First I note that officially the National Association of Securities Dealers, Inc. has changed their name to NASD, Inc. for public relations reasons. However, this is merely a very recent (early 00's) cosmetic change, and therefore I prefer to use the full proper name. After all, it's been called National Association of Securities Dealers for approximately seven decades.

What is the NASD?
Although the internal organization of the NASD has changed in recent years, it still serves its founding mission. NASD is a private not-for-profit organization that oversees the securities industry in the United States. It founded the Nasdaq markets and acquired the American Stock Exchange (AMEX) through a merger. However, both those assets were divested in its recent reorganization for financial reasons.

The NASD as a provider of regulatory services...
As the NASD likes to promote in its propaganda, "NASD mission is to bring integrity to the markets and confidence to investors." This mission is a direct result of its unique history. In order to fully understand how the NASD works, we will take a trip to the Great Depression. By 1932, all gains ever made in the relatively young capital markets were wiped out. Soon after, Franklin D. Roosevelt sought to fix the derailed US economy with New Deal legislation. Buried in the massive amount of legislation of the New Deal Era was a broad National Industrial Recovery Act (NIRA). Under this act, the investment banking community formed a Code Committee to better regulate the capital markets.

Since the NIRA was all encompassing, it is not surprising that it was soon overturned by the United States Supreme Court in A.L.A. Schechter Poultry Corp. v. United States (295 U.S. 495) on May 27, 1935. Since the NIRA was the source of the Code Committee's power, its undoing forced the group to reorganize. After a ninety percent vote, the group became the Investment Banker's Conference. In the years that followed, the group decided that it was in the best interests of all involve to self-regulate. A series of regulatory rules were established to handle disputes between and against its members. Impressed with its 'Rules of Fair Practice', the SEC helped the Investment Banker's Conference to reform yet again into a regulatory organization. The result of this cooperation yielded the Maloney Act. Not long after its introduction to Congress on January 18, 1938, it was signed into law by FDR on June 25, 1938. This act created the National Association of Securities Dealers (NASD).

Not soon after its experimental birth, the US got itself into more trouble (another World War). During this time, NASD demonstrated it's power by helping to finance the war effort with war bonds. During the war, NASD initiated a program to register all securities personnel despite the shortage of manpower. When the dust finally settled, the NASD continued inspection of its members, developed standards for securities sales literature, and started a certification program for stockbrokers.

It was business as usual until 1964 when the Securities Exchange Act of 1934 was expanded to give the NASD power to establish standards for its members and prosecute violators. This Congressional amendment officially confirmed the regulatory power of the NASD and settled complaints by disciplined member firms. In 1975, the NASD had its power expanded again to allow it oversight of municipal securities dealers.

What does the NASD do?
Today the NASD regulates about 5,000 member firms, with approximately 100,000 offices and 670,000 registered securities brokers. By regulate, I mean the NASD makes the rules, checks for violations, and enforces offenders.

Also, the NASD oversees trading on the Nasdaq markets.

This is all fun and dandy but my school report is about Nasdaq...
As a overseer of markets NASD is directly responsible for the creation of the Over-The-Counter Clearing Corporation (1962), the National Clearing Corporation (1969), and the National Securities Clearing Corporation (1977). Over the years, the NASD also had a direct hand in the Nasdaq markets and the American Stock Exchange. In 1976 it buys the Nasdaq System from Bunker Ramo Corporation and creates the Nasdaq National Market six years later. Over-The-Counter Bulletin Board (OTC:BB) was added 1990 and the AMEX was acquired in a 1998 merger. However, soon the NASD started having financial issues and sells the Nasdaq markets in 2000-2001 to its member and makes American Stock Exchange independent in late 2003. These reorganizations allow the NASD to concentrate on its primary mission: keeping the markets fair and liquid.

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