ICI Supports NASD/NYSE Guidance on Electronic Communications

Washington, DC, July 16, 2007 - NASD and NYSE joint guidance will provide much-needed regulatory clarity regarding the use of electronic communications by securities industry firms.

Background
Technological innovations have created new challenges for securities firms attempting to establish adequate supervisory systems and procedures related to electronic correspondence with the public concerning the solicitation or execution of securities transactions.

As a result, NASD and NYSE issued a joint request for public comment on proposed guidance setting forth principles for their members to consider when developing supervisory systems and procedures. Under the guidance, members generally could decide, by employing risk-based principles, the extent to which the review of internal and external electronic communications is necessary.

ICI Position
In a July 12 comment letter, ICI supported the adoption of the NASD/NYSE joint guidance, noting that it should help resolve some uncertainty in the securities industry resulting from a recent enforcement proceeding involving a broker-dealer's failure to reasonably supervise salespersons' electronic communications. In particular, ICI supported the "technology neutral" approach employed in the guidance, which it believes will benefit firms as they consider how to deploy and accommodate new technologies into their supervisory policies and procedures.

ICI made a number of specific recommendations to clarify the guidance in its submission.

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