SEC approves Rule 2342 Setting Forth Requirements for providing SIPC information to customers NASD Rule 2342 - which was approved May 10, 2007 –requires all members, unless they are excluded from SIPC membership and are not members or only transact business in investments that are not eligible from SIPC coverage, to advise all new customers, in writing, at the opening of an account that they may obtain information about SIPC – including the SIPC brochure – by contacting SIPC directly and provide them with SIPC’s Web site address and telephone number.  Members must also provide this same information, in writing, to all clients, at least once each year.  .  The effective date for this new rule is November 6, 2007.

Mark-Ups on Debt Securities IM-2440-2 was approved by the SEC on April 16, 2007, which requires broker/dealers to compute the mark-up (or mark-down) in a debt security transaction, excluding municipal securities, with a customer from the prevailing market price of that security.  The prevailing market price of a debt security is further defined as the broker-dealer’s contemporaneous cost – and in a sale – the broker-dealer’s contemporaneous proceeds, except when the broker/dealer has discretion. Where a BD has discretion, the new IM addresses procedures for determining the prevailing market price. Transactions in non-investment grade debt between BD and qualified institutional buyers (QIBs) are exempted from this requirement. The adoption of this IM also included the renumbering of IM-2440 to IM-2440-1. This new interpretation and the amendment to IM-2440 becomes effective July 5, 2007.

Corporate Debt Securities Effective June 4, 2007 the TRACE system was enhanced to accept reports of transactions in TRACE-eligible securities where the execution date is more than T+365 days old.  These transactions must now be reported electronically using the TRACE system.  Any reports that would relate to transactions that correct previously reported information are subject to these same requirements.

New Member Applications (NMA) NASD amended Rules 1012 and 1013 to now require applicants for membership to submit their applications electronically using the online form NMA. This requirement does not apply to continuing membership (1017) applications, which continue to be filed in paper with the Districts.

Trading Ahead of Customer Limit Orders IM-2110-2 prohibits a member from trading NMS stock (the term “exchange-listed security” was replaced with NMS stock) for its own account at a price that is equal to or better than an unexecuted customer limit order in the same security, unless the member immediately executes the customer limit order at the same – or better price. On February 26, 2007, the SEC approved an amendment to IM-2110-2 so that it will also apply to over-the counter equity securities.  The amendments were originally to become effective July 26, 2007; however the effective date has been delayed until November 26, 2007.  This extension is in response to requests by several firms to delay the effective date in light of other competing technological demands required by the implementation of Regulation NMS.