The NASD Wednesday issued a notice to members outlining best practices for developing and vetting new products.

The regulator said that it made the move in response to concerns about the number of increasingly complex investment products that are being introduced to the market. The notice urges firms to improve their procedures for determining what constitutes a new product and for ensuring that the right questions are asked and answered before a new product is offered for sale.

NASD rules already require firms that sell new products to have formal, written procedures in place to ensure that no new product is offered to the public before it has been thoroughly reviewed from a regulatory as well as a business perspective. To help firms determine whether their current procedures are appropriate, NASD surveyed firms that manufacture proprietary products and/or distribute third-party products to identify the best practices.

“In the current investment environment, investors and brokers are increasingly turning to alternatives to conventional equity and fixed-income investments in search of higher returns or yields. Those alternatives include products such as asset-backed securities, distressed debt, structured notes and derivative products,” said Mary Schapiro, NASD vice chairman. “We believe that by establishing appropriate procedures for reviewing new products before they are offered to the public, firms will be able to avoid unsuitable sales, compliance issues, conflicts of interest and other problems before violations occur.”