NASD Ruling Delay to April 1, 2004
NASD Notice to Members 04-08
Effective Date of Amendments to NASD Rule 3370 (Affirmative
Determination Requirements) Extended to April 1, 2004
Executive Summary
NASD is delaying the effective date of amendments to Rule 3370 (Prompt
Receipt and Delivery of Securities—the "Affirmative Determination"
Rule) approved by the SEC in November 2003,1 until April 1, 2004. The
amendments expand the scope of the affirmative determination
requirements to include orders received from broker/dealers that are not
members of NASD ("non-member broker/dealers"). The effective date of
the amendments originally was February 20, 2004.2 NASD understands
that some members need to make significant technological changes to
their systems to comply with the new requirements; therefore, NASD is
extending the effective date to provide members with additional time to
make such changes.
Questions/Further Information
Questions concerning this Notice may be directed to Gary L. Goldsholle,
Associate General Counsel, Regulatory Policy and Oversight, NASD, at
(202) 728-8104; or Patricia M. Albrecht, Assistant General Counsel,
Regulatory Policy and Oversight, NASD, at (202) 728-8026.
Discussion
As further detailed in Notice to Members 04-03, the SEC recently
approved amendments to Rule 3370 to require that, prior to accepting a
short sale order from a non-member broker/dealer, a member make an
affirmative determination that the member will receive delivery of the
security from the non-member broker/dealer or that the member can
borrow the security on behalf of the non-member broker/dealer for
delivery by the settlement date. In addition, the amendments provide
exemptions for certain proprietary orders of a non-member broker/dealer
if those proprietary orders meet the same conditions for exemptions
applicable to proprietary orders of member firms, and the following two
conditions are satisfied: (1) the non-member broker/dealer must be
registered with the SEC; and (2) if using the market maker exemption, the
non-member broker/dealer is registered or qualified as a market maker in
the securities and is selling such securities in connection with bona fide
market making.
As approved, the effective date of the amendments was February 20, 2004.
However, NASD is delaying the effective date of these provisions until
April 1, 2004. NASD understands that some members will need to make
significant technological changes to their systems to comply with the new
requirements. NASD believes that delaying the effective date of these
amendments until April 1, 2004, will provide members the additional time
necessary to make changes to their systems.
Endnotes
1 File No. SR-NASD-2001-85; SEC Release No. 34-48788 (Nov.
14, 2003); 68 F.R. 65978 (Nov. 24, 2003).
2 See Notice to Members 04-03 (January 2004). |
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