In response to questions raised by Regulatory Notice 08-21, the Financial Industry Regulatory Authority (FINRA) has provided additional guidance on the issue of partial redemptions of auction rate securities. Where a member firm is considering the adoption of an allocation process that diverges from the express provisions of NYSE Rule 402.30, but such methodology is believed to comport with the principles set forth in the Notice, the member firm should contact its FINRA Coordinator for a determination that such methodology will be acceptable. FINRA notes further that, when dealing with investors who hold securities that have become illiquid (such as auction rate securities that are experiencing failed auctions), NASD Rule 2110 requires that firms must provide fair and balanced communications pertaining to material matters related to such securities, including allocation methodologies in the case of redemptions and calls. Among the possible methods of such communications could be (i) specific notice by mail or email; (ii) maintenance of an accessible page on the member firm's website; and/or (iii) including prominent, plain English disclosures on customer statements. Such communications should include examples of the allocation process to illustrate the explanation.

http://www.finra.org/RulesRegulation/PublicationsGuidance/InterpretiveLetters/ConductRules/P038895