[Federal Register: December 24, 2003 (Volume 68, Number 247)]
[Notices]
[Page 74673-74674]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24de03-144]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48930; File No. SR-NASD-2003-177]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. Relating to Technical Amendments to
Interpretive Material 3130
December 16, 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 December 2, 2003, the National Association of Securities Dealers,
Inc. (``NASD'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by NASD. NASD has
designated the proposed rule change as ``non-controversial'' under
section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders the proposed rule change effective upon filing with 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\ 15 U.S.C. 78s(b)(3)(A).
\4\ 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
NASD is proposing to amend NASD IM-3130. The text of the proposed
rule change is set forth below. Proposed new language is in italics;
proposed deletions are in [brackets].
* * * * *
IM-3130. Restrictions on a Member's Activity
(a) This explanation outlines and discusses some of the financial
and operational deficiencies which could initiate action under Rule
3130. Paragraphs [(b)](c)(2) and [(c)](d)(2) of Rules 3130 and 3131
recognize that there are various unstated financial and operational
reasons for which [the Association] NASD may impose restrictions on a
member so as to prohibit its expansion or to require a reduction in
overall level of business. These provisions are deemed necessary in
order to provide for the variety of situations and practices which do
arise and which, if allowed to persist, could result in increased
exposure to customers and to broker/dealers.
(b) In the opinion of the Board of Governors, it would be
impractical and unwise to attempt to identify and list all of the
situations and practices [which] that might lead to the imposition of
restrictions or the types of remedial actions [the Association] NASD
may direct be taken because they are numerous and cannot be totally
identified or specified with any degree of precision. The Board
believes, however, that it would be helpful to members' understanding
to list some of the other bases upon which [the Association] NASD may
conclude that a member is in or approaching financial difficulty.
(c) For purposes of paragraphs [(b)](c)(2) and [(c)](d)(2) of Rule
3130, a member may be considered to be in or approaching financial or
operational difficulty in conducting its operations and therefore
subject to restrictions if it is determined by [the Association] NASD
that any of the parameters specified therein are exceeded or one or
more of the following conditions exist:
(1) through (8) No change
(d) For purposes of paragraphs [(b)](c)(2) and [(c)](d)(2) of Rule
3131, a member may be considered to be in or approaching financial or
operational difficulty in conducting its operations and therefore
subject to restrictions if it is determined by [the Association] NASD
that any of the parameters specified therein are exceeded or one or
more of the following conditions exist:
(1) No change
(2) The member has experienced a substantial change in the manner
in which it processes its business which, in [the] NASD's view, [of the
Association,] increases the potential risk of loss to customers and
members.
(3) through (8) No change
(e) If [the Association] NASD determines that any of the conditions
specified in paragraphs (c) or (d) of this explanation exist, it may
require that the member take appropriate action by effecting one or
more of the following actions until such time as [the Association] NASD
determines they are no longer required:
(1) through (12) No change
(13) Be subject to such other restrictions or take such other
action as [the Association] NASD deems appropriate under the
circumstances in the public interest and for the protection of members.
* * * * *
[[Page 74674]]
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. 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
The proposed rule change would: (i) change references to
``paragraphs (b)(2) and (c)(2)'' of NASD Rules 3030 and 3031 to
``paragraphs (c)(2) and (d)(2)'' in NASD IM-3130(a), (c), (d), and (e);
and (ii) change references to ``the Association'' to ``NASD'' in NASD
IM-3130, thereby conforming the rule language in NASD IM-3130 to the
rule language in Rules 3130 and 3131, as recently amended.\5\
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\5\ See Securities Exchange Act Release No. 48438 (September 4,
2003), 68 FR 53766 (September 12, 2003) (SR-NASD-2003-74).
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2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of section 15A of the Act,\6\ in general, and with section
15A(b)(6) of the Act,\7\ in particular, 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. NASD believes that conforming the references in NASD
IM-3130 to renumbered paragraphs in recently amended NASD Rules 3130
and 3131 and changing references to ``the Association'' to ``NASD''
would be consistent with the protection of investors and the public
interest.
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\6\ 15 U.S.C. 78o-3.
\7\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASD does not believe that the proposed rule change would result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
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
Because the foregoing proposed rule change does not:
(i) significantly affect the protection of investors or the public
interest;
(ii) impose any significant burden on competition; and
(iii) become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, if
consistent with the protection of investors and the public interest, it
has become effective pursuant to section 19(b)(3)(A) of the Act \8\ and
Rule 19b-4(f)(6) thereunder.\9\ 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.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). The Commission notes that NASD
provided written notice of its intent to file the proposed rule
change, along with a brief description and text of the proposed rule
change at least five business days prior to the date of filing of
the proposed rule change.
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NASD has requested that the Commission waive the 30-day operative
delay. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest.
The proposed rule change corrects references to recently amended rules,
which should preserve the accuracy of NASD's rules. For these reasons,
the Commission designates the proposal to be effective and operative
upon filing with the Commission.\10\
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\10\ For purposes only of accelerating the operative date of the
proposed rule change the Commission considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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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.
Comments may also be submitted electronically at the following e-mail
address: rule-comments@sec.gov. All comment letters should refer to
File No. SR-NASD-2003-177. This file number should be included on the
subject line if e-mail is used. To help the Commission process and
review comments more efficiently, comments should be sent in hardcopy
or by e-mail but not by both methods. 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 available for
inspection and copying at the principal office of the NASD. All
submissions should refer to File No. SR-NASD-2003-177 and should be
submitted by January 14, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31649 Filed 12-23-03; 8:45 am]
BILLING CODE 8010-01-P