department and that provide them with the department's address and telephone number, and branch examination and verification that the procedures are being followed.