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News April 11, 2005 Issue

Best Practices for Vetting New Products

The NASD has issued a Notice to Members, NTM 05-26, that sets forth a number of "best practices" for vetting new products. Itís worth a read: although advisers donít sell products per se, advisory firm CCOs may find the NASDís notice helpful in the context of considering new lines of business.

The NASD noted that many firms create a mandatory, standardized process for approving new products that involves the preparation of a written new product proposal and the assigning of ownership of the product to a particular business unit.

Other best practices include:

  • A preliminary assessment of a proposed product or concept by compliance and/or legal personnel to determine, among other things, whether it is really a "new" product or a material modification of an existing product;
  • A detailed review by a committee made up of representatives from all relevant sectors of the firm, including compliance, legal, finance, marketing, sales, and operations;
  • A formal decision to approve, disapprove, or table the proposal by a decision-making group that includes members of the firmís senior management; and
  • Post-approval follow up and review.