NASD Pushes CEO, 'Chief Compliance Officer' Assurances

The National Association of Securities Dealers (NASD) wants its member firms to act to reassure investors that they have proper supervisory policies and procedures in place. NASD is seeking to instill a "culture of compliance" in its members, which creates and/or elevates the position of "Chief Compliance Officer" to a more senior level in member companies.

In response to increased scrutiny under Sarbanes-Oxley, the NASD has issued a proposal for its member companies to require the CEO and Chief Compliance Officer of each member firm to jointly certify annually that the member firm has adequate supervisory policies and procedures in place, and that they are complying with those policies.

The proposal is not meant to hold individuals personally liable for activities of the company. However, by requiring joint certification, NASD hopes to ensure an ongoing, high-level dialogue between compliance officers and business officers of member companies.

A further interpretation of the NASD proposal shows the following:

  • Certification is meant to foster ongoing attention by firm senior management to its compliance and supervisory systems and increase interaction between senior business officers and compliance and legal officers.

  • The CEO and Chief Compliance Officer will be certifying as to the adequacy of the compliance and supervisory system, but not necessarily the implementation of that system in each instance.

  • No liability will accrue to the signatories, provided that when they sign they have a reasonable basis for doing so, and do so consistent with high standards of commercial honor and just and equitable principles of trade.

The proposal now requires approval by the Securities and Exchange Commission.

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