July 5, 2005
The following electronic comment is sent on behalf of Joseph W. Mays, Jr.
NASD is proposing to amend 8310-2 based on NASD Rule 1015 decisions. Rules 1014 and 1017 involve membership applications and membership agreements. Both of these Rules (1014 & 1017) use the term “Associated Person”. This term is now being applied to individuals (or entities) that are not registered or employees of the broker-dealer they are only shareholders. These shareholders do not supervise, manage or direct the activities of the broker-dealer or are members of the board of directors. Both the NASD and SEC have managed to adjust or amend NASD Rules 1014 & 1017 to include the public audience, thereby stripping them of their constitutional rights. NASD Rules do not allow the 5th Amendment in their rules. Their Rules do not separate private or public ownership of broker-dealers using the term “Associated Person” When stock of a broker-dealer is sold to the public, they are not advised that they could lose t heir constitutional rights.
There are federal statutes on the books protecting confidentiality and privacy issues regarding individuals and entities. Therefore, the term “Associated Person” as defined by the NASD violates these Federal Statutes (and possibly State Statutes). The NASD is not above the law.
I believe Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 do not represent confidentiality or privacy protection as outlined above. Therefore, the releasing of information by the NASD regarding non-employees of the broker-dealer should not be approved.
The SEC is required to uphold Federal Statutes and not allow the NASD to circumvent our laws. An individual should not be stripped of his constitutional rights by owning stock in a private or public broker-dealer. The securities laws cannot be prejudiced against private vs. public broker-dealers. The NASD should amend or clarify their rule proposal to address the above issue.
Your comments would be greatly appreciated.
Joseph W. Mays, Jr.
Securities Consulting Group, Inc.