ACLI Will Fight NASDs New Definition Of Branch Office
The American Council of Life Insurers, Washington, is planning to challenge a new proposed rule issued last week by the National Association of Securities Dealers that would change the definition of “branch office” in a way that could impose substantial new costs on limited service broker-dealers affiliated with life insurance companies.
The proposed rule would alter the current function-based definition of branch office to a numerical one. Specifically, “branch office” would be defined as any location where one or more associated persons regularly conducts business.
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Carl B. Wilkerson, ACLIs chief counsel for securities and litigation, says the proposed new definition would have a disparate impact on insurance-affiliated broker-dealers.
Unlike securities, he says, which usually are sold from central locations, variable annuities and other insurance products often are sold in small offices that are widely dispersed geographically.
The numerical test, Wilkerson says, would bring a lot of small offices under the definition of branch office, subjecting them to new administrative and record-keeping requirements.
Moreover, Wilkerson says, the proposed rule change would represent a “windfall” for the NASD. Bringing countless small offices under the definition of “branch office,” he says, would greatly increase the NASDs fee income.