[Federal Register Volume 69, Number 12 (Tuesday, January 20, 2004)]
[Notices]
[Pages 2801-2805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1079]



[[Page 2801]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49055; File No. SR-NASD-2003-131]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change, and Notice of 
Filing and Order Granting Accelerated Approval to Amendment No. 1 
Relating to Proposed Amendments to NASD's Telemarketing Rules to 
Require Members To Participate in the National Do-Not-Call Registry

January 12, 2004.

I. Introduction

    On August, 18, 2003, the National Association of Securities 
Dealers, Inc. (``NASD''), filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change relating to the NASD's adoption 
of telemarketing rules to require its members to participate in the 
national do-not-call registry. The proposed rule change was published 
for comment in the Federal Register on August 27, 2003.\3\ On December 
18, 2003, the NASD submitted Amendment No. 1 to the proposed rule 
change.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission published the proposed rule changes filed by 
the NASD and the MSRB simultaneously. See Securities Exchange Act 
Release Nos. 48390 (August 22, 2003), 68 FR 51613 (August 27, 2003) 
(SR-NASD-2003-131); 48389 (August 22, 2003), 68 FR 51609 (August 27, 
2003) (SR-MSRB-2003-07).
    \4\ See letter from Brian J. Woldow, Attorney, NASD to Katherine 
A. England, Assistant Director, Division of Market Regulation, 
Commission, dated December 17, 2003 (``Amendment No. 1'').
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    The Commission received five comment letters on the proposed rule 
change.\5\ The text of proposed Amendment No. 1 is below. Additions 
from the original filing are in italics; deletions are in [brackets].
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    \5\ See letters from Ted F. Angus, V.P. and Senior Corporate 
Counsel for RetailBrokerage, Charles Schwab, to Mr. Jonathan G. 
Katz, Secretary, Commission, dated September 17, 2003, (``Schwab 
Letter''); James Y. Chin, A.V.P., Director and Counsel, State 
Government Affairs & Staff Advisor to the State Telemarketing 
Subcommittee, Securities Industry Association, to Mr. Jonathan G. 
Katz, Secretary, Commission, dated September 17, 2003, (``SIA 
Letter''); Carl B. Wilkerson, Chief Counsel, Securities & 
Litigation, American Council of Life Insurers, to Jonathan G. Katz, 
Secretary, Commission, dated September 17, 2003, (``ACLI Letter''); 
Kevin S. Thompson, V.P., Deputy General Counsel, CUNA Mutual Group, 
to Jonathan G. Katz, Secretary, Commission, dated September 23, 
2003, (``CUNA Letter''); Richard M. Whiting, Executive Director and 
General Counsel, The Financial Services Roundtable, to Mr. Jonathan 
G. Katz, Secretary, Commission, dated September 25, 2003, (``FSR 
Letter'').
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* * * * *

2200. Communications With the Public

* * * * *

221[1]2. Telemarketing

    (a)-(f) (No Change).
    (g) Definitions
    (1) Established business relationship
    (A) An established business relationship exists between a member 
and a person if:
    (i) the person has made a financial transaction or has a security 
position, a money balance, or account activity with the member or at a 
clearing firm that provides clearing services to such member within the 
previous 18 months immediately preceding the date of the telemarketing 
call; [or]
    (ii) the member is the broker/dealer of record for an account of 
the person within the previous 18 months immediately preceding the date 
of the telemarketing call; or;
    [(ii)](iii) the person has contacted the member to inquire about a 
product or service offered by the member within the previous three 
months immediately preceding the date of the telemarketing call.
    (B) A person's established business relationship with a member does 
not extend to the member's affiliated entities unless the person would 
reasonably expect them to be included. Similarly, a person's 
established business relationship with a member's affiliate does not 
extend to the member unless the person would reasonably expect the 
member to be included.
    (2)-(3) (No Change).
    (4) the term ``account activity'' shall include, but not be limited 
to, purchases, sales, interest credits or debits, charges or credits, 
dividend payments, transfer activity, securities receipts or 
deliveries, and/or journal entries relating to securities or funds in 
the possession or control of the member.
    (5) the term ``broker/dealer of record'' refers to the broker/
dealer identified on a customer's account application for accounts held 
directly at a mutual fund or variable insurance product issuer.
* * * * *

II. Description

A. General

    The Federal Trade Commission (``FTC'') and the Federal 
Communications Commission (``FCC'') established requirements for 
sellers and telemarketers to participate in a national do-not-call 
registry.\6\ Since June 2003, consumers have been able to enter their 
home and mobile telephone numbers into the national do-not-call 
registry, which is maintained by the FTC. Under rules of the FTC and 
FCC, sellers and telemarketers generally are prohibited from making 
telephone solicitations to consumers whose numbers are listed in the 
national do-not-call registry.
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    \6\ Rules and Regulations Implementing the Telephone Consumer 
Protection Act of 1991 (``TCPA''), FCC 03-153, adopted June 26, 
2003.
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    On July 2, 2003, the SEC requested that the NASD amend its 
telemarketing rules to include a requirement for its members to 
participate in the national do-not-call registry.\7\ Because broker/
dealers and banks are subject to the FCC's jurisdiction, the NASD 
modeled its rules after the FCC, specifically tailoring the rules to 
broker/dealers and the securities industry.\8\
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    \7\ The Telemarketing and Consumer Fraud and Abuse Prevention 
Act of 1994 requires the Commission to promulgate telemarketing 
rules substantially similar to those of the FTC or direct self-
regulatory organizations to do so, unless the Commission determines 
that such rules are not in the interest of investor protection. 15 
U.S.C. 6102(d) (2003).
    \8\ See The Do-Not-Call Implementation Act, 108 Pub. L. 10, 117 
Stat. 557 (Mar. 11, 2003).
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    The NASD submitted a proposed rule change to amend NASD Rule 
2211,\9\ to implement rules that prohibit its members from making 
telemarketing calls to people who have registered on the FTC's national 
do-not-call registry.\10\ The proposal retains the requirement that 
members make their a telemarketing calls only during certain times of 
day (8 a.m. to 9 p.m. local time at the called party's location) and a 
restriction against making calls to persons who have requested to be on 
a firm-specific do-not-call list.\11\
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    \9\ The Commission notes that, in Amendment No. 1, the NASD 
changed the numbering of NASD Rule 2211 to NASD Rule 2212. 
Accordingly, unless otherwise specified, this notice generally 
references proposed NASD Rule 2212, as amended.
    \10\ See proposed NASD Rule 2212(a)(3).
    \11\ See proposed NASD Rule 2212(a)(1)&(2).
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B. Exceptions

    The NASD currently provides its members with an ``existing 
customer'' exception to its requirement that members make their a 
telemarketing calls only during certain times of day (8 a.m. to 9 p.m. 
local time at the called party's location) and to its requirement that 
members provide certain information about the caller during the course 
of the telephone conversation.\12\ The proposed rule change would 
replace the ``existing customer'' exception with an ``established 
business relationship'' exception, a ``prior

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express invitation or permission'' exception and a ``personal 
relationship exception.''\13\
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    \12\ See NASD Rule 2211(c)&(d).
    \13\ See proposed NASD Rule 2212(b).
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    As originally proposed, the established business relationship 
exception would have enabled NASD members to make a telephone 
solicitation as long as the call's recipient had made a financial 
transaction with the member within 18 months preceding the date of the 
telemarketing call, or if the recipient had contacted the member to 
inquire about a product or service offered by the member within the 
three months preceding the date of the telemarketing call.\14\ The 
proposed established business relationship exception would not provide 
an exception for those individuals who have requested to be put on a 
member's firm-specific do-not-call list or from the time-of-day 
restrictions.
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    \14\ See original proposed NASD Rule 2211(g)(1)(A).
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    The second exception to the national do-not-call rules pertains to 
those persons from whom the member has obtained prior express written 
invitation or permission to make a telemarketing call.\15\ The final 
exception pertains to those persons with whom an associated person of a 
member has a ``personal relationship.''\16\
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    \15\ See proposed NASD Rule 2212(b)(2).
    \16\ See proposed NASD Rule 2212(b)(3).
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C. Telemarketing Procedures

    The NASD also proposed that its members must institute certain 
procedures related to do-not-call lists. As proposed, these procedures 
must include requirements to: have a written policy for maintaining a 
do-not-call list, train personnel engaged in telemarketing in the 
existence and use of the do-not-call list, record and disclose requests 
from a person to be added to the member's do-not-call list, and have 
the member provide the called party with the name of the individual 
caller, the name of the member, a telephone number or address at which 
the member may be contacted, and that the purpose of the call is to 
solicit the purchase of securities or related services.\17\ The 
proposed rules clarify that, absent a specific request, a person's do-
not-call request would apply to the member making a call, but not an 
affiliated entity of such a member unless the person would expect such 
an affiliated entity to be included, given the identification of the 
caller and the product being advertised.\18\ Further, the NASD proposed 
that members must maintain a record of a caller's request to receive no 
further telemarketing calls and must honor that request for a period of 
five years.\19\
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    \17\ See proposed NASD Rule 2212(d)(1)-(d)(4).
    \18\ See proposed NASD Rule 2212(d)(5).
    \19\ See proposed NASD Rule 2212(d)(6).
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D. Safe Harbor

    In addition to proposing certain baseline procedures that members 
must follow, the NASD proposed a ``safe harbor'' under which a member 
would not be liable for calling a person on the national do-not-call 
registry if that call is the result of an error and if the 
telemarketer's routine business practice meets certain specified 
standards.\20\ In order to benefit from this safe harbor the member 
must establish and implement written procedures to comply with the 
national do-not-call rules, train its personnel in those procedures, 
maintain a list of telephone numbers that the member may not contact, 
and use a process to prevent telephone solicitations to any telephone 
number that appears on any national do-not-call registry, including a 
version of the list obtained from the administrator.
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    \20\ See proposed NASD Rule 2212(c).
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E. Miscellaneous

    The NASD proposed that the applicability of the telemarketing and 
telephone solicitation restrictions and exceptions would extend to 
wireless telephone subscribers.\21\ Further, the NASD proposed that if 
a member uses another entity to perform telemarketing services on its 
behalf, the member remains responsible for ensuring compliance with all 
provisions contained in proposed NASD Rule 2212.\22\
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    \21\ See proposed NASD Rule 2212(e).
    \22\ See proposed NASD Rule 2212(f).
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III. Summary of Comments

    The commission received five comment letters addressing the 
proposed rule change.\23\ All five letters expressed concerns with the 
NASD's proposed amendments to NASD Rule 2212.
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    \23\ See supra note 5.
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A. Established Business Relationship

    In general, the five commenters believe that the proposed rule 
change, as proposed in the original filing, would restrict the ability 
of member firms to contact their existing customers.\24\ The 
commenters' primary concern relates to the NASD's proposed definition 
of an ``established business relationship'' exception.\25\ The 
commenters generally stated the NASD's proposed version of the 
established business relationship exception, which is created when a 
customer has ``effected a securities transaction or deposited funds or 
securities with the member'' is too limited in scope and appears 
inconsistent with the TCPA and FCC Rules.
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    \24\ See ACLI Letter, at 3-4; Charles Schwab Letter, at 4; CUNA 
Letter, at 2; FSR Letter, at 2-3; SIA Letter, at 4.
    \25\ Id.
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    The established business relationship exclusion, under the FCC's 
amendment to the TCPA, provides that formation of an existing 
relationship involves a voluntary two-way communication ``with or 
without an exchange of consideration.''\26\ By limiting the scope of 
the established business relationship exclusion, the commenters believe 
that the proposed rule change restricts opportunities for both broker-
dealers and customers and may preclude member firms from fulfilling 
their account monitoring responsibilities.\27\
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    \26\ 47 CFR 64.1200(f)(3).
    \27\ See FSR Letter, at 2.
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    In addition, commenters expressed concerns that changing the 
interpretation from a customer that ``carries an account'' to requiring 
a ``financial transaction'' within the previous eighteen months imposes 
difficult compliance issues, increases confusion, and generally 
restricts the ability of broker-dealers to contact their customers. 
These commenters believe the change undermines the broker-client 
relationship. In addition, some commenters claimed that narrowing the 
scope of existing customers for the established business relationship 
exception would force broker-dealers to implement costly system changes 
that distinguish among their account holders.\28\ As a whole, the 
commenters assert that the NASD is setting forth a new concept that was 
not included in the FCC Rules under the amended TCPA.\29\
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    \28\ FSR Letter at 4; Schwab Letter, at 5; SIA Letter, at 2.
    \29\ See Schwab Letter; SIA Letter; ACLI Letter; CUNA Letter; 
FSR Letter.
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    All five commenters believe that the NASD's definition of an 
established business relationship is too narrow and omits various 
situations under which a broker/dealer may need to contact its 
customers.\30\ For example, one commenter believes that the definition 
of established business relationship does not properly accommodate the 
interests of broker/dealers distributing variable life insurance and 
variable annuities.\31\ The same commenter states that variable life 
insurance and annuity contracts are long term accumulation

[[Page 2803]]

products necessitating long-term business relationships with 
customers.\32\ Three commenters state that the proposed definition of 
an established business relationship is significantly narrower than the 
NASD's definition of existing customer, which is used for NASD's 
existing telemarketing rules and the FCC's and FTC's definition of 
established business relationship.\33\ Two commenters also believe that 
an established business relationship generally should exist when a 
customer is an account holder at a member firm.\34\ Charles Schwab 
states that the proposed rule should permit a member to win back a 
customer's account.\35\
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    \30\ See ACLI Letter, at 3-4; Schwab Letter, at 4; CUNA Letter, 
at 2; FSR Letter, at 2-3; and SIA Letter, at 4.
    \31\ ACLI Letter, at 2-4.
    \32\ ACLI Letter, at 3.
    \33\ See SIA Letter, at 3-4; Charles Schwab Letter at 2-4; and 
FSR Letter at 2-3.
    \34\ See SIA Letter at 3; and Schwab Letter at 3.
    \35\ See Schwab Letter, at 5. The FCC has stated, ``a consumer 
who once had telephone service with a particular carrier or a 
subscription with a particular newspaper could expect to receive a 
call from those entities in an effort to `win back' or `renew' that 
consumer's business within eighteen (18) months.'' 68 FR 44144, 
44158 (July 25, 2003).
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    The commenters request a review of the proposal with consideration 
of the wide array of business activities of all member firms. One 
commenter stated that the statutory 21-day comment period was 
insufficient to address the issues raised by this proposed rule 
change.\36\ Most commenters urged the NASD to revise the proposed rule 
change by expanding the definition of ``established business 
relationship'' to accommodate an effective means for member firms to 
deliver products and services to customers.\37\
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    \36\ See ACLI Letter, at 5.
    \37\ See ACLI Letter, at 5; SIA Letter, at 4; CUNA Letter, at 2; 
and FSR Letter, at 3.
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B. Networking Agreements

    One commenter stated that the proposed definition of established 
business relationship does not properly provide for networking 
relationships between different entities.\38\ That commenter believes 
that if a person maintains an account at a bank, the person should be 
viewed as having an established business relationship with that bank's 
networking broker/dealer.
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    \38\ See CUNA Letter at 2.
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C. The Prior Express Written Consent Exception

    As described above, NASD's proposed rule contains an exemption from 
the do-not-call provisions if a consumer has provided consent in 
writing to be called by the firm.\39\ One commenter believes that 
NASD's rule is inconsistent with the FTC and FCC rules in that it 
requires ``written'' consent.\40\
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    \39\ See proposed NASD Rule 2212(b)(2).
    \40\ See FSR Letter at 4-5.
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IV. Amendment No. 1

A. Established Business Relationship

    In its letter included within Amendment No. 1, NASD noted that 
proposed NASD Rule 2212 would restrict only ``telephone 
solicitations,'' which would be defined as ``the initiation of a 
telephone call or message for the purpose of encouraging the purchase 
or rental of, or investment in, property, goods, or services, which is 
transmitted to any person.'' Accordingly, under the original proposed 
definition, the NASD interpreted a telephone call to a customer 
concerning a margin call or similar administrative event would not 
constitute a telephone solicitation.
    In response to commenters' concerns about the narrow scope of the 
established business relationship exception, the NASD stated that a 
member may, at times, be compelled to contact a customer to satisfy the 
member's attendant agency obligations, including situations where 
market swings, interest rate changes, new tax laws, or specific 
industry or company news may necessitate a broker contacting his or her 
customer.
    In addition, the NASD proposed two changes to the definition of an 
``established business relationship.'' The first change to the 
definition would encompass situations where the person has a security 
position, a money balance, or account activity at a clearing firm on 
behalf of such member within the previous 18 months. The second change 
to the definition would include situations where a member was the 
``broker/dealer of record'' for an account of a person within the 18 
months immediately preceding the date of the telemarketing call. Both 
definitions of established business relationship continue for 18 months 
after a triggering event, thus providing an opportunity for a firm to 
win back a customer.
    Moreover, the NASD noted that the proposed rule change cannot 
assure members that compliance with the proposed NASD Rule 2212 ensures 
compliance with FCC rules because members also must comply with the 
telemarketing rules of the FCC and any FCC interpretations of those 
rules.

B. Networking Agreements

    In response to one commenter's concerns with respect to networking 
agreements, the NASD stated that it did not agree with the commenter's 
view on the scope of a member's established business relationship with 
banks' networking broker/dealer. The NASD stated that it believed that 
the FCC and FTC rules concerning ``related parties'' were clear in that 
a person's established business relationship with a member does not 
extend to the member's affiliated entities unless the person would 
reasonably expect them to be included. The NASD stated that it 
similarly designed its established business relationship exception to 
not extend to the member unless the person receiving the call would 
reasonably expect the member to be included as a related party. The 
NASD stated that it does believe that a networking arrangement, which 
is formed by contract and that also may be terminated by a bank under 
such contract, meets the threshold intended by the FCC and FTC rules. 
In addition, it stated that it does not believe that a customer of the 
bank that has not made a financial transaction with a broker/dealer 
would reasonably expect to be contacted by such broker/dealer.

C. Prior Express Written Consent Exception

    In response to one commenter's concern about the need for the prior 
express consent to be in writing, the NASD stated that it interpreted 
the FCC and FTC rules to require prior written consent in order for an 
exception to the prohibition against calling the registrants on the 
national do-not-call registry to apply. The NASD noted that the FCC 
rule states that a person or entity shall not be held liable for 
violating the national do-not-call registry prohibition if ``[i]t has 
obtained the subscriber's prior express invitation or permission. Such 
permission must be evidenced by a signed, written agreement between the 
consumer and seller which states that the consumer agrees to be 
contacted by this seller and includes the telephone number to which the 
calls may be placed.''\41\ The NASD stated that the FTC rule also 
requires prior express written notice.\42\ Moreover, the NASD believes 
the potential for misuse of this exception is

[[Page 2804]]

heightened if it can be based on verbal consent. Based on the 
foregoing, the NASD declined to amend the prior consent provisions to 
accommodate verbal requests.
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    \41\ 68 FR 44144, 44177 (July 25, 2003) (codified at 47 CFR 
64.1200(c)(2)(ii)) (emphasis added).
    \42\ The FTC rule states that a seller or telemarketer may call 
a person on the national do-not-call registry if the seller or 
telemarketer ``has obtained the express agreement, in writing, of 
such person to place calls to that person. Such written agreement 
shall clearly evidence such person's authorization that calls made 
by or on behalf of a specific party may be placed to that person, 
and shall include the telephone number to which the calls may be 
placed and the signature of that person.'' 68 FR 4580, 4672 (January 
29, 2003) (codified at 16 CFR 310.4(b)(iii)(B)(i)) (emphasis added).
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V. Discussion and Commission Findings

    After careful review of the proposed rule change and the related 
comments, the Commission finds that the proposed rule change, as 
amended, is consistent with the requirements of the Act and the rules 
and regulations thereunder which govern the NASD \43\ and, in 
particular, the requirements of Section 15A(b)(6) of the Act and the 
rules and regulations thereunder.\44\ Section 15A(b)(6) of the Act 
requires, among other things, that NASD's rules must be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest.
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    \43\ Additionally, in approving this rule the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition and capital formation. 15 U.S.C. 78c(f).
    \44\ 15 U.S.C. 78o-3(b)(6).
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A. General

    The Commission believes that the investing public's participation 
in the do-not-call registry, as described in the proposed rule change, 
creates an expectation among national do-not-call registrants that they 
will not receive unwanted telephone solicitations from NASD members. 
The Commission believes that the NASD's proposal generally prohibits 
its members from making telemarketing calls to people who have 
registered on the national do-not-call registry, while retaining time-
of-day and firm-specific do-not-call list restrictions.\45\ The 
Commission believes that the proposed rule change, as amended 
establishes adequate procedures to prevent members from making 
telephone solicitations to do-not-call registrants which should have 
the effect of protecting investors, while providing appropriate 
exception to the rule for certain enumerated situations, which should 
promote just and equitable principles of trade.
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    \45\ See proposed NASD Rule 2212(a)(1) and (2).
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B. Exceptions

    The Commission recognizes the importance of having certain 
exceptions to the general prohibition of NASD members from soliciting 
persons who have signed up on the FCC's national do-not-call registry. 
The Commission believes that the ``established business relationship'' 
exception, ``prior express invitation or permission'' exception, and a 
``personal relationship'' exception provide appropriate scenarios where 
an NASD member should not be precluded from making a telemarketing call 
to do-not-call registrants.
    The Commission further believes that the NASD's expansion of 
``established business relationship'' is appropriate. As originally 
drafted, an established business relationship would exist between the 
customer and an NASD member as long as the call's recipient had made a 
financial transaction with the member within 18 months preceding the 
date of the telemarketing call, or if the recipient had contacted the 
member to inquire about a product or service offered by the member 
within the three months preceding the date of the telemarketing 
call.\46\ In response to commenters concerns about the narrowness of 
the exception, the NASD expanded the definition of ``established 
business relationship'' to include situations where the telemarketing 
call recipient has a security position, a money balance, or account 
activity at a clearing firm on behalf of such member within the 
previous 18 months, and where a member was the ``broker/dealer of 
record'' for an account of a person within the 18 months immediately 
preceding the date of the telemarketing call.
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    \46\ See original proposed NASD Rule 2211(g)(1)(A).
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    The Commission believes that an NASD member should be able to 
discuss the purchase or sale of a security with a customer who has 
registered on the national do-not-call registry without fear of 
violating an NASD rule when there is some development that could 
materially impact the investment decision of a reasonable investor. As 
originally proposed, an established business relationship did not exist 
unless an account holder had made a financial transaction within the 
previous eighteen months or affirmatively contacted the member to make 
an account inquiry within the past three months. The Commission 
believes that the definition, as originally proposed, would have 
restricted a member from making a telemarketing call to its customer in 
many situations where a prudent investor would ordinarily desire to be 
contacted, such as the existence of market swings, interest rate 
changes, new tax laws, or specific industry or company news. The 
Commission believes that the expansion of the definition of 
``established business relationship'' exception to include persons that 
have a security position, money balance or account activity with a 
member or at a clearing firm that provides clearing services on behalf 
of a member will, among other things, assist NASD members in upholding 
their agency obligations to customers. In addition, the Commission 
believes that broker/dealers of record who have served as such for a 
customer within the eighteen months preceding the date of the 
telemarketing call should be allowed to contact a customer whose 
account is held directly at a mutual fund or variable insurance product 
issuer.
    Moreover, the Commission believes that the proposed established 
business relationship exception adequately protects customers who are 
most interested in not being contacted by a member by specifying that 
the exception does not apply to those individuals who have specifically 
requested to be put on a member's do-not-call list. The Commission 
further believes a member should not generally be restricted from 
contacting those do-not-call registrants from whom the member has 
received express written consent to contact and those registrants who 
have a personal relationship with the associated person making the 
call.

C. Telemarketing Procedures

    As described above, the NASD also proposed that its members must 
institute certain procedures related to do-not-call lists. \47\ The 
Commission believes that the procedures that the NASD has proposed 
provide adequate guidelines for a member to establish education and 
training of its affiliated persons and adequately provides that a 
member will incorporate the names of persons who request to be put on a 
firm's do-not-call list among the list of names that a member may not 
contact. Further, the Commission believes that the identification 
procedure that a member or associated person must follow when making a 
telemarketing call should enhance the ability of consumers to hold 
members and associated persons accountable for adhering to firm-
specific and national do-not-call registry restrictions.
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    \47\ See proposed NASD Rule 2212(d)(1)-(d)(6).
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D. Safe Harbor

    As described above, the NASD proposed ``safe harbor'' procedures 
that a member could follow to avoid liability for do-not-call list 
violations that arise out of errors if the telemarketer's routine 
business practice meets certain specified standards.\48\ The Commission 
believes that the safe harbor that the NASD has proposed should ensure 
that a member incorporates national do-not-call registrants in its own 
list of telephone numbers that it may not

[[Page 2805]]

contact, and that members and associated persons follow procedures to 
refrain from contacting such persons. Accordingly, the Commission 
believes it is appropriate to grant members who have established the 
appropriate routine business practices a safe harbor exemption from 
liability for calls made out of genuine error.
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    \48\ See proposed NASD Rule 2212(c).
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E. Miscellaneous

    The Commission believes that the NASD's proposal to apply the 
telemarketing and telephone solicitation restrictions to wireless 
telephone numbers is appropriate, given that consumers can register 
wireless telephone numbers in the national do-not-call registry. 
Further, the Commission believes that a member should not be able to 
avoid accountability for complying with telemarketing restrictions and 
regulations by employing another entity to perform telemarketing 
services on behalf of the member. Accordingly, the Commission finds 
proposed NASD Rule 2212(f), relating to outsourcing telemarketing, to 
be appropriate.

F. Accelerated Approval of Amendment No. 1

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act, for approving Amendment No. 1 prior to the thirtieth day after 
the date of publication of notice thereof in the Federal Register. As 
discussed above, in Amendment No. 1, the NASD expanded the breadth the 
established business relationship exception. The Commission believes 
that the proposed Amendment No. 1 will, among other things, facilitate 
members' ability to uphold their agency obligations by enabling them to 
make a telemarketing call under certain circumstances to customers who 
have not actively traded or made deposits to their brokerage accounts. 
In making the determination to accelerate approval of Amendment No. 1, 
the Commission notes that all five commenters supported a broader 
definition of ``established business relationship.''\49\
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    \49\ See ACLI Letter, at 3-4; Schwab Letter, at 4; CUNA Letter, 
at 2; FSR Letter, at 2-3; SIA Letter, at 4.
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VI. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1, including whether Amendment No. 1 
is consistent with the Act. Persons making written submissions should 
file six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Comments 
may also be submitted electronically at the following e-mail address: 
[email protected]. All comment letters should refer to File No. SR-
NASD-2003-131. This file number should be included on the subject line 
if e-mail is used. To help the Commission process and review your 
comments more efficiently, comments should be sent in hardcopy or by e-
mail but not by both methods. Copies of the submission, all subsequent 
amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Room. Copies of such filing also will be available for 
inspection and copying at the principal office of the NASD. All 
submissions should refer to File No. SR-NASD-2003-131 and should be 
submitted by February 10, 2004.

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\50\ that the proposed rule change, as amended (File No. SR-NASD-
2003-131) is approved, and Amendment No. 1 is approved on an 
accelerated basis.
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    \50\ Id.
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\51\
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    \51\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-1079 Filed 1-16-04; 8:45 am]
BILLING CODE 8010-01-P