In part due to current market conditions and trends, more brokerage firms have been consolidating or otherwise restructuring their business operations, including selling their assets. Certain proposed changes in a firm's ownership, control or business operations require advance approval from NASD. In some instances, NASD has found proposed transactions, particularly when a firm seeks to transfer assets without liabilities, raise investor protection issues, especially when there are unpaid arbitration awards or pending arbitration claims. NASD policy currently prohibits members from using the membership rules to unfairly prejudice customer claims or awards.
To ensure that brokerage restructures do not negatively impact current and former investors, NASD has proposed several new provisions to its membership rules. The proposed amendments will:
- Expand NASD's authority to include review of any transfer involving a material amount of assets and/or revenues that contribute materially to earnings.
- Require the filing of an application with NASD for all transfers by non-NYSE selling members regardless of whether the acquiring firm is a NYSE member.
- Amend the membership rules to provide explicit authority allowing NASD to take into consideration unpaid arbitration awards and pending arbitration claims, as well as other adjudicated customer awards against a member when reviewing new and continuing member applications.
- Strengthen NASD's authority to consider an applicant's past behavior by requiring applicants to demonstrate that their application should be approved despite the presence of a regulatory history.
