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September 16, 2005 at 08:00 PM
The U.S. Securities and Exchange Commission has approved a rule change that could force broker-dealers affiliated with life insurers to register more offices as branch offices.[@@]
The SEC has approved a proposal by the National Association of Securities Dealers Inc., Washington, to change the NASD’s definition of the term “branch office.”
The NASD, a securities industry self-regulatory organization, requires member firms to register branch offices with it and pay a registration fee to cover the NASD’s supervision costs for those offices.
The NASD hopes to begin requiring member firms to abide by the new definition in early 2006, a few months after it deploys the new branch office features of its Central Registration Depository system, according to a copy of the SEC order that appears today in the Federal Register.
The NASD filed the first version of the proposed rule change in July 2003 and the final version last month.
The NASD has been defining as “any location identified by any means to the public or customers as a location at which member conducts an investment banking or securities business.”
The old definition exempts certain types of satellite locations, such as locations identified on business cards or in advertisements, as long as the member firm also gives the telephone number and address of the branch office that supervises the satellite location.
The old NASD definition conflicts with the definitions used by the SEC and the New York Stock Exchange, and the NASD and the New York Stock Exchange have been working to come up with a single definition to increase the usefulness of the Central Registration Depository as a system for keeping track of branch offices and the reps associated with those offices, SEC officials write in a discussion of their order.
The NASD and New York Stock Exchange came up with definitions similar to the SEC definition, but the NASD left out a requirement that might have required member firms to register reps’ homes if the reps work in their homes at least 50 days a year.
The current version of the NASD definition leaves out the 50-day limit for reps’ use of homes as unregistered locations.
But reps might have to register their homes if they handle money or securities in their home offices, use their own electronic mail systems to communicate with their customers rather than the broker-dealers’ systems, or meet with customers in their homes.
The NASD exempts satellite locations other than homes if reps use those locations for fewer than 30 business days per year or effect fewer than 25 securities transactions at those locations per year.
