A rule change in 2004 made a number of supervisory changes. A significant change was that only a person senior to or “otherwise independent” of a producing manager may conduct the producing manager’s day-to-day supervisory reviews. However, Rule 3012 provides an exception for any member firm that is so limited in size and resources (the “limited size and resources” exception) that the member does not have sufficient senior or “otherwise independent” persons who can conduct the required supervisory reviews. In such situations, a principal who is sufficiently knowledgeable of the member’s supervisory control procedures may conduct the required supervisory reviews. Firms using that exemption are required to notify the NASD of the intended use of the exempton.
However, the electronic notification system was not in place until now. Members who have been relying on the exception must notify the NASD by March 16, 2006 (30 days after the notification system is active).
If your small firm has questions regarding the new rules and the reporting provisions, feel free to contact me at astarita@seclaw.com
