AMENDMENTS TO RULE 440A ("TELEPHONE SOLICITATIONS") PERTAINING TO "FACSIMILE ADVERTISEMENTS"
 

Information Memo  07-48  is available for viewing or printing with Adobe Acrobat
 
Number 07-48 05/21/2007
 
ATTENTION:   CHIEF EXECUTIVE OFFICER/MANAGING PARTNER, CHIEF FINANCIAL OFFICER/PARTNER, AND COMPLIANCE AND REGULATORY REPORTING DEPARTMENTS
 
TO:   ALL MEMBER ORGANIZATIONS
 
SUBJECT:   AMENDMENTS TO RULE 440A ("TELEPHONE SOLICITATIONS") PERTAINING TO "FACSIMILE ADVERTISEMENTS"
 



Synopsis

On May 10, 2007, the Securities and Exchange Commission (the “Commission”) approved amendments1 to NYSE Rule 440A (“Telephone Solicitations”) to reflect legislation2 passed by Congress concerning unwanted telemarketing communications. Specifically, the legislation restored an exemption from the general prohibition against sending unsolicited faxed advertisements which applies when the sender and the recipient have an established business relationship and other conditions are met. The amendments to Rule 440A are effective immediately.
Amendments to Rule 440A

NYSE Rule 440A (the “Rule”) addresses the telephonic solicitation of customers by member organizations. Rule 440A(g) provides that no member organization “may use a telephone facsimile machine, computer or other device to send an unsolicited advertisement to a telephone facsimile machine, computer or other device.”

Subsection 440A(g)(1) provides that a “facsimile advertisement” is not considered to be “unsolicited” where the recipient has granted the member organization prior express invitation or permission to deliver the advertisement.3

The amendments to Rule 440A(g)(1) further allow that such advertisements are not considered to be “unsolicited” where: 1) there is an “established business relationship” between the member organization and the recipient; 2) the member organization obtains the recipient’s facsimile number pursuant to prescribed conditions; and 3) the member organization includes prescribed “opt-out” notice language in the facsimile advertisement. The specifics of these requirements are outlined as follows:

Established Business Relationship

The term “established business relationship” is defined in Rule 440A(j)(1). For purposes of the amendments, it means a prior or existing relationship formed by a voluntary two-way communication between a member organization and a person, with or without an exchange of consideration, if:

(i) the person has made a financial transaction or has a securities position, a money balance, or account activity with the member organization, or at a clearing firm that provides clearing services to such member organization, within the previous 18 months immediately preceding the transmission of the facsimile advertisement; or

    (ii) the member organization is the broker-dealer of record for an account of the person within the previous 18 months immediately preceding the transmission of the facsimile advertisement; or

    (iii) the person has contacted the member organization to inquire about, or make an application regarding a product or service offered by the member organization within the previous three months immediately preceding the transmission of the facsimile advertisement, which relationship has not been previously terminated by either party.

    Means of Obtaining the Facsimile Number

    Rule 440A(g)(1)(ii) states that member organizations must obtain the recipient’s facsimile number directly from the recipient, from the recipient’s own directory, advertisement, or site on the Internet, unless the recipient has noted on such materials that it does not accept unsolicited advertisements at the facsimile number in question, or from directories or other sources of information provided by third parties, provided that the member organization must take reasonable steps to verify that the recipient consented to have the number listed. If the established business relationship existed before July 9, 2005, and the member organization also possessed the facsimile number before July 9, 2005, the member organization may send the facsimile advertisements without demonstrating how the number was obtained.

    Prescribed “Opt-Out” Notice

    Rule 440A(g)(1)(iii) requires that facsimile advertisements include specific notice and contact information on the facsimile allowing recipients to “opt-out” of future facsimile advertisements. Such notice must:

    (A) be clear and conspicuous, on the first page of the advertisement;

    (B) state that the recipient may make a request to the member organization not to send any future facsimiles, and that failure to comply with the request within 30 days is unlawful; and

    (C) include a telephone number, facsimile number, and cost-free mechanism to opt-out of facsimiles. Such mechanism must permit customers to make opt-out requests 24 hours a day, 7 days a week.

    Any questions regarding this Information Memo may be directed to Gregory Taylor at (212) 656-2920 or Michael Troha at (212) 656-5639.

    _______________________________________
    Grace B. Vogel
    Executive Vice President
    Member Firm Regulation


    _______________________________________
    1 See SR-NYSE 2007-06, approved by the SEC in Release No. 34-55735 (May 10, 2007)
    72 FR 27610 (May 16, 2007).
    2 See Junk Fax Prevention Act of 2005, Pub. L. 109-21, 119 Stat. 359 (2005) and FCC 06-42 (April 5, 2006).
    3 Such express invitation or permission must be evidenced by a signed, written statement that includes the facsimile number to which any advertisements may be sent and clearly indicates the recipient’s consent to receive such facsimile advertisements from the member organization.