[Federal Register: September 12, 2003 (Volume 68, Number 177)]
[Notices]
[Page 53766-53767]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12se03-87]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48438; File No. SR-NASD-2003-74]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Granting Approval of Proposed Rule Change and
Amendment Nos. 1 and 2 Thereto by the National Association of
Securities Dealers, Inc. Regarding the Regulation of Activities of
Members Experiencing Financial and/or Operational Difficulties
September 4, 2003.
On April 16, 2003, the National Association of Securities Dealers,
Inc. (``NASD'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to: (i) amend NASD Rules 3130, 3131 and the Rule
9410 Series to expand NASD's authority to take expedited action against
all member firms with capital deficiencies and to permit NASD to
suspend a member that operates for any period of time with inadequate
net capital, and (ii) delete subparagraph (g) of NASD Rule 9160 because
NASD's Department of Member Regulation staff does not participate as an
adjudicator in an NASD Rule 9410 decision. On June 17, 2003, NASD
submitted Amendment No. 1 to the proposed rule change.\3\ On July 9,
2003, NASD submitted Amendment No. 2 to the proposed rule change.\4\
The proposed rule change, as amended by Amendment No. 1 and Amendment
No. 2, was published for comment in the Federal Register on July 31,
2003.\5\ The Commission received no comments on the proposal. This
order approves the proposed rule change, as amended.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Shirley H. Weiss, Associate General Counsel,
Office of General Counsel, Regulatory Policy and Oversight, NASD, to
Katherine A. England, Assistant Director, Division of Market
Regulation (``Division''), Commission, dated June 17, 2003
(``Amendment No. 1'').
\4\ See letter from Shirley H. Weiss, Associate General Counsel,
Office of General Counsel, Regulatory Policy and Oversight, NASD, to
Katherine A. England, Assistant Director, Division, Commission,
dated July 8, 2003 (``Amendment No. 2'').
\5\ See Securities Exchange Act Release No. 48227 (July 25,
2003), 68 FR 44980.
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The Commission 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.\6\
Specifically, the Commission believes that the proposed rule change is
consistent with the provisions of section 15A(b)(6) of the Act,\7\
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.
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\6\ 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).
\7\ 15 U.S.C. 78o-3(b)(6).
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The Commission believes that the proposed amendments adequately
address those circumstances where limiting an NASD member's business
operations would be futile. Specifically, the Commission believes that
because the proposal permits NASD to suspend any member that operates
for any period of time with inadequate net capital, as required by Rule
15c3-1 under the Act, and Sec. 402.2 of the rules of the Treasury
Department, the proposed rule change should protect investors, market
participants, and the general public from the risks posed by members
operating securities businesses without appropriate levels of capital.
The Commission believes that the proposal to apply NASD Rules 3130
and 3131 to all members regardless of their minimum capital
requirements should protect investors and the public interest. The
Commission believes that any firm that operates with inadequate capital
poses a risk to other firms and investors. Accordingly, the Commission
believes
[[Page 53767]]
that the NASD should have the authority to take action against any
member that is not in capital compliance.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
\8\ that the proposed rule change (SR-NASD-2003-74), as amended, be,
and it hereby is, approved.
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\8\ 15 U.S.C. 78(b)(2).
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. 03-23225 Filed 9-11-03; 8:45 am]
BILLING CODE 8010-01-P