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Abstract: 

In 2005, NASD focused its energy on resolving compliance problems created by a relatively recent phenomenon—securities businesses operated by one or just a few independent contractor securities-salesmen housed at small off-site “branches” away from direct oversight by compliance personnel or supervisory managing partners. Throughout the long history of the securities industry in the U.S., “wire house” branches dominated the way of doing business through large branch locations where registered reps were centralized, conducting their securities business under the direct purview of compliance personnel and/or supervising branch managers. In 2005, NASD finalized its efforts for redefining “branch office” and modernizing its expectation as to how “branch” and “non-branch” offices are to be supervised. This article aims at simplifying some of the confusion over the “new” definition of “branch office”—examining when an off-site location is and is not a “branch office” under revised NASD Rule 3010. Concern for protecting the investing public from abuse in the securities market is a legitimate concern for regulators. The flip-side of this concern is effective supervision of these “branch” and “nonbranch” offices. This is the impetus that drove regulators to resolve the branch/ non-branch office issue. This article also addresses the steps that regulators now expect broker/dealers to take to effectively supervise their off-site locations.

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Affiliations:  1: Start & Stark.