[Federal Register: March 27, 2003 (Volume 68, Number 59)]
[Notices]
[Page 15023-15024]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27mr03-81]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47558; File No. SR-NASD-2003-36]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. Relating to Amendments to NASD Rule 2340
March 21, 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 March 12, 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,
II, and III below, which Items have been prepared by NASD. Pursuant to
Section 19(b)(3)(A)(i) of the Act,\3\ and Rule 19b-4(f)(1)
thereunder,\4\ NASD has designated this proposal as constituting a
stated policy, practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule, 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)(i).
\4\ 17 CFR 240.19b-4(f)(1).
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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NASD is proposing to amend NASD Rule 2340 to eliminate outdated and
unnecessary references to Rule 15c3-1 under the Act. Below is the text
of the proposed rule change. Proposed new language is italicized;
proposed deletions are in brackets.
* * * * *
2200. Transactions with Customers
* * * * *
2340. Customer Account Statements
(a) through (b) No change.
(c) Definitions
For purposes of this Rule, the following terms will have the stated
meanings:
(1) No change.
(2) a ``general securities member'' refers to any member [which]
that conducts a general securities business and is required to
calculate its net capital pursuant to the provisions of SEC Rule 15c3-
1(a)[, except for paragraphs (a)(2) and (a)(3)]. Notwithstanding the
foregoing definition, a member [which] that does not carry customer
accounts and does not hold customer funds [and] or securities is exempt
from the provisions of this section.
(3) through (5) No change.
(d) No change.
* * * * *
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
NASD represents that the proposed rule change would eliminate from
NASD Rule 2340 outdated and unnecessary references to Rule 15c3-1 under
the Act. NASD Rule 2340 requires that a general securities member send
quarterly account statements to customers. Rule 2340(c)(2) defines a
general securities member as ``any member which conducts a general
securities business and is required to calculate its net capital
pursuant to the provisions of SEC Rule 15c3-1(a), except for paragraphs
(a)(2) and (a)(3).'' NASD represents that when the SEC amended Rule
15c3-1 to change the net capital requirements of certain broker-
dealers, the SEC also moved, with some minor modifications, many of the
provisions that were in paragraphs (a)(2) and (a)(3) into new Rule
15c3-1(a)(2)(iv), (v), and (vi) under the Act.\5\
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\5\ Specifically, old paragraph (a)(2) described introducing
broker-dealers that do not carry customers' accounts, but that
occasionally receive customer funds and securities. Old paragraph
(a)(2) has been replaced by Rule 15c3-1(a)(2)(iv), which describes
broker-dealers that introduce customer accounts and that also
receive, but do not hold, customer funds or securities and Rule
15c3-1(a)(2)(vi), which describes broker-dealers that introduce
customer accounts but do not receive or hold customer funds or
securities or carry customer accounts. Old paragraph (a)(3)
described broker-dealers that engage solely in the sale of
redeemable shares of registered investment companies and certain
other share accounts. These broker-dealers also do not hold customer
funds or securities. This category is now described in Rule 15c3-
1(a)(2)(v). As a result of these changes, the references to Rule
15c3-1 in NASD Rule 2340 no longer refer to the sections that were
intended when NASD Rule 2340 was adopted.
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NASD represents that, besides being obsolete, the references to old
paragraphs (a)(2) and (3) are unnecessary in light of the broader
exemption that already exists in NASD Rule 2340(c)(2). Specifically,
the second sentence of NASD Rule 2340(c)(2) excludes from the
definition of a general securities member any member that ``does not
carry customer accounts and does not hold customer funds and
securities.'' Because the broker-dealers described in old paragraphs
(a)(2) and (a)(3) of Rule 15c3-1 do not carry customer accounts or hold
customer funds or securities, NASD represents that the exemption in
NASD Rule 2340(c)(2) automatically excludes them from the definition of
general securities member.
NASD represents that it is not proposing new references to the
amended provisions of Rule 15c3-1 under the Act because the broker-
dealers described in these provisions also do not carry customer
accounts or hold customer funds or securities, and therefore, are
excluded from the definition of general securities member by the
exemption currently provided in NASD Rule 2340(c)(2). In addition, NASD
represents that deleting such
[[Page 15024]]
references in NASD Rule 2340 prevents the need to change the rule if
the broker-dealers described in paragraphs (a)(2)(iv), (v), and (vi)
are moved to other provisions in Rule 15c3-1 under the Act.
In addition, NASD represents that to ensure that Rule 2340(c)(2)
more closely reflects the language in Rule 15c3-1 and the NASD staff's
long-standing interpretation, the proposed rule change amends the
exclusion from the definition of a general securities member for ``a
member that does not carry customer accounts and does not hold customer
funds and securities'' to state ``a member that does not carry customer
accounts and does not hold customer funds or securities'' (emphasis
added).
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of section 15A(b)(6) of the Act,\6\ 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 represents that the proposed rule change would
amend NASD Rule 2340 to eliminate outdated and unnecessary references
to Rule 15c3-1 under the Act.
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\6\ 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 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 become immediately effective pursuant
to section 19(b)(3)(A)(i) of the Act,\7\ and Rule 19b-4(f)(1)
thereunder,\8\ in that it constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule. At any time within 60 days of the
filing of such proposed rule change, the Commission may summarily
abrogate the 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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\7\ 15 U.S.C. 78s(b)(3)(A)(i).
\8\ 17 CFR 240.19b-4(f)(1).
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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 proposal 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 available for
inspection and copying at the principal office of NASD. All submissions
should refer to File No. SR-NASD-2003-36 and should be submitted by
April 17, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-7344 Filed 3-26-03; 8:45 am]
BILLING CODE 8010-01-P