[Federal Register: July 18, 2008 (Volume 73, Number 139)]
[Notices]
[Page 41390-41392]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jy08-126]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58123; File No. SR-NSCC-2007-08]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change To Amend
Membership Disqualification Criteria Rules
July 9, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 30, 2007, the
National Securities Clearing Corporation (``NSCC'') filed with the
Securities and Exchange Commission (``Commission'') and on February 7,
2008, and on March 18, 2008, amended the proposed rule change as
described in Items I, II, and III below, which items have been prepared
by NSCC. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NSCC is seeking to amend its membership disqualification criteria
rules in an effort to create more uniformity with the rules of the
Fixed Income Clearing Corporation (``FICC'') and The Depository Trust
Company (``DTC'').\2\
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\2\ DTC and FICC have filed proposed rule changes seeking to
harmonize their membership disqualification criteria rules with each
other and with NSCC.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\3\
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\3\ The Commission has modified the text of the summaries
prepared by NSCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of this filing is to amend the NSCC rules as they
relate to
[[Page 41391]]
membership disqualification criteria in an effort to create more
uniformity between the rules of NSCC and the rules of NSCC's
affiliates, FICC and DTC.
Currently, Addendum S of the rules sets forth NSCC's policy as to
standards relating to competence for membership. The Addendum includes
both objective and subjective factors that may be considered by NSCC in
its evaluation of an applicant or the continued membership of a
particular member. Going forward, NSCC is proposing to amend its rules
to only include those disqualification criteria that can be objectively
monitored by Risk Management staff. For example, NSCC proposes to
delete from its rules specific references to criteria that may not be
reported in a regulatory background check, such as an entity being
subject to ``heightened supervision'' by a regulatory body. NSCC is
proposing to include in its rules a general provision to permit
consideration of events with respect to an applicant or member that may
not be expressly mentioned but that may impact a member's suitability
as a member.
In addition, pursuant to NSCC's current disqualification criteria,
NSCC can consider the criteria with respect to a person or entity that
has ``significant managerial responsibility'' over the applicant or
member. Because it is not easily ascertainable as to what entities or
individuals have ``significant managerial responsibility'' over a
particular entity, NSCC is proposing to amend these provisions in the
rules so that they are consistent with internal surveillance
procedures. Going forward, NSCC will extend the reach of certain
disqualification criteria to persons and entities acting as
``controlling management,'' which will include those officers of the
entity that are currently screened by Risk Management staff pursuant to
internal procedures.
Specifically, NSCC's disqualification criteria will now include:
(i) An applicant or member being subject to statutory
disqualification as defined in Section 3(a)(39) of that Act.\4\ While
this provision currently exists in the rules, it will be moved within
the rules and will be grouped with all other disqualification criteria.
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\4\ The NSCC rules will also provide that applicants and members
must notify NSCC if any member of its controlling management is or
becomes subject to a statutory disqualification, as defined in
Section 3(a)(39) of the Act.
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(ii) An applicant, member, or its controlling management making a
misstatement of material facts; committing fraudulent acts; or being
convicted of any of the crimes listed in the rule.
(iii) An applicant, member, or its controlling management being
permanently or temporarily enjoined from acting on behalf of a
financial institution such as a broker-dealer.
(iv) An applicant or member's suspension or termination from
participation in a national securities association, exchange registered
under the Exchange Act, a self-regulatory organization, clearing
agency, or securities depository.
Pursuant to the proposed change, NSCC would also continue to be
able to cease to act for a member when any of the factors in sections
(i) through (iv) above are present. Addendum S would be struck entirely
from the rules, and the listed disqualification criteria would be
included in NSCC's proposed Rule 2A ``Initial Membership
Requirements.'' \5\
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\5\ NSCC has also filed proposed rule change SR-NSCC-2006-17
which seeks to reorganize NSCC's rules related to membership
standards and membership requirements.
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NSCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \6\ and the rules and
regulations thereunder applicable to NSCC because it will remove
impediments to the perfection of a national system for the prompt and
accurate clearance and settlement of securities transactions and is not
designed to permit unfair discrimination in the admission of
participants or among participants in the use of NSCC by refining
NSCC's rules and procedures with regard to applicants and members, and
in general will protect investors and the public interest.
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\6\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule change would impose
any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were not and are not intended to be solicited with
respect to the proposed rule change, and none have been received. NSCC
will notify the Commission of any written comments it receives.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which the self-regulatory organization consents,
the Commission will:
(A) By order approve such proposed rule change or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NSCC-2007-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NSCC-2007-08. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). 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 Section, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 am and 3 pm. Copies of such filing also will be available for
inspection and copying at the principal office of NSCC and on NSCC's
Web site at http://www.dtcc.com/downloads/legal/rule_filings/2007/
nscc/2007-08.pdf . All comments received will be posted
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without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NSCC-2007-08 and should be submitted on or before August
8, 2008.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16400 Filed 7-17-08; 8:45 am]
BILLING CODE 8010-01-P