This communication reflects NASD`s ongoing commitment to helping members working in banking buildings comply with NASD rules on fair practice and federal securities laws. Members close to the bank and members of banking networks have been previously advised by nasD to take steps to protect investors by addressing potential investor confusion issues. In particular, members were advised to put in place procedures to ensure that investors understand the differences between banking products and investment products offered and sold by brokers and traders and to ensure that risks related to investment products are not fully disclosed. Finally, in the NASD communication to members 94-16 (March 1994), nasD reminded members of their obligations under the rules of fair practice to ensure that disclosure of essential information relating to the sale of investment funds is accurate and complete. Similarly, in the communication to members 93-87 (December 1993), the NASD provided members with guidelines for fulfilling their obligations under the rules of good practice for the marketing of investment funds, replacing the certificates of deposit due. The networking agreement described above does not prohibit a fiduciary department of a financial institution from operating securities activities authorized by law. All materials used by CHCs or financial institutions (including necessary service companies) to promote or promote the availability of intermediation services under network agreements are approved by CSC for compliance with federal securities laws prior to distribution. All of these materials are considered CCS materials and clearly indicate that intermediation services are provided by CSC and not by the financial institution or its required service company; that neither the financial institution nor its required service company is a registered broker or trader; that the client only deals with CCS with respect to intermediation services; and that CSC is not related to the financial institution or its required service company. References to a financial institution in advertising or advertising materials are used to identify where only brokerage services are available and will not be important in this type of material. CSC will provide brokerage services on the premises of each financial institution in an area physically separate from the ordinary activities of the financial institution, so that CSC will be clearly separated from the financial institution and will be distinguished. The area in which CSC provides brokerage services clearly indicates the name of CSC and indicates that CSC is a member of the NASD and is registered with the NASD as a branch of CSC. Under the networking agreements, CSC provides intermediation services only on the premises of the financial institutions themselves and not in areas where a service company has a site independent of the financial institution. The networking agreement between the SCC and each financial institution (including its required service company) is subject to a customer access agreement that defines the responsibilities of the parties, the terms of the agreement and compensation to the financial institution (including its required service company).
As a registered broker-dealer, CSC meets all legal and regulatory requirements applicable to brokers, including the current rules of self-regulatory organizations (“SROs”).