ARM comment Re NASD Rule 3010 g 2

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Informations

• Publié par: Phoim
• Nombre de lectures: 20
• Langue: English

Extrait

www.armgmnt.org via electronic mail January 6, 2004 Mr. Jonathan G. Katz Secretary United States Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 205490609 Re: FileNo. SRNASD2003104 Dear Mr. Katz: The Association of Registration Management (“ARM”) appreciates the opportunity to comment on proposed rule changes intended to bring about a uniform definition of “branch office” under NASD Rule 3010(g)(2). ARM applauds NASD’s efforts to formulate a uniform definition of a branch office with respect to industry rules and regulations regarding office registration and as well applauds the North American Securities Administrators Association’s efforts with respect to bringing about uniformity in this area. We are glad that NASD has eliminated the fiftyday residency rule (that would trigger the need to register a representative’s residence as a branch office); we are also mindful of the New York Stock Exchange’s insistence that this stipulation be maintained in any enacted rule.ARM, though, respectfully disagrees with the NYSE’s stance and hopes that the Exchange will follow suit and adopt the uniform definition currently proposed by NASD. Webelieve, along with others who have already provided commentary on this issue, that the rationale for registering residences as branch offices should be based on the types of activitiesconducted at locations and not on arbitrary criteria such as the number of days spent at the location.A firm holding any location out to the public would, however, subject such a location to registration requirements (both under current and proposed regulations) and ARM certainly is in agreement here.

We are aware that an existing interpretation to Exchange Rule 342.11 requires, in the instance of representatives working out of their homes on a parttime basis, the need for the representative’s firm to register the representative’s home as a branch office; as well, an argument could be made that a fiftyday trigger is less onerous that what currently exists today.While that might be true, ARM believes that today’s technology has had such a tremendous impact on the work environment that relaxing Exchange Rule 342.11 to a fiftyday trigger does not go far enough.Clearly, statistics would support the fact that working out of one’s home has become commonplace and is no longer perceived to be an extremely unusual or exceptional arrangement.Given today’s technology, as well as quality of life issues (e.g., childrearing constraints, accommodating those with disabilities or health care issues) that would enable or necessitate a representative to ocassionally work from home, any concerns that activity would take place in violation of existing regulatory framework should be ameliorated.With respect to the fiftyday trigger, ARM concurs with others in the industry that tracking time spent from home would impose an undue burden on member firms’ compliance departments and would prove to be a rather subjective rule to monitor and enforce, especially since it is common for registered representatives to spend time out of the office meeting with existing and prospective clients at various times and locations.We believe any concerns that the NYSE would have with respect to the handling of customer funds or securities as well as the use of electronic communication are legitimate concerns; however, they are not concerns that could be eliminated by registering a representative’s home as a branch office. Concerns about meeting with clients in a residential setting should not be an impediment to all agreeing to a uniform definition; already, representatives and investors routinely chat after trading hours (in residences, telephonically, social gatherings, etc.) or otherwise. Representativesand investors, for example, might live in the same neighborhood and maintain friendships outside of any existing business relationship. Nothing in this current environment would (or should) constitute any violation of industry rules so it is unclear why subjecting a residence to an office registration requirement would better serve the interest of investor protection and/or would assist in maintaining market integrity. In this regard, ARM believes that section 3010(g)(B)(ii) in NASD’s proposed uniform definition which states in part“…the associated person does not meet with customers at the location” is too restrictive. ARM is comfortable with registered representatives meeting clients on an occasional basis as outlined above; however, we don’t envision representativesroutinelywith clients during trading hours under the proposed meeting rules. ARMsuggests that the proposed language be modified to state“…the associated person does notregularlymeet with customers at the location”. Again, this would be a quality of life issue more than anything else where a representative and a client would be permitted to discuss investing opportunities and strategies well within the context of existing rules and regulations as relate to supervision, handling of customer funds, etc.The crux of this may come down to defining the phrase “engaging in securities activities”; ARM is of the opinion that a client/representative relationship in a residential or social setting doesn’t constitute activity that would require regulation above and beyond what is already appropriately in place.Again, we point out

that NASD sees no need for a fiftyday rule and would not envision any added regulatory benefit from such a rule. Should industry be compelled to register representative’s homes as branch offices, additional fees and costs would be borne by member firms with respect to industry registration and licensing, business licensing with municipalities, taxation, real estate, insurance, bonding and staffing (compliance department staffs and budgets would likely need to be increased in order address inspection and visitation issues) with no regulatory benefit. Finally, ARM agrees with NASD that the proposed rule change would most assuredly facilitate and streamline the branch office registration process by utilizing the Central Registration Depository (“CRD”).Doing so would provide an efficient and centralized method for members and associated persons to register branch office locations as required both by the selfregulatory organizations and states mandating branch office registration. Fordual NASD/NYSE member firms, the current practice of having to submit applications onto two separate systems (i.e., the Exchange’s Electronic Filing Platform and CRD) is an unnecessary duplication of efforts, timeconsuming and inefficient (the NYSE’s system, for example, takes upwards of four weeks for a branch office approval to be granted; as well, the Exchange already utilizes CRD for all other registration requirements). ARM hopes the Commission will be able reach a resolution with the involved self regulatory organizations in developing a uniform definition of a branch office which is acceptable to all parties—one that does not impose undue regulation or cost on industry. Sincerely, Mario DiTrapani President