Brokers are getting a Valentine from the National Association of Securities Dealers.[@@]
The Washington-based group has approved a new rule interpretation that lets brokers use investment analysis tools such as Monte Carlo simulations in discussions with clients.
The interpretation, given in NASD Rule 2210, IM-2210-6, will take effect Feb. 14. The U.S. Securities and Exchange Commission gave its blessing to the self regulatory organization’s interpretation in September 2004.
Previously, NASD members could not make predictions regarding investments or investment strategies.
NASD members now can use analytical investment tools such as Monte Carlo simulations to come up with forecasts.
Traditionally, forecasters have used a “deterministic” approach that shows how a few scenarios involving changes in variables such as interest rates might affect an investment portfolio. In the past, forecasters often simplified their calculations by using a single, “non-moving” value for each variable.