NASD Board OKs Small-Cap Rules

The National Assn. of Securities Dealers said its board of governors on Thursday approved a series of proposed rule changes to help stem market abuses of small-capitalization stocks.

The Bulletin Board eligibility rule would permit only those companies that report current financial information to the Securities and Exchange Commission or banking or insurance regulators to be quoted on the Bulletin Board, NASD said at the end of a two-day board meeting in New York.

Any company not making current filings would be eliminated from the OTC Bulletin Board after the phase-in period. Ineligible companies would be allowed to be quoted in other quotation mediums, such as the pink sheets, NASD said.

The rules would enhance investor protection by ensuring that current financial information quoted on the over-the-counter Bulletin Board is publicly available.

The rules also would require brokers to review current financial statements before recommending a transaction in any over-the-counter security, NASD said.

The rules would require brokers to provide investors with written disclosure of the differences between OTC transactions and those traded on a listed market.