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NASD

NASD is the Acronym for National Association of Securities Dealers

The United States securities industry has long relied on self-regulation to complement government oversight. The National Association of Securities Dealers (NASD) was a key player in this system, established in 1939 following amendments to the Securities Exchange Act of 1934. Known as the Maloney Act amendments, these changes allowed for the creation of national securities associations to supervise the conduct of their members. The NASD's primary purpose was to protect investors and maintain market integrity by regulating the activities of broker-dealers and their associated persons.

History and Establishment

The NASD was founded in response to the 1938 Maloney Act amendments, which enabled the creation of national securities associations. This organization played a pivotal role in shaping the regulatory landscape of the U.S. securities industry.

  • Key milestone: The NASD created the National Association of Securities Dealers Automated Quotations (NASDAQ) stock market in 1971, which became the world's first electronic stock market.

Responsibilities and Functions

The NASD's main responsibilities included establishing and enforcing rules and standards for its members related to business conduct and market integrity. It also registered and educated industry participants, examined member firms for compliance, and investigated and disciplined members for violations.

  • Rule enforcement: The NASD set and enforced rules to ensure fair and honest practices among its member firms.
  • Education: The organization educated industry participants on regulatory requirements and best practices.
  • Compliance examinations: The NASD conducted regular examinations of member firms to ensure compliance with its rules and federal securities laws.

Merger and Legacy

In 2007, the NASD merged with the regulatory arm of the New York Stock Exchange (NYSE) to form the Financial Industry Regulatory Authority (FINRA). This consolidation aimed to streamline the regulation of broker-dealers under a single self-regulatory organization (SRO). The NASD's legacy continues through FINRA, which oversees the securities industry today. The United States Securities and Exchange Commission (SEC) serves as the ultimate regulator of the U.S. securities industry, including oversight of FINRA.