NASD and NYSE regulators, which will soon merge, jointly released proposed guidance for broker-dealers to establish policies and procedures on electronic communications employees use to conduct business and to “take reasonable steps” to monitor such compliance.
The two securities self-regulatory organizations (SRO’s) stated that brokerage firms should have a supervisory system in place to make sure brokers are complying with all applicable rules when employing all types of electronic communications.
The SRO’s added that, once “reasonable” policies and procedures are in place, the firms would themselves decide what “additional supervisory policies and procedures are required to adequately supervise their business and manage the member’s reputational, financial, and litigation risk.” Unlike SRO rules, SRO “guidelines” do not require approval of the SEC.
The regulators addressed generally the use of weblogs and other electronic methods and also covered the review of certain e-communications by legal or compliance personnel. The release advised some type of compliance review of e-mails sent by a registered representatives, including as part of standard branch office inspections.
While its own guidelines are non-specific, these stressed that “vague language addressing these issues may leave room for unwanted individual interpretation,” adding that there should be “specific language explaining to employees the potential consequences of noncompliance.”
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