Securities Activities of Banks in the GLB Era - Cleary Gottlieb Steen ...

G. NASD Developments
mixed-product arrangement, it will likely be more difficult for
a bank to establish a good faith belief that such an
arrangement provides an individual a meaningful option to
satisfy the condition associated with the arrangement solely
through the purchase of traditional bank products without a
detailed analysis of the individual’s financial needs and
capabilities.
1. NASD Notice to Members No. 02-64 (September 2002) (the “NASD
Tying Notice”) expressed concern about the practice of tying
commercial credit to investment banking and noted that tying issues
usually arise in three contexts: (a) bridge loans in which the loan is
intended to be repaid out of the proceeds of a bond offering;
(b) backup credit facilities that support a company’s issuance of
commercial paper; and (c) syndicated loans. The NASD cautioned its
members that aiding and abetting a violation of the BHCA by an
affiliated bank would violate “just and equitable principles of trade.”
a. The NASD concluded that a threat by a broker-dealer to
discontinue research coverage of, and stop making a market
in, stock of an issuer if the issuer did not select the brokerdealer
for investment banking services on terms desired by the
broker-dealer but not wanted by the issuer was “inconsistent
with high standards of commercial honor and just and
equitable principles of trade” required by NASD Rule 2110.
See Letter of Acceptance, Waiver and Consent re U.S.
Bancorp Piper Jaffray (No. CAF020020) (July 2002).
b. Other NASD Rules could also have implications in the tying
context. See, e.g.:
(i) Rule 113: NASD Rules “shall be interpreted . . . so as
to require that all practices in connection with the
investment banking and securities business shall be
just, reasonable and not unfairly discriminatory”.
(ii) Rule 2120: “No member shall effect any transaction
in, or induce the purchase or sale of any security by
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