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NASD Rule 3110 & NYSE Rule 440

Who is required to comply?
All persons engaged in trading securities as a broker or dealer, and persons associated with the business.

What is it?

Both the National Association of Securities Dealers (NASD) Conduct Rule 3110 on Books and Records and the NYSE Rule 440 went into effect May 2003. Both rules establish standards for the preservation of accounts, records and importantly, electronic correspondence under the guidelines approved by the SEC 17a (3, 4).

What are the requirements?

The NASD Rule 3110 and NYSE Rule 440 require brokers and dealers to retain all electronic records and correspondence between the firm and customer. In close relation to the SEC 17a (3, 4) rules, there is a requirement to retain emails for six years in an accessible, non-rewriteable and non-erasable format. NASD Rule 3110 requires that supervisors have the ability to review corporate outgoing mail for non- compliant language and to enforce internal policy surrounding email correspondence.

What is the cost of non-compliance?

Heavy fines, imprisonment and loss of corporate reputation.

What is the significance of NASD Rule 3110 and NYSE Rule 440 compliance?

The rules are designed to protect investors and brokers from fraudulent activity and misinterpretation through electronic messaging.