Institute Files Comment Letter on NASDR Proposed Rule Amendments Regarding Review of Customer Correspondence

Washington, DC, May 12, 1998 - The Institute recently filed with the Securities and Exchange Commission a comment letter on the proposed amendment to National Association of Securities Dealers, Inc. Rule 3010 that would require NASD members to review all incoming nonelectronic correspondence directed to a registered representative and related to the member's securities or investment banking business.

The letter expresses concerns with this amendment, and recommends that it not be implemented. The letter states that this provision is unnecessary to protect investors given that members already must adopt detailed, comprehensive procedures regarding review and supervision of correspondence. Moreover, NASD rules require members to keep records of, and report to the NASD, all correspondence relating to customer complaints. Additionally, concerns over possible misappropriation of customers' funds or securities generally do not apply to NASD members that serve only as mutual fund underwriters, since mutual fund underwriters normally do not handle customer funds or securities. The letter suggests in a footnote that, if review of incoming written correspondence directed to registered representatives is deemed necessary, such review should be limited to correspondence directed to representatives that have a history of violations of SEC or NASD rules relating to the handling of customer funds or sales practices.