Commentary

Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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December 1, 2000

NASD E-Mail Discounts' Criticized

By William Hoffman

An NASD spokesperson calls an e-mail to members offering "quality products at a discount price" an "affinity program."

One NASD member calls it is a scam. In two letters to the SEC, Alan Davidson, president of the Independent Broker Dealers Association, slammed it as a "continuing violation and abuse of the NASD Regulatory E-mail Notification list."

Davidson's reason: NASD members can be sanctioned for refusing to provide their e-mail address for the notification list. Members are also required to read messages sent through the system, he said.

Those requirements obligate the NASD to use the system only for its intended purpose, he said, not to solicit on behalf of corporate advertisers.

Computer Products

The NASD e-mailed its first offering in October: a discount on Dell Computer products. The offering is part of the NASD's five-year-old member benefits program.

The program charges corporate sponsors a fee for participation. The NASD would not disclose how much it charges or what the money is used for.

An NASD official said the organization keeps its e-mail list private. The NASD will not give, loan or sell it to others, the official said.

Davidson said that's not the point. "What I'm really suggesting is that it makes no difference whether they're selling the e-mail list or just making it available to corporate sponsors," he said. "Unfortunately, [the NASD is] our regulator. It's not like AT&T, where you can call them up and tell them to take you off their list."

Evaluating Use

The NASD official is undeterred. "This is a program we expect to continue," he said, noting that the use of e-mail notification will be evaluated.

The SEC won't comment on Davidson's pending complaints. An NASD spokesperson said the member benefits program was Davidson's idea in the first place.

Davidson acknowledged that he called for the NASD to initiate a group discounts program, using competitive bidding to contract for special offers with quality suppliers. That was in 1992, he noted.

Davidson also derided the programs for offering discounts that ordinary customers could get elsewhere. "They have offered no greater benefits for members than are available to anybody who reads the newspapers, or visit's Dell's website," he said.

Genuine Savings

The NASD official said the NASD's in-house staff work with sponsors to ensure that the savings offered are genuine and substantially superior to what retail customers can get.

The NASD official said that the IBDA's president's complaints aren't new: Davidson levelled similar charges of abuse of the NASD e-mail and fax list during the board of governors election earlier this year.