(a) All Principals Must
Be Registered
All persons engaged or to be
engaged in the investment banking or securities business of a member who are to
function as principals shall be registered as such with NASD in the category of
registration appropriate to the function to be performed as specified in
Rule 1022. Before their
registration can become effective, they shall pass a Qualification Examination
for Principals appropriate to the category of registration as specified by the
Board of Governors. A member shall not maintain a principal registration with
NASD for any person (1) who is no longer active in the member's investment
banking or securities business, (2) who is no longer functioning as a principal,
or (3) where the sole purpose is to avoid the examination requirement prescribed
in paragraph (c). A member shall not make application for the registration of
any person as principal where there is no intent to employ such person in the
member's investment banking or securities business. A member may, however,
maintain or make application for the registration as a principal of a person who
performs legal, compliance, internal audit, back-office operations, or similar
responsibilities for the member or a person engaged in the investment banking or
securities business of a foreign securities affiliate or subsidiary of the
member.
(b) Definition of
Principal
Persons associated with a
member, enumerated in subparagraphs (1) through (5) hereafter, who are actively
engaged in the management of the member's investment banking or securities
business, including supervision, solicitation, conduct of business or the
training of persons associated with a member for any of these functions are
designated as principals. Such persons shall include:
(1) Sole Proprietors
(2) Officers
(3) Partners
(4) Managers of Offices of
Supervisory Jurisdiction, and
(5) Directors of
Corporations.