[Federal Register: March 10, 2003 (Volume 68, Number 46)]
[Notices]
[Page 11424-11430]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10mr03-93]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47433; File No. SR-NASD-2003-24]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. To Amend the NASD Registration Rules
March 3, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and rule 19b-4 thereunder,\2\ notice is hereby given that
on February 26, 2003, the National Association of Securities Dealers,
Inc. (``NASD'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
items I and II below, which items have been prepared by NASD. NASD has
designated the proposed rule change as constituting a ``non-
controversial'' rule change pursuant to rule 19b-4(f)(6) under the
Act,\3\ which renders the proposal effective upon receipt of this
filing by the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
As part of its rule modernization initiative, NASD is proposing to
make technical changes to the NASD registration rules and to update
these rules. Below is the text of the proposed rule change. New text is
in italics. Proposed deletions are in [brackets].
* * * * *
1000. Membership, Registration and Qualification Requirements
* * * * *
1020. Registration of Principals
1021. Registration Requirements
(a) All Principals Must Be Registered
All persons engaged or to be engaged in the investment banking or
securities
[[Page 11425]]
business of a member who are to function as principals shall be
registered as such with [the Association] NASD in the category of
registration appropriate to the function to be performed as specified
in rule 1022. Before their registration can become effective, they
shall pass a Qualification Examination for Principals appropriate to
the category of registration as specified by the Board of Governors. A
member shall not maintain a principal registration with [the
Association] NASD for any person (1) who is no longer active in the
member's investment banking or securities business, (2) who is no
longer functioning as a principal, or (3) where the sole purpose is to
avoid the examination requirement prescribed in paragraph (c). A member
shall not make application for the registration of any person as
principal where there is no intent to employ such person in the
member's investment banking or securities business. A member may,
however, maintain or make application for the registration as a
principal of a person who performs legal, compliance, internal audit,
back-office operations, or similar responsibilities for the member or a
person engaged in the investment banking or securities business of a
foreign securities affiliate or subsidiary of the member.
(b) through (c) No change.
(d) Application for Principal Status
(1) Any person associated with a member as a Registered
Representative whose duties are changed by the member so as to require
registration in any principal classification shall be allowed a period
of 90 calendar days following the change in his duties during which to
pass the appropriate Qualification Examination for Principals. Upon
elevation, the member shall submit to [the Association] NASD an
[elevation form] amended ``Uniform Application for Securities Industry
Registration or Transfer'' [designated by the Board of Governors] and
the applicable fees. In no event may a person function as a Principal
beyond the initial 90 calendar day period following the change in his
duties without having successfully passed the appropriate Qualification
Examination.
(2) No Change.
[(3) If an applicant does not take the examination within the
ninety calendar day period or if the applicant fails the examination, a
new principal elevation form and examination fee shall be required.]
(e) Requirement of Two Registered Principals for [New Applicants for]
Membership] Members
(1) An [applicant for membership in the Association] NASD member,
except a sole proprietorship, shall have at least two officers or
partners who are [qualified to become] registered as principals with
respect to each aspect of the [applicant's] member's investment banking
and securities business pursuant to the applicable provisions of rule
1022[(a), (d) and (e), whichever are applicable, before it shall be
admitted to membership]. This requirement applies to persons seeking
admission as members and existing members.
(2) through (3) No change.
1022. Categories of Principal Registration
(a) General Securities Principal
(1) through (2) No Change.
(3) Except as provided in rule 1021(c), a person who was registered
with [the Association] NASD as a Principal [or a Financial Principal,]
shall not be required to pass a Qualification Examination for General
Securities Principal and shall be qualified as a General Securities
Principal.
(4) A person registered solely as a General Securities Principal
shall not be qualified to function as a Limited Principal--Financial
and Operations; Limited Principal--Registered Options and Security
Futures; Limited Principal--General Securities Sales Supervisor;
Municipal Securities Principal, or Municipal Fund Securities Limited
Principal, unless [he] that person is also qualified and registered as
such [pursuant to paragraph (b)].
[(5) A person registered solely as a General Securities Principal
shall not be qualified to function as a Registered Options Principal
unless he is also qualified and registered as such pursuant to the
provisions of paragraph (f).]
[(6) A person qualified solely as a General Securities Principal
shall not be qualified to be registered as a Limited Principal--General
Securities Sales Supervisor unless he is also qualified and registered
as such pursuant to the provisions of paragraph (g)(1).]
(b) Limited Principal--Financial and Operations
(1) through (2) No change.
[(3) Except as provided in rule 1021(c), a person designated
pursuant to the provisions of subparagraph (1) hereof shall not be
required to take the Limited Principal--Financial and Operations
Examination and shall be qualified for registration as a Limited
Principal--Financial and Operations if:
(A) such person had been performing the functions of a Limited
Principal--Financial and Operations as defined in subparagraph (2)
hereof on or before September 1, 1972; or
(B) such person was registered with the Association as a Financial
Principal.]
(4) Renumbered as (3).
(c) through (e) No change.
(f) Limited Principal--Registered Options and Security Futures
[Principals]
No change to rule language.
(g) Limited Principal--General Securities Sales Supervisor
(1) No change.
(2) A person registered in this category solely on the basis of
having passed the Qualification Examination for Limited Principal--
General Securities Sales Supervisor shall NOT be qualified to:
(A) [be registered in any other category of principal registration]
function in a principal capacity with responsibility over any area of
business activity not prescribed in subparagraph (1);
(B) through (C) No change.
(3) No change.
(h) Limited Principal--Government Securities
(1) All persons associated with a member not previously registered
as a principal who are to function as government securities principals
shall be registered as such with NASD.
(2) Each person associated with a member must be registered as a
Limited Principal--Government Securities if such person is:
(A) Engaged in the management or supervision of the member's
government securities business, including:
(i) Underwriting, trading or sales of government securities;
(ii) Financial advisory or consultant services for issuers in
connection with the issuance of government securities;
(iii) Research or investment advice, other than general economic
information or advice, with respect to government securities in
connection with the activities described in (i) and (ii) above;
(iv) Activities other than those specifically described above that
involve communication, directly or indirectly, with public investors in
government securities in connection with the activities described in
(i) and (ii) above; or
(B) Responsible for supervision of:
[[Page 11426]]
(i) The processing and clearance activities with respect to
government securities; or
(ii) The maintenance of records involving any of the activities
described in paragraph (2)(A) above.
(3) Notification of Principal Status
A member shall promptly notify NASD when an individual not
previously registered with the member as a principal assumes the duties
of a principal on the form designated by the Board accompanied by the
applicable fees.
IM-1022-1. Limited Principal--Registered Options and Security Futures
[Principals]
No change to rule language.
* * * * *
1030. Registration of Representatives
1031. Registration Requirements
(a) All Representatives Must Be Registered
All persons engaged or to be engaged in the investment banking or
securities business of a member who are to function as representatives
shall be registered as such with [the Association] NASD in the category
of registration appropriate to the function to be performed as
specified in rule 1032. Before their registration can become effective,
they shall pass a Qualification Examination for Representatives
appropriate to the category of registration as specified by the Board
of Governors. A member shall not maintain a representative registration
with [the Association] NASD for any person (1) who is no longer active
in the member's investment banking or securities business, (2) who is
no longer functioning as a representative, or (3) where the sole
purpose is to avoid the examination requirement prescribed in paragraph
(c). A member shall not make application for the registration of any
person as representative where there is no intent to employ such person
in the member's investment banking or securities business. A member
may, however, maintain or make application for the registration as a
representative of a person who performs legal, compliance, internal
audit, back-office operations, or similar responsibilities for the
member, or a person who performs administrative support functions for
registered personnel, or a person engaged in the investment banking or
securities business of a foreign securities affiliate or subsidiary of
the member.
(b) through (c) no change.
1032. Categories of Representative Registration
(a) General Securities Representative
(1) No change.
(2) Except as provided in rule 1031(c):
[(A) Any person who was registered with the Association as a
Representative prior to September 1, 1974, shall be qualified to be
registered with the Association as a General Securities
Representative.]
[(B) A person who applied for registration as a Representative
prior to September 1, 1974, and who became registered as a
Representative prior to April 1, 1975, by virtue of having passed the
Qualification Examination for Representatives (Test Series 1) shall be
qualified to be registered as a General Securities Representative.]
[(C) A person who applied for registration as a Representative on
or after September 1, 1974, or who registered as a Representative on or
after April 1, 1975, by virtue of having passed the Qualification
Examination for Registered Representatives (Test Series 1) shall be
qualified to be registered only as a Limited Representative--Investment
Company and Variable Contracts Products and as a Limited
Representative--Direct Participation Programs as defined in paragraph
(b) and (c) hereof.]
[(D) A person who was registered as a Registered Representative
after September 1, 1974, by virtue of having passed the General
Securities Representative Examination (Test Series 7) shall be
qualified to be registered as a General Securities Representative.]
(E) Renumbered as (A)
[(F) A person who was registered as a Registered Representative for
Sale of Variable Contracts Only shall be qualified to be registered as
a Limited Representative--Investment Company and Variable Contracts
Products.]
[(G)](B) A person [registered and in good standing with] who is
authorized or approved to conduct business in accordance with the
requirements of The [Securities and Futures] Financial Services
Authority and having passed the Modified General Securities
Representative Qualification Examination [for United Kingdom
Representatives] shall be qualified to be registered as a General
Securities Representative except that such person's activities in the
investment banking or securities business may not involve the
solicitation, purchase and/or sale of municipal securities as defined
in section 3(a)(29) of the Act.
(H) through (I) renumbered as (C) through (D).
(3) No change.
(b) through (e) no change.
(f) Limited Representative--Equity Trader
(1) No change.
(2) Before registration as a Limited Representative--Equity Trader
as defined in subparagraph (1) hereof may become effective, an
applicant must:
(A) No change.
(B) pass an appropriate Qualification Examination for Limited
Representative--Equity Trader. [Any person who was performing any of
the activities described in paragraph (f)(1) above on or prior to May
1, 1998, and who has filed an application to take this examination by
August 31, 1998, must pass the examination by May 1, 2000. Any person
who is eligible for this extended qualification period and who fails
this examination during the 24 month time period commencing on May 1,
1998, and ending on May 1, 2000, must wait 30 days from the date of
failure to take the examination again. Any person, other than a person
who is eligible for the extended qualification period, who files an
application to take this qualification examination after May 1, 1998,
must pass this examination before conducting such activities as
described in paragraph (f)(1) above. In no event may a person who is
eligible for the extended qualification period function as an Equity
Trader beyond the 24-month period without having successfully passed
the appropriate qualification examination.]
(g) Limited Representative--Government Securities
(1) through (2) no change.
[(3) A person who has been performing the functions of a Limited
Representative--Government Securities on or before April 1, 1996, may
register as such without first meeting the requirement of subparagraph
(1)(B) above unless:
(A) Such person is currently subject to a statutory
disqualification as defined in section 3(a)(39) of the Act or
(B) During the past 10 years before the effective date of that
requirement was the subject of a suspension or fine of $5,000 or more
by the Association, the Securities and Exchange Commission, the
Commodity Futures Trading Commission, state securities commission,
foreign financial regulatory authority, or any other regulatory
organization responsible for the investment banking or securities
business.]
(h) No change.
* * * * *
[[Page 11427]]
1070. Qualification Examinations and Waiver of Requirements
(a) through (b) No Change.
(c) Examination results shall be reported to member firms [on a
pass/fail basis only] and may be accompanied by an analysis of the
candidate's performance on the examination. Passing scores assigned to
each examination series shall be determined by the Board of Governors,
or its designee.
(d) [An applicant cannot receive assistance while taking the
examination. Each applicant shall certify to the Board of Governors
that no assistance was given to or received by him during the
examination.]
[(e)] Pursuant to the rule 9600 Series, [the Association] NASD may,
in exceptional cases and where good cause is shown, waive the
applicable Qualification Examination and accept other standards as
evidence of an applicant's qualifications for registration. Advanced
age[,] or physical infirmity [or experience in fields ancillary to the
investment banking or securities business] will not individually of
themselves constitute sufficient grounds to waive a Qualification
Examination. Experience in fields ancillary to the investment banking
or securities business may constitute sufficient grounds to waive a
Qualification Examination.
(f) Renumbered as (e)
* * * * *
1080. Confidentiality of Examinations
[The Association] NASD considers all of its Qualification
Examinations to be highly confidential. The removal from an examination
center, reproduction, disclosure, receipt from or passing to any
person, or use for study purposes of any portion of such Qualification
Examination, whether of a present or past series, or any other use
which would compromise the effectiveness of the Examinations and the
use in any manner and at any time of the questions or answers to the
Examinations are prohibited and are deemed to be a violation of rule
2110. An applicant cannot receive assistance while taking the
examination. Each applicant shall certify to the Board that no
assistance was given to or received by him during the examination.
* * * * *
1100. Foreign Associates
(a) No Change.
(b) Prior to the time the exemption provided for in paragraph (a)
hereof may become effective, the member desiring to employ any such
person must file with [the Association] NASD a [form designated
``Application for Classification as a Foreign Associate''] ``Uniform
Application for Securities Industry Registration or Transfer'' for each
such person and must certify that such person meets the criteria of
paragraph (a), as well as that:
(1) through (2) no change.
(c) No change.
[1110. Registration of Government Securities Principals and
Representatives]
[1111. Registration of Principals]
[All persons associated with a member not previously registered as
a principal who are to function as government securities principals
shall be registered as such with the Association.]
[(a) Definition of Government Securities Principal]
[Persons associated with a member who are:]
[(1) engaged in the management or supervision of the member's
government securities business, including:]
[(A) underwriting, trading or sales of government securities;]
[(B) financial advisory or consultant services for issuers in
connection with the issuance of government securities;]
[(C) research or investment advice, other than general economic
information or advice, with respect to government securities in
connection with the activities described in (A) and (B) above;]
[(D) activities other than those specifically mentioned that
involve communication, directly or indirectly, with public investors in
government securities in connection with the activities described in
(A) and (B) above; or]
[(2) are responsible for supervision of:]
[(A) the processing and clearance activities with respect to
government securities; or]
[(B) the maintenance of records involving any of the activities
described in paragraph (a)(1) above;]
[are designated as principals.]
[(b) Notification of Principal Status]
[A member shall promptly notify the Association of the assumption
by an individual not previously registered with the member as a
principal on the form designated by the Board of Governors accompanied
by the applicable fees.]
* * * * *
[1113. Persons Exempt From Registration
Persons associated with a member whose functions are exclusively
clerical or ministerial are not required to register with the
Association.]
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASD included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
item IV below. The NASD has prepared summaries, set forth in sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
As part of the NASD's rule modernization initiative, NASD has
identified certain registration rules that are antiquated and need to
be updated to reflect changes in the regulatory landscape. Many of
these registration rules impose requirements that no longer serve a
valid investor protection goal. The proposed changes, which primarily
are technical in nature, are intended to clarify and clean-up existing
rules to reduce burdens on the industry caused by outdated registration
requirements.
Rules 1021 and 1031 (Principal and Representative Registration
Requirements)
Rules 1021(a) and 1031(a) state that persons engaged in a member's
investment banking or securities business who are functioning as
principals or representatives must be registered with NASD in the
appropriate registration category. These rules prohibit a member from
registering a person as principal or representative where the member
does not intend to employ the person in its investment banking or
securities business. Rules 1021(a) and 1031(a) provide a narrow
exception to this general prohibition by permitting a member to
maintain the registration of a principal or representative who performs
legal, compliance, internal audit, or similar responsibilities. NASD
believes that principals or representatives who perform back-office
operations,
[[Page 11428]]
including, but not limited to, cashiering, accounting, settling, and
the record keeping of customers' cash or margin accounts, also should
be included under this limited exception. Accordingly, NASD is
proposing to add the term ``back-office operations'' before the terms
``or similar responsibilities'' in rules 1021(a) and 1031(a). Rule
1021(d)(1) states that a person who is currently a registered
representative may function as a principal for 90 calendar days before
he or she is required to pass the appropriate qualification examination
for principal. This rule requires that a member submit an ``elevation
form'' for a representative who has been elevated to principal. NASD no
longer uses an ``elevation form.'' Rather, NASD now requires members to
submit an amended ``Uniform Application for Securities Industry
Registration or Transfer'' (Form U-4). NASD is proposing to amend the
rule to reflect this change.
Rule 1021(d)(3) suggests that an applicant who does not take the
examination within 90 days or fails the examination can submit a new
form and continue to function as a principal until qualified. This is
inconsistent with rule 1021(d)(1), which states that in no event may a
person function as a principal beyond the initial 90-day period.
Therefore, NASD is proposing to delete rule 1021(d)(3).
Rule 1021(e) requires applicants for NASD membership to have at
least two principals with respect to each aspect of the applicant's
investment banking and securities business. NASD has interpreted rule
1021(e) to generally require all members, including new applicants, to
have at least two principals with respect to each aspect of the
member's investment banking and securities business. Therefore, NASD is
proposing to amend rule 1021(e) to clarify that this requirement
applies to existing members as well as new applicants.
Rules 1022 and 1032 (Principal and Representative Registration
Categories)
Rule 1022(a)(3) states that a person who was registered with NASD
as a principal or financial principal is not required to pass a
qualification examination for general securities principal to be
qualified as a principal. The term ``financial principal'' refers to an
examination that is no longer administered and thus should be deleted
from rule 1022(a)(3).
Rules 1022(a)(4), (5), and (6) provide that a person registered
solely as a general securities principal is not automatically qualified
to function in certain limited principal capacities. NASD is proposing
to combine these rules to eliminate certain redundancies in the
language. Further, NASD is proposing to clarify that a person
registered solely as a general securities principal is not
automatically qualified to function as a municipal securities principal
or municipal fund securities limited principal.
Rule 1022(b)(3) provides an exception from the limited principal--
financial and operations examination for those persons who were
performing these functions before September 1, 1972, and those persons
who were registered as a financial principal. NASD is proposing to
delete rule 1022(b)(3) because the grandfather clause and the reference
to ``financial principal'' relate to changes made in the 1970s.
For consistency with the other headings under rule 1022, NASD is
proposing to amend the headings for rule 1022(f) and IM-1022-1 to
state: ``Limited Principal-Registered Options and Security Futures.''
Rule 1022(g)(2)(A) provides that a limited principal'general
securities sales supervisor cannot be qualified to be registered in any
other principal registration category. NASD believes that rule
1022(g)(2)(A) is inaccurate. Accordingly, NASD is proposing to replace
the current language in rule 1022(g)(2)(A) to state that a person
registered solely as a Limited Principal--General Securities Sales
Supervisor shall not be qualified to function in a principal capacity
with responsibility over any of the areas of business not described in
that rule. This will clarify that such persons may be registered in
other categories, if applicable.
Rules 1032(a)(2)(A)-(D) and 1032(a)(2)(F) relate to the transition
from the Series 1 to the Series 7, which took place in the 1970's. NASD
is proposing to delete rules 1032(a)(2)(A)-(D) and 1032(a)(2)(F)
because these sections are no longer relevant to a vast majority of our
members and NASD could provide waivers if necessary. Rule 1032(a)(2)(G)
provides that persons registered and in good standing with the
Securities and Futures Authority (``SFA'') and who have passed the
Modified General Securities Representative Qualification Examination
for United Kingdom Representatives are qualified to be registered as
general securities representatives, with certain restrictions. Under
the previous regulatory framework in the United Kingdom, certain
persons engaged in the securities and derivatives business were
required to register with the SFA before they could engage in such
business. The Financial Services Authority (``FSA'') has consolidated
the regulatory duties that were carried out by the previous regulatory
bodies, including the SFA. The FSA is an independent non-governmental
body with statutory powers under United Kingdom legislation to regulate
the financial services industry in the United Kingdom. Under the FSA
structure, persons that plan to perform specified functions, known as
regulated activities or controlled functions, must be either authorized
or approved by the FSA before they can carry out these functions.
Therefore, NASD is proposing to revise the language in rule
1032(a)(2)(G) to reflect the FSA's new authorization and approval
process.
Rule 1032(f)(2)(B) sets forth the grace periods for passing the
equity trader examination. For instance, registered representatives who
were eligible for the two-year grace period were given until October 1,
2000, to pass the examination. Because the grace period deadlines have
passed, NASD is proposing to delete the periods specified under rule
1032(f)(2)(B).
Rule 1032(g)(3) provides a grandfathering provision for persons who
were performing the functions of a government securities limited
representative on or before April 1, 1996. NASD believes that it is no
longer necessary to keep this section because most persons who were
eligible for grandfathering have been processed and, if necessary, the
staff may provide waivers to new applicants. Accordingly, NASD is
proposing to eliminate rule 1032(g)(3) in its entirety.
Rule 1070 (Qualification Examination and Waiver of Requirements)
Rule 1070(c) provides that qualification examination results will
be reported to members on a pass/fail basis only. NASD is proposing to
delete the phrase ``on a pass/fail basis only'' because NASD provides
more than just pass/fail information to members.
Rule 1070(d) prohibits an applicant from receiving assistance while
taking an examination. Rule 1080 requires that examinations be kept
confidential. NASD is proposing to combine the language in rule 1070(d)
and rule 1080 because these sections cover similar topics.
Consequently, NASD is proposing to incorporate rule 1070(d) into rule
1080 and delete rule 1070(d).
Rule 1070(e) provides that experience in fields ancillary to
investment banking or securities business will not in and of itself
constitute sufficient grounds for waiving an examination. NASD is
proposing to amend rule 1070(e) to clarify that although age or
physical
[[Page 11429]]
infirmity will not individually of themselves constitute sufficient
grounds to waive an examination, experience in an ancillary field may
be sufficient grounds to waive an examination.
Rule 1100 (Foreign Associates)
Rule 1100(b) requires that members employing foreign associates
file an ``Application for Classification as a Foreign Associate.'' NASD
no longer uses this application. Thus, NASD is proposing to replace the
terms ``Application for Classification as a Foreign Associate'' with
the terms ``Uniform Application for Securities Industry Registration or
Transfer,'' which is the current application.
Rule 1111 (Registration of Government Securities Principals)
Rule 1111 relates to the registration requirements for government
securities principals. Because this rule relates to principal
registration requirements, NASD is proposing to move this rule to the
rule 1020 Series and renumber it as rule 1022(h). The heading for rule
1022(h) will be ``Limited Principal--Government Securities.'' Rule
1022(h) will not include a subsection on examination because there is
no required examination for this registration category. Non-substantive
changes also were made to this provision to clarify its application.
Rule 1113 (Persons Exempt From Registration)
Both rules 1060(a)(1) and 1113 state that associated persons whose
functions are solely and exclusively clerical or ministerial are exempt
from registration. NASD is proposing to delete rule 1113 because it
duplicates rule 1060(a)(1).
Finally, NASD is adopting a new corporate structure and is seeking
the merger of NASD Regulation and NASD Dispute Resolution into NASD,
with the merger becoming effective upon the Commission's authorization
of the operation of Nasdaq other than as a facility of NASD. To
underscore this new corporate structure and renewed regulatory focus,
NASD generally does not refer to itself using its full corporate name,
``the Association'' or ``the NASD.'' Instead NASD uses ``NASD'' unless
otherwise appropriate for corporate or regulatory reasons. Accordingly,
NASD has replaced several references to ``the Association'' and ``the
NASD'' in the text of the proposed rule change with ``NASD.''
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of section 15A(b)(6) of the Act,\4\ which requires, among
other things, that NASD's rules must 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. NASD believes that the proposed rule change also is
consistent with the provisions of sections 15A(b)(3)\5\ and 15A(g)(3)
of the Act,\6\ which, among other things, authorize NASD to prescribe
standards of training, experience, and competence for persons
associated with NASD members. NASD believes that the proposed rule
change clarifies NASD registration obligations and provides consistency
throughout these rules and will assist members and their associated
persons in complying with these rules.
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\4\ 15 U.S.C. 78o-3(b)(6).
\5\ 15 U.S.C. 78o-3(b)(3).
\6\ 15 U.S.C. 78o-3(g)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASD does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has been filed by NASD as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act
\7\ and rule 19b-4(f)(6) thereunder.\8\ Because the foregoing proposed
rule change: (1) Does not significantly affect the protection of
investors or the public interest; (2) does not impose any significant
burden on competition; and (3) does not become operative for 30 days
(or such shorter time as the Commission may designate if consistent
with the protection of investors and the public interest) after the
date of this filing; and NASD provided the Commission with written
notice of its intent to file the proposed rule change at least five
business days prior to the filing date,\9\ the proposed rule change has
become effective pursuant to section 19(b)(3)(A) of the Act \10\ and
rule 19b-4(f)(6) thereunder.\11\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6).
\9\ NASD initially filed the proposed rule change on December
30, 2002 for full notice and comment in accordance with section
19(b)(2) of the Act. See SR-NASD-2002-185. NASD subsequently
withdrew SR-NASD-2002-185 and refiled the proposed rule change as a
``non-controversial'' filing pursuant to section 19(b)(3)(A) of the
Act and rule 19b-4(f)(6) thereunder because the proposed rule change
is highly technical in nature. Rule 19b-4(f)(6)(iii) under the Act
requires the self-regulatory organization to provide the Commission
written notice of its intent to file the proposed rule change at
least five business days before doing so (or such shorter time as
designated by the Commission). The Commission finds that NASD
satisfied the five-day pre-filing requirement by filing SR-NASD-
2002-185.
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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NASD has requested that the Commission waive the 30-day pre-
operative waiting period, which would make the proposed rule operative
immediately. The Commission believes that it is consistent with the
protection of investors and the public interest to waive the 30-day
pre-operative period in this case because the proposed rule change is
highly technical in nature. For these reasons, the Commission waives
the 30-day pre-operative period and designates that the proposal become
operative immediately.\12\
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\12\ For purposes of accelerating the operative date of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of such filing will also be
[[Page 11430]]
available for inspection and copying at the principal office of the
NASD. All submissions should refer to File No. SR-NASD-2002-03 and
should be submitted by March 31, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-5570 Filed 3-7-03; 8:45 am]
BILLING CODE 8010-01-P