SEC Imposes Limits on ‘Cold Calls’ by Brokers

The Securities and Exchange Commission on Wednesday approved new telemarketing rules aimed at curbing “cold call” abuses by brokers.

The rules, which go into effect immediately, forbid calls to prospective customers before 8 a.m. or after 9 p.m. without the customer’s prior consent. Brokers who make these calls must, under the new rules, immediately give their name, telephone number and firm, and disclose that they’re calling to sell securities.

The rule, originally proposed by the National Assn. of Securities Dealers, seeks to stem numerous customer complaints.

“This rule ensures that anybody receiving a cold call from a broker will immediately know who they’re dealing with and why,” said Michael Jones, director of individual investor services for the NASD, an industry body that polices the Nasdaq Stock Market.

The rule exempts calls to other brokers, as well as calls to a firm’s existing customers who have traded in the last year.

In a separate development, the NASD board is expected to approve today a new test on Nasdaq trading rules that would supplement current licensing exams and be given to all 10,000 U.S. stock traders, NASD Regulation Inc. President Mary Schapiro said.

The test, which would be given to aspiring and current stock traders, is intended to supplement the six-hour Series 7 licensing exam that applicants already must take to become general-service brokers.

The NASD Regulation board, an NASD unit, approved the testing requirement last month and will strongly recommend its adoption, Schapiro said. Once the parent NASD board approves the plan, it will be forwarded to the SEC, which will issue it as a rule proposal for public comment. If adopted, the new exam could be introduced as early as April.