Commentary on NASD Rule 2210:
Q: Does Retirement Savings Planner need to be submitted to the NASD for approval
by my Broker/Dealer?
A: No, according to NASD Interpretative Material IM-2210-6.
Some financial
advisors that work for NASD member firms often ask us "Does the software
need to be submitted to the NASD for approval?".
We are
obviously not members of the NASD, but have made available to you the following
PDF file that is very clear as far as how NASD Rule 2210 applies to software.
Read the
Investment
Analysis Tools Guidance 
letter from the NASD made final February 14, 2005 (portions highlighted by Torrid
Technologies)
Quoting
from this letter, "IM-2210-6 defines an investment analysis tool as 'an interactive
technological tool that produces simulations and statistical analyses that present
the likelihood of various investment outcomes if certain investments are made
or certain investment strategies or styles are undertaken, thereby serving as
an additional resources to investors in the evaluation of the potential risks
and returns of investment choices.'"
Note: our
software does not produce simulations or statistical analyses related to the likelihood
of investment outcomes. This is more typical with software that touts "monte
carlo simulation" which our software currently does not do.
Quoting
from this letter, "The filing requirement does not apply to hypothetical
illustrations of mathematical principles that do not predict or project the
performance of an investment or investment strategy, such as Web site calculators
that compute future returns based upon assumed variables, since Rule 2210(d)(1)(D)
does not prohibit (and IM-2210-6 thus does not cover) such illustrations."
Note: our
software falls under this exception since it just computes future returns based
upon the assumed variables that you enter.
Endnote
3 elaborates on this by saying, "The 'hypothetical illustration' exception
to the prohibition in Rule 2210(d)(1)(D) applies to tools that serve the function
of a calculator that computes the mathematical outcome of certain assumed variables
without predicting the likelihood of either the assumed variables or the outcome.
For example, this exception would apply to a calculator that computes a net
amount of savings that an investor would earn over an assumed period of time with
assumed variables of rates of returns, frequency of compounding, and tax rates.
On the other hand, this exception would not apply to a calculator that predicted
the likelihood of achieving these assumed variables and outcomes."
Our conclusion:
If you are with an NASD member firm, the
Retirement Savings Planner software falls under the "Hypothetical Illustration"
Exception to Rule 2210 and does not need to be filed with the NASD.
THIS
IS NOT LEGAL ADVICE, NOR SHOULD IT BE CONSTRUED TO BE LEGAL ADVICE. IF YOU HAVE
ANY QUESTIONS, CONSULT YOUR FIRM'S COMPLIANCE DEPARTMENT FOR GUIDANCE, OR CONTACT
THE NASD.
|
