NASD Board OKs Small-Stock Rules

The National Assn. of Securities Dealers on Thursday approved tough new rules for the market’s smallest stocks, while easing some of the burden on brokers by exempting several thousand banks, insurance companies, and larger firms from the requirements.

In its original proposal last December, NASD would have required brokers to do research on a company’s financial statements before recommending the shares of any company that trades on the electronic bulletin board or in the Pink Sheets--both of which host many small, high-risk stocks.

After getting public comments, the NASD board Thursday approved a plan that would apply that requirement only to smaller firms that aren’t banks or insurance companies. The smaller companies still make up most of the 9,400 stocks that trade on the bulletin board and the Pink Sheets.

In general, the new rules require all bulletin board firms to submit to Securities and Exchange Commission disclosure requirements--a change that could force as many as 3,200 companies off the bulletin board and into the Pink Sheets.

The SEC still must approve the NASD’s proposals, which are aimed at stemming trading abuses and broker fraud in tiny stocks.