Keeping NASD Rules and Avoiding Customer Complaints

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The NASD, which used to be known as the National Association of Securities Dealers, Inc., was established in 1939 as the US Congress and the Securities and Exchange Commission (SEC)—the dealers and brokers in over-the-counter securities—joined to regulate themselves with the help of governmental supervision.

From its launch in 1939 until 1970, the main role played by the NASD was to be a regulatory body between buyers and sellers of over-the-counter stocks. During these years, the fixed price of stock was almost impossible to nail down because the stock buyer had to call around and “shop” for the best price. Due to this time-consuming process and the lack of ability to fix a price for stock, it was difficult at best to tell if stock value was rising or falling.

The stock market dramatically changed in 1971 when an automated market called the National Association of Securities Dealers Automated Quotations (NASDAQ) was created, bringing transparency to the over-the-counter stock market.

NASD Growing Pains

In the 1980s, in order to increase its power and reputation, the NASDAQ established a 2-tier system: the companies with a higher reputation made the NASDAQ National Market List and those that do not meet the stringent requirements appeared on the secondary or Small Cap Market list.

As the NASDAQ grew and expanded, it had some associated growing pains. In 1985, the NASD had a controversy raised from an unsatisfied investor about the way the NASDAQ market worked. The complaint from the investor had to do with how his broker was dealing with his own interest at the forefront and his clients in a secondary seat, all the while these actions by the broker were permitted by the exchange. This was the first of many complaints to take place in the 80s and a decade of growing pains for the NASD.

In an effort to regain investor confidence and to hedge the number of complaints, the NASD split into two independent subsidiaries in 1996, one being a regulatory arm. NASD has a long list of regulatory rules in order to keep investor confidence high and complaints low.

NASD Rules and Regulations

The Financial Industry Regulatory Authority (FINRA) oversees the many NASD regulations. The NASD is a leading private-sector provider of regulatory services in the financial sector; they are dedicated to being the advocates of investors and preserving market integrity. NASD is charged with many regulatory responsibilities from education, examination of securities firms, and enforcement of all regulations.

Just a few of the regulations of the NASD include the following:

  • Communications about variable life insurance and variable annuities
  • Customer account statements
  • Commissions, markups, and charges
  • Discretionary accounts
  • Securities distributions
  • Research analysts and research reports
  • Special products
  • Investment company securities
  • Transactions for or by associated persons
  • Approval of change in exempt status
  • Reporting requirements for clearing firms
  • Exemptive relief

Customer Complaints

No business likes to deal with unhappy customers, and financial companies are no different. Unhappy clients mean a drop in business and if the complaints begin to mount—whether they are founded or not—your company’s reputation takes a hit.

In addition to the business side of customer complaints, in July 2011 FINRA’s Rule 4530 went into effect. This rule expanded the amount of reporting requirements for firms including the quarterly reporting of statistical and summary information in regards to written customer complaints. With this public reporting, there is even more incentive to hedge complaints.

So, how do you avoid customer complaints?

Proper Compliance and Organization

One of the best ways to avoid customer complaints is to ensure they have nothing to complain about. It sounds a bit simplistic, but if you are in 100% compliance with all NASD and FINRA rules and regulations, you will limit those who are going through the rules with a fine-toothed comb.

In order to stay 100% compliant, you need intuitive software and programs that are already set up to be FINRA and NASD compliant. This is accomplished through eFileCabinet products such as SecureDrawer and other document management software (DMS) products.

With SecureDrawer, a cutting-edge web portal with safety and security at its core, you can send and receive files to clients, all with a generous portion of peace of mind, and this makes your clients happy and less likely to complain.

With DMS, you can have the automated incoming and outgoing file services that keep you up-to-date with proper reporting, all while knowing that your clients’ files and your company files are only viewed by those who have proper authority to view them, for the specified time they can be viewed.

The number of complaints will go down as you educate your clients on the compliance measures you take and the organizational structure you employ with SecureDrawer and DMS from eFileCabinet. Additionally, your clients will see that with this new organizational structure, you will be able to meet their needs promptly, just as they anticipate and desire.

Take a moment to fill out the contact form to see how eFileCabinet can increase your client satisfaction today.

By | 2016-12-15T11:59:45+00:00 October 7th, 2015|
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