Recent Changes to Branch and Small Office Requirements:Getting Out in the Neighborhood

The structure of the regulation of the securities industry continues to change to accommodate changes in customer demand and technological capabilities of the industry. As discussed in detail below, the National Association of Securities Dealers (NASD), the New York Stock Exchange (NYSE) and the North American Securities Administrators Association (NASAA) have proposed, and the Securities and Exchange Commission (SEC) has approved, a new and uniform definition of “branch office” (the “Uniform Definition”) and the transition to a centralized, CRD-based branch office application system, using a new Form BR. The new Form BR will allow member organizations to submit a single filing to simultaneously fulfill the branch office registration/approval requirements of the NASD, the NYSE and most states. And, in a more recent development, the SEC has approved the NYSE’s proposed Interpretation of its Rule 342 (concerning supervision and control of offices) to permit waiver of the otherwise normally required level of supervisory qualifications of resident branch office managers for “limited purposes offices” which have more than three registered representatives (RRs).

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Selling Away: You and Your RR Can Both Be Honest and Still Be Liable to Someone Who is Not

“Selling away”, as you know, occurs when an RR invests his client’s money without doing so at or through the brokerage firm at which he is employed. Although it occurs in all types of brokerage situations, it occurs most frequently in non-traditional, generally off-site situations. According to the NASD, selling away is the most frequently committed violation by off-site RRs. For example, RRs who also sell insurance products frequently operate in off-site locations, and selling away frequently occurs on the part of independent insurance agents registered only as Series 6 investment company and variable contract products representatives. These RRs are frequently targeted by issuers, promoters and marketing agents to sell variable contracts and promissory notes to their customers. In many instances these products constitute securities, but their promoters market them to RRs as non-securities products that do not have to be sold through the RR’s broker-dealer.

“Selling away”, also known as “private securities transactions”, is a violation by the RR of his obligation to submit to the supervision of his BD, and to allow it is a violation by the BD of its duty to supervise all securities transactions by the RR. “Selling away” is easy to do even without knowing it.

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Financing the Entrepreneur: Determining the Best Method for Your Client

Although the financing sources available to small business clients do not fit a logical pattern, some guidelines may be developed to assist the attorney to help his client seek and evaluate financing sources.

The optimum source and type of financing will vary with the nature of the client, the client’s present and future needs, the client’s stage of development and possible legal problems. An understanding of such variations may allow the attorney to protect the client from a harmful transaction, and will at least avoid wasting time and effort on inappropriate types and sources of financing.

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