The National Association of Securities Dealers announced today that it has fined Green Street Advisors, a Los Angeles-based broker-dealer, US$150,000 for failing to register its eight research analysts under NASD rules that took effect last year.

The rules established a special examination and registration classification for analysts. As of March 30, 2004, NASD rules require research analysts to be registered with NASD after passing new research analyst examinations. Existing analysts were granted a one-year grace period for meeting the new registration requirements — provided their firm applied for the new research analyst registration by May 31, 2004.

The NASD found that Green Street failed to apply for the research analyst designation for its analysts by the May 31 deadline. Consequently, the one-year grace period for passing the research analyst qualification examinations was not available to Green Street’s analysts. In June 2004, after Green Street discovered that it had failed to apply for new registration for its eight analysts, the firm sought an extension from NASD of the filing deadline. That request was denied.

Nevertheless, during the period from June 1 to November 5, 2004 – the date by which all of Green Street’s analysts were properly qualified and registered – Green Street’s analysts continued to prepare and publish research reports. NASD found that Green Street issued 123 reports and/or updates of the reports, 104 of which were issued after the firm received notice that NASD had denied its request for a filing deadline extension. In settling this matter, Green Street neither admitted nor denied the charges, but consented to the entry of NASD’s findings.

In May, in its first enforcement action arising from the new analyst registration rules, NASD sanctioned SunTrust Capital Markets Inc. US$100,000 for similar rule violations.

These analyst registration rules were adopted followed a series of enforcement actions relating to conflicts of interest involving research analysts. “NASD’s analyst registration requirements are designed to protect investors by ensuring that research analysts are properly qualified and fully understand their regulatory obligations,” said Barry Goldsmith, NASD executive vice president and head of enforcement, in a release. “It is particularly disturbing that this firm was aware of the problem, failed to observe the new rules’ deadlines, and yet continued to issue reports without properly registering their analysts.”