NASD Notice to Members 02-34 SEC Approves Proposed Changes to Rule 3070 Concerning the Reporting of
Criminal Offenses by Members and Persons Associated with Members; Effective
Date: July 15, 2002
Executive Summary
On May 15, 2002, the Securities and Exchange Commission (SEC) approved
amendments to NASD Rule 3070, concerning the reporting of criminal offenses
by members and persons associated with members. Effective July 15, 2002, these
amendments will require the reporting of the following criminal offenses under
Rule 3070(a)(5): any felony; misdemeanors involving the purchase or sale of any
security, the taking of a false oath, the making of a false report, bribery, perjury,
burglary, larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent
concealment, embezzlement, fraudulent conversion, misappropriation of funds or
securities; a conspiracy to commit any of these offenses; or substantially
equivalent activity in a domestic, military, or foreign court.
The text of the amendment to Rule 3070 as provided in Attachment A becomes
effective on July 15, 2002.
Questions/Further Information
Questions concerning this Notice may be directed to Emily Gordy, Director,
Regulation Policy, at (202) 728-8070, or Shirley H. Weiss, Associate General
Counsel, at (202) 728-8844.
Discussion
Rule 3070, adopted in 1995, assists NASD in the timely identification and
investigation of problem members, branch offices, and registered representatives
that may pose heightened risks to public investors. Rule 3070 requires members
promptly to report to NASD the occurrence of 10 specified events and to file
quarterly statistical information concerning customer complaints.1 The reporting
requirements under Rule 3070 significantly parallel comparable provisions of
NYSE Rule 351 as well as the disclosure requirements of the Uniform
Application for Securities Industry Registration or Transfer (Form U-4). Rule
3070 exempts from its provisions any member subject to substantially similar
reporting requirements of another self-regulatory organization of which it is a
member.
To bring about greater consistency with NYSE Rule 351,2 as well as Questions
23A(1)3 and 23B(1)4 of the Form U-4, NASD has amended NASD Rule 3070 to
require the reporting of the following criminal offenses under Rule 3070(a)(5):
any felony; misdemeanors involving the purchase or sale of any security, the
taking of a false oath, the making of a false report, bribery, perjury, burglary,
larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment,
embezzlement, fraudulent conversion, misappropriation of funds or securities; a
conspiracy to commit any of these offenses; or substantially equivalent activity in
a domestic, military, or foreign court. Previously, Rule 3070(a)(5) required
members promptly to report to NASD indictments, convictions, guilty pleas, and
no contest pleas with respect to "any criminal offense other than traffic
violations."
Effective Date of Amendments
These amendments become effective on July 15, 2002.
Endnotes
1 For a complete list of the 10 reporting requirements, members should
review Rule 3070.
2 Amended Rule 3070(a)(5) is consistent with recent amendments to NYSE
Rule 351(a)(5) that require the reporting of criminal offenses to: any felony; or
any misdemeanor that involves the purchase or sale of any security, the taking of
a false oath, the making of a false report, bribery, perjury, burglary, larceny, theft,
robbery, extortion, forgery, counterfeiting, fraudulent concealment,
embezzlement, fraudulent conversion or misappropriation of funds or securities,
or substantially equivalent activity in a domestic, military, or foreign court.
3 Question 23A(1) of Form U-4 requires members and associated persons to
report "any felony."
4 Question 23B(1) of Form U-4 limits the scope of reportable misdemeanor
criminal events to misdemeanors involving investments or an investment-related
business, fraud, false statements or omissions, wrongful taking of property,
bribery, forgery, counterfeiting or extortion, or a conspiracy to commit any of
these offenses.
© 2002. NASD. All rights reserved. Notices to Members attempt to present
information to readers in a format that is easily understandable. However, please
be aware that, in case of any misunderstanding, the rule language prevails.
ATTACHMENT A
Text of Rule
New language is in {brackets}; deletions are in [brackets].
3000. RESPONSIBILITIES RELATING TO ASSOCIATED PERSONS,
EMPLOYEES, AND OTHERS' EMPLOYEES
* * *
Rule 3070. Reporting Requirements
(a) Each member shall promptly report to the Association whenever such member
or person associated with the member:
(1) through (4) No change.
{(5)} is indicted, or convicted of, or pleads guilty to, or pleads no contest to,
[any criminal offense (other than traffic violations)] {any felony; or any
misdemeanor that involves the purchase or sale of any security, the taking of a
false oath, the making of a false report, bribery, perjury, burglary, larceny, theft,
robbery, extortion, forgery, counterfeiting, fraudulent concealment,
embezzlement, fraudulent conversion, or misappropriation of funds, or securities,
or a conspiracy to commit any of these offenses, or substantially equivalent
activity in a domestic, military, or foreign court.} |
