NASD Revised Sanction Guidelines
Amended Effective - March 31, 2006

The NASD has again modified the Sanction Guidelines. The current modifications became effective March 31, 2006. These revisions are significant for two primary reasons:

1. Monetary sanctions have increased dramatically …in some cases, as much as five (5) times previous amounts; and

2. The new sanction guidelines will apply to any pending and or unresolved disciplinary cases.

From the NASD's perspective, the revisions are designed to address a wide variety of potential violations, provide fact-specific guidance for crafting appropriate remedial sanctions, increase the level of flexibility built into individual guidelines and to provide additional guidance as to mitigating and aggravating circumstances for individual violations.

Previously, the guidelines grouped certain misconduct solely by whether it was a first, second, or subsequent action. Under the prior structure, the recommended monetary sanctions for first offenders, regardless of the number of violations or other egregious misconduct, tended to be at the low end of the monetary sanction range. Similarly, less egregious misconduct that happened to be a second or subsequent violation received monetary sanctions at the high end of the range. The current NASD revisions will enable adjudicators and settling parties to take into account other factors, in addition to the member's disciplinary history, and allow for significant flexibility in sanction ranges.

To this end, the NASD has raised the sanction ranges for first violations, in some instances, to begin at $5,000 from $1,000. The NASD feels this increase will preserve the deterrent effect and be "significant enough to prevent and discourage future misconduct by a respondent, to deter others from engaging in similar misconduct, and to modify and improve business practices." (NASD Sanction Guidelines, General Principal No. 1.) Similarly, the range for a second violation will begin, in some instances, at $10,000, formerly $2,000 - $5,000. The NASD feels this should send a clear message about the need for improvement after settling a first offense and to deter repeat violations. In addition, it is believed that the revised guidelines will provide adjudicators or settling parties the ability to impose a fine on a per violation basis for cases involving egregious misconduct and multiple violations that harm the investing public.

These increases are of particular concern to members with open or pending disciplinary cases. As of March 31, 2006, all open and pending NASD disciplinary cases are now subject to these new sanction guidelines.