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Those proposed amendments were in response to the failures of several government securities dealers which caused substantial harm to public investors through fraudulent prnctiens.
The proposal included amendments to the Commission's net capital rule, securities count and recordkeeping rules and customer protection rule. Subsequently, Congress enacted the Government Securities Act of 1986 ("CSA").
which authorized the Department of the Treasury ('Treasury") to adopt financial responsibility and customer protection rules for all brokers and dealers of U. government securities, including those firms currently registered with the Commission.
The Treasury has since adopted rules that, in large part, incorporate existing Commission financial responsibility rules.
*Other conditions may be included which have been set forth in the offering document.
*If the amount is significant, consideration should be given to disclosing such potential purchases as a risk factor.
* * * * * The attached amendments to Schedule C to the NASD By-Laws have been approved by the NASD Board of Governors and filed for approval with the Securities and Exchange Commission.
Registration in this category alone will not allow a representative to transact a member's business in municipal securities, direct participation programs, redeemable securities of companies registered under the Investment Company Act of 1940, variable contracts, or options.
A representative seeking to transact business in these latter products must register in one or more of the NASD's other limited representative categories, or as a General Securities Registered Representative.
Paragraphs A through D following are alternative provisions, one or more of which may be included in the Underwriting and Selected Dealer Agreements depending on the structure of the distribution and the internal supervisory review procedures of participating broker-dealers.
Under SEC staff interpretation of Rule 15c2-4, the procedure for transmittal of purchaser payments to the escrow agent for deposit in an offering of direct participation program securities may be accomplished by one of several methods depending on whether: (1) pursuant to a soliciting broker-dealer's internal supervisory procedures, internal supervisory review is conducted at the same location at which subscription documents and checks are received from purchasers; or (2) internal supervisory review is conducted at a different location from that which receives the subscription documents and checks from purchasers; or (3) a "processing broker-dealer," whose responsibilities in the offering include reviewing investor suitability, processing, and documentation of subscriptions and investor funds received, is involved in the distribution process. the Escrow Agent by noon of the second business day after the General Partner receives the subscription documents for purposes of a suitability determination, which documents were forwarded to the General Partner by noon of the next business day following receipt of the check by the Selected Dealer. the Escrow Agent or the Processing Broker-Dealer by the end of the next business day following receipt where internal supervisory review is conducted at the same location at which subscription documents and checks are received and thereafter transmitted to the Escrow Agent by the Processing Broker-Dealer by the end of the second business day following receipt by the Processing Broker-Dealer. the Final Review Office by the end of the next business day following receipt where internal supervisory review is conducted at a different location at which subscription documents and checks are received, and thereafter transmitted to the Escrow Agent or the Processing Broker-Dealer by the Final Review Office by the end of the next business day following receipt by the Final Review Office and thereafter transmitted to the Escrow Agent by the end of the second business day following receipt by the Processing Broker-Dealer.
The amendments further require registered broker-dealers to maintain possession or control of securities subject to hold in custody repurchase agreements, except that possession or control during the trading day is not required if certain conditions are met.