A Practitioner's Guide for Entrance to Nasd Membership
| Publication year | 1985 |
| Pages | 1967 |
1985, November, Pg. 1967. A Practitioner's Guide for Entrance to NASD Membership
With the ever-expanding business methods that fall within the definition of a "broker/dealer," attorneys are more frequently faced with representation of clients seeking membership in the National Association of Securities Dealers, Inc. ("NASD"). NASD is the self-regulatory organization of the securities industry and is responsible for the regulation of the over-the-counter securities market.
NASD was established under the authority granted by the 1938 Maloney Act amendments to the Securities Exchange Act of 1934. The principle behind the 1938 legislation is that of cooperative regulation under which voluntary associations of broker-dealers regulate themselves. They are overseen by the Securities and Exchange Commission ("SEC"). NASD is the only securities association to have been established under the legislation. Today, its members comprise virtually all the broker-dealers in this country doing securities business with the public.
Although NASD offers a broad opportunity for admission to membership, certain persons and entities are excluded from becoming an NASD member or from associating with a member. If a member firm employs or otherwise associates itself with a disqualified or ineligible person, such firm would itself be ineligible for membership or, if already a member, subject to disqualification from membership.
A person is excluded from membership if he or she:
1. Has been or is expelled or suspended from membership or participation in, or banned or suspended from being associated with a member of any self-regulatory organization;
2. Is subject to an order of the SEC denying, suspending or revoking registration as a broker, dealer, or municipal securities dealers (including a bank department or division of a bank);
3. By his or her conduct while associated with a broker, dealer, or municipal securities dealers (including a bank, department or division of a bank), has been found to be a cause of any effective suspension, expulsion or order of the character described above;
4. Has been associated with him or her, any person who is known or in the exercise of reasonable care should be known to him or her or to be a person described above;
5. Has willfully made or has cause to be made on the application for membership in the NASD, or to become associated with a member of the NASD, or in any proceeding before the NASD, any statement which was at the time, and in light of the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in such application, report, or proceeding any material fact which is required to be stated therein;
6. Has been convicted within ten years preceding within the filing of the application for membership in the NASD, or to become associated with a member of the NASD or at any time thereafter, of any felony or misdemeanor which:
a) Involves the purchase or sale of any security, the taking of a false oath, the making of a false report, bribery, perjury, or conspiracy to commit such an offense;
b) Arises out of the conduct of the business of a broker, dealer, municipal securities dealers, investment advisor, bank, insurance company, or fiduciary;
c) Involves larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or...
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