Effective Date of Amendments to NASD Rule 3370 (Affirmative
Determination Requirements) Extended to April 1, 2004
NASD Notice to Members 04-08
National Association of Securities Dealers, Inc (NASD) is delaying the
effective date of amendments to Rule 3370 (Prompt Receipt and Delivery of
Securitiesthe "Affirmative Determination" Rule) approved by the SEC in
November 2003,1 until April 1, 2004. The amendments expand the scope of the affirmative
determination requirements to include orders received from broker/dealers that are not
members of NASD ("non-member broker/dealers"). The effective date of the
amendments originally was February 20, 2004.2 NASD understands that some members need to
make significant technological changes to their systems to comply with the new
requirements; therefore, NASD is extending the effective date to provide members with
additional time to make such changes.
Questions concerning this Notice may be directed to Gary L. Goldsholle, Associate General Counsel, Regulatory Policy and Oversight, NASD, at (202) 728-8104; or Patricia M. Albrecht, Assistant General Counsel, Regulatory Policy and Oversight, NASD, at (202) 728-8026.
As further detailed in Notice to Members 04-03, the SEC recently approved amendments to Rule 3370 to require that, prior to accepting a short sale order from a non-member broker/dealer, a member make an affirmative determination that the member will receive delivery of the security from the non-member broker/dealer or that the member can borrow the security on behalf of the non-member broker/dealer for delivery by the settlement date. In addition, the amendments provide exemptions for certain proprietary orders of a non-member broker/dealer if those proprietary orders meet the same conditions for exemptions applicable to proprietary orders of member firms, and the following two conditions are satisfied: (1) the non-member broker/dealer must be registered with the SEC; and (2) if using the market maker exemption, the non-member broker/dealer is registered or qualified as a market maker in the securities and is selling such securities in connection with bona fide market making.
As approved, the effective date of the amendments was February 20, 2004; however, NASD is delaying the effective date of these provisions until April 1, 2004. NASD understands that some members will need to make significant technological changes to their systems to comply with the new requirements. NASD believes that delaying the effective date of these amendments until April 1, 2004, will provide members the additional time necessary to make changes to their systems.
1 File No. SR-NASD-2001-85; SEC Release No. 34-48788 (Nov. 14, 2003); 68
F.R. 65978 (Nov. 24, 2003).
2 See Notice to Members 04-03 (January 2004).
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