Federal Register: April 5, 2004 (Volume 69, Number 65)
DOCID: FR Doc 04-7600
SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-49497; File No. SR-NASD-2003-184]
NOTICE: NOTICES
ACTION: Self-regulatory organizations; proposed rule changes:
SUBJECT CATEGORY:
Self-Regulatory Organizations; Order Granting Approval of Proposed Rule Change by the National Association of Securities Dealers, Inc., To Require Members To Review and Update Executive Representative Contact Information on a Quarterly Basis
DOCUMENT SUMMARY:
March 29, 2004.
I. Introduction
On December 8, 2003, the National Association of Securities
Dealers, Inc. (``NASD'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC''), pursuant to section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b4
thereunder,\2\ a proposed rule change to require members to conduct a
review, and, if necessary, update their executive representative
contact information on a quarterly basis, specifically within 17
business days after the end of each calendar quarter. The proposed rule
change was published for notice and comment in the Federal Register on
January 27, 2004.\3\ The Commission received two comment letters on the
proposal.\4\ On March 17, 2004, the NASD filed a response to comments.\5\ This order approves the proposed rule change.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ See Securities Exchange Act Release No. 49110 (January 21, 2004), 69 FR 3973.
\4\ See February 4, 2004 letter from Bradley C. McCurtain, Maine
Securities Corporation (``MSC letter'') (via email), and February
16, 2004 letter from John J. Dardis, President, Jack Dardis & Associates, LTD (``Dardis letter'') (via email).
\5\ See March 17, 2004 letter from Grace Yeh, Assistant General
Counsel, NASD, to Katherine A. England, Assistant Director, Division of Market Regulation, Commission (``NASD letter'').
II. Summary of Comments
The Commission received two comment letters on the NASD's
proposal.\6\ One commenter expressed full support for the proposal, but
suggested the information become a line item on the quarterly FOCUS
report, because ``small firms seldom have executive management
changes.'' \7\ The other commenter found it ``difficult to not agree''
with the NASD's proposal, but noted a lack of instructions on how the
NASD will implement the proposed rule change, and a concern that the
costs of the proposed rule change might outweigh the benefits of the
new requirement.\8\ The commenter raised a number of specific questions, including:
\6\ See footnote 4, supra.
\7\ MSC letter.
\8\ Dardis letter.
\9\ Id.
NASD, in response to the comments, stated the proposal ``is
essential to its ability to regulate the marketplace.'' \10\ NASD
believes that requiring members to review and update such information will ``help ensure the accuracy of the information.'' \11\
\10\ NASD letter at 1.
\11\ NASD has proposed similar quarterly contact information
review requirements. See Securities Exchange Act Release Nos. 49246
(February 13, 2004), 69 FR 8255 (February 23, 2004) (SRNASD2003
183) (order approving continuing education contact person(s)
quarterly update requirement), and 46444 (August 30, 2002), 67 FR
57257 (September 9, 2002) (SRNASD2002108) (proposing quarterly update of emergency contact information).
NASD stated it will collect the information through NASD's Contact System (``NCS''), with all quarterly reviews and updates being performed on a central location in NCS. Additionally, NASD will require members ``to perform all quarterly reviews and updates on the same schedule (i.e., within 17 business days after the end of each quarter).'' \12\
\12\ NASD letter at 2.
In response to a commenter's suggestion that NASD add the executive
representative contact information directly to the FOCUS report, NASD
``notes that the FOCUS report is an SEC document, requiring SEC action
to be amended, and that any amendments to such form tend to be related
to financial reporting requirements.'' \13\ Instead, to help members
comply with this new requirement, NASD is considering different methods
of notifying members of the need to update their executive
representative designation and contact information, including (1)
reminders that are contemporaneous with the act of filing a quarterly
FOCUS report; (2) periodic email broadcasts distributed to members'
executive representatives; and (3) individual emails to executive representatives.\14\
\13\ Id.
\14\ Id.
The NASD explained that failure to provide the requisite
information during the 17 business days following each calendar quarter
can result in disciplinary action by NASD.\15\ NASD noted that, in SR
NASD2004025,\16\ NASD seeks to amend its minor rule violation plan to
address violations of the requirement that members provide or update contact information.
\15\ NASD letter at 3 (``NASD may use informal or formal means to enforce violations of its rules'').
\16\ The Commission has not yet published notice of SRNASD
2004025. Copies of the proposed rule change are available at the Commission and at the NASD.
III. Discussion and Commission Findings
The Commission has reviewed carefully the proposed rule change, the [[Page 17724]]
comment letters, and the NASD's response to the comments, and finds
that the proposed rule change is consistent with the requirements of
the Act and the rules and regulations thereunder applicable to a
national securities association \17\ and, in particular, the
requirements of section 15A(b)(6) of the Act,\18\ which requires, among
other things, that NASD's rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the public interest.
\17\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\18\ 15 U.S.C. 78o3(b)(6).
Specifically, the Commission believes the proposed rule change should assist the NASD in maintaining accurate information about its members' executive representative designation and contact information. Balancing the important role of an executive representative, the NASD's need for accurate information, and the NASD's efforts to minimize the burden of reporting on a quarterly basis the information described in this proposed rule change, the Commission believes the proposed rule change is reasonable and consistent with the purposes of the Act. The Commission also is satisfied that NASD has adequately addressed the commenters' concerns.
IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the Act,\19\ that the proposed rule change (SRNASD2003184) be, and it hereby is, approved.
\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\20\
\20\ 17 CFR 200.303(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 047600 Filed 4204; 8:45 am]
BILLING CODE 801001P
SUMMARY:
National Association of Securities Dealers, Inc.,
DOCUMENT BODY 2:
March 29, 2004.
I. Introduction
On December 8, 2003, the National Association of Securities
Dealers, Inc. (``NASD'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC''), pursuant to section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b4
thereunder,\2\ a proposed rule change to require members to conduct a
review, and, if necessary, update their executive representative
contact information on a quarterly basis, specifically within 17
business days after the end of each calendar quarter. The proposed rule
change was published for notice and comment in the Federal Register on
January 27, 2004.\3\ The Commission received two comment letters on the
proposal.\4\ On March 17, 2004, the NASD filed a response to comments.\5\ This order approves the proposed rule change.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ See Securities Exchange Act Release No. 49110 (January 21, 2004), 69 FR 3973.
\4\ See February 4, 2004 letter from Bradley C. McCurtain, Maine
Securities Corporation (``MSC letter'') (via email), and February
16, 2004 letter from John J. Dardis, President, Jack Dardis & Associates, LTD (``Dardis letter'') (via email).
\5\ See March 17, 2004 letter from Grace Yeh, Assistant General
Counsel, NASD, to Katherine A. England, Assistant Director, Division of Market Regulation, Commission (``NASD letter'').
II. Summary of Comments
The Commission received two comment letters on the NASD's
proposal.\6\ One commenter expressed full support for the proposal, but
suggested the information become a line item on the quarterly FOCUS
report, because ``small firms seldom have executive management
changes.'' \7\ The other commenter found it ``difficult to not agree''
with the NASD's proposal, but noted a lack of instructions on how the
NASD will implement the proposed rule change, and a concern that the
costs of the proposed rule change might outweigh the benefits of the
new requirement.\8\ The commenter raised a number of specific questions, including:
\6\ See footnote 4, supra.
\7\ MSC letter.
\8\ Dardis letter.
\9\ Id.
NASD, in response to the comments, stated the proposal ``is
essential to its ability to regulate the marketplace.'' \10\ NASD
believes that requiring members to review and update such information will ``help ensure the accuracy of the information.'' \11\
\10\ NASD letter at 1.
\11\ NASD has proposed similar quarterly contact information
review requirements. See Securities Exchange Act Release Nos. 49246
(February 13, 2004), 69 FR 8255 (February 23, 2004) (SRNASD2003
183) (order approving continuing education contact person(s)
quarterly update requirement), and 46444 (August 30, 2002), 67 FR
57257 (September 9, 2002) (SRNASD2002108) (proposing quarterly update of emergency contact information).
NASD stated it will collect the information through NASD's Contact System (``NCS''), with all quarterly reviews and updates being performed on a central location in NCS. Additionally, NASD will require members ``to perform all quarterly reviews and updates on the same schedule (i.e., within 17 business days after the end of each quarter).'' \12\
\12\ NASD letter at 2.
In response to a commenter's suggestion that NASD add the executive
representative contact information directly to the FOCUS report, NASD
``notes that the FOCUS report is an SEC document, requiring SEC action
to be amended, and that any amendments to such form tend to be related
to financial reporting requirements.'' \13\ Instead, to help members
comply with this new requirement, NASD is considering different methods
of notifying members of the need to update their executive
representative designation and contact information, including (1)
reminders that are contemporaneous with the act of filing a quarterly
FOCUS report; (2) periodic email broadcasts distributed to members'
executive representatives; and (3) individual emails to executive representatives.\14\
\13\ Id.
\14\ Id.
The NASD explained that failure to provide the requisite
information during the 17 business days following each calendar quarter
can result in disciplinary action by NASD.\15\ NASD noted that, in SR
NASD2004025,\16\ NASD seeks to amend its minor rule violation plan to
address violations of the requirement that members provide or update contact information.
\15\ NASD letter at 3 (``NASD may use informal or formal means to enforce violations of its rules'').
\16\ The Commission has not yet published notice of SRNASD
2004025. Copies of the proposed rule change are available at the Commission and at the NASD.
III. Discussion and Commission Findings
The Commission has reviewed carefully the proposed rule change, the [[Page 17724]]
comment letters, and the NASD's response to the comments, and finds
that the proposed rule change is consistent with the requirements of
the Act and the rules and regulations thereunder applicable to a
national securities association \17\ and, in particular, the
requirements of section 15A(b)(6) of the Act,\18\ which requires, among
other things, that NASD's rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the public interest.
\17\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\18\ 15 U.S.C. 78o3(b)(6).
Specifically, the Commission believes the proposed rule change should assist the NASD in maintaining accurate information about its members' executive representative designation and contact information. Balancing the important role of an executive representative, the NASD's need for accurate information, and the NASD's efforts to minimize the burden of reporting on a quarterly basis the information described in this proposed rule change, the Commission believes the proposed rule change is reasonable and consistent with the purposes of the Act. The Commission also is satisfied that NASD has adequately addressed the commenters' concerns.
IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the Act,\19\ that the proposed rule change (SRNASD2003184) be, and it hereby is, approved.
\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\20\
\20\ 17 CFR 200.303(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 047600 Filed 4204; 8:45 am]
BILLING CODE 801001P