[Federal Register Volume 60, Number 232 (Monday, December 4, 1995)]
[Notices]
[Pages 62115-62118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29430]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36517; File No. SR-NASD-95-51]


Self-Regulatory Organizations; Notice of Proposed Rule Change by 
National Association of Securities Dealers, Inc. Relating to 
Rearranging of Rules and New Rule Numbering System

November 27, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on November 
3, 1995 the National Association of Securities Dealers, Inc. (``NASD'' 
or ``Association'') 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 the NASD. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

I. Self-regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD is herewith filing a proposed rule change to its Rules and 
various interpretations thereto. This and other material now contained 
in the NASD Manual is proposed to be rearranged, so that the complete 
contents of the Manual will be replaced. A binder containing the 
complete text of the revised Rules of the Association as well as a 
chart converting the old manual into its revised format is available 
for inspection at the Commission's Public Reference Room. A summary of 
the order of material filed with the Commission is reprinted below:
* * * * *

Guide to the Manual

Table of Contents
Conversion Charts

Administrative

History and Organization of the NASD
Officials
Telephone Inquiries
List of Selected Notices to Members
Publications Order Form
Clearing Corporation and Depository References
Members
Changes to List of Members; Disciplinary Actions

Corporate Organization

Certificate of Incorporation
By-Laws
    Schedule A  Assessments and Fees
    Schedule B  Districts: Number and Territorial Boundaries

Rules of the Association

0100  General Provisions

Membership and Registration Rules

1000  Membership, Registration and Qualification Requirements

Conduct Rules

2000  Business Conduct
    2100  General Standards
    2200  Communications with Customers and the Public
    2300  Transactions with Customers
    2400  Commissions, Markups and Charges
    2500  Special Accounts
    2600  Reserved
    2700  Securities Distributions
    2800  Special Products
    2900  Responsibilities to Other Brokers or Dealers
3000  Responsibilities Relating to Associated Persons, Employees, 
and Others' Employees
    3100  Books and Records, and Financial Condition
    3200  Settlements
    3300  Trading

Marketplace Rules

4000  The Nasdaq Stock Market
    4100  General
    4200  Definitions
    4300  Qualification Requirements for Nasdaq Stock Market 
Securities
    4400  Nasdaq National Market--Issuer Designation Requirements
    4500  Issuer Listing Fees
    4600  Nasdaq Market Maker Requirements
    4700  Small Order Execution System (SOES)
5000  Other Nasdaq and NASD Markets
    5100  Nasdaq International Service Rules
    5200  Intermarket Trading System/Computer Assisted Execution 
System (ITS/CAES)
    5300  The PORTALSM Market
6000  NASD Systems and Programs
    6100  Automated Confirmation Transaction Service (ACT)
    6200  Fixed Income Pricing System (FIPS)
    6300  Consolidated Quotations Service (CQS)
    6400  Reporting Transactions in Listed Securities
    6500  OTC Bulletin Board (OTCBB)
    6600  Reporting Transactions in Over-The-Counter Equity 
Securities
    6700  Reporting Transactions in Certain Non-Nasdaq Securities
    6800  Mutual Fund Quotation Program
7000  Charges for Services and Equipment

Procedural Rules

8000  Complaints, Investigations and Sanctions
    8100  Complaints
    8200  Investigations
    8300  Sanctions
9000  Code of Procedure
    9100  Administrative Provisions
    9200  Disciplinary Actions by District Business Conduct 
Committees, the Market Surveillance Committee and Others
    9300  Review of Disciplinary Actions by the National Business 
Conduct Committee and the Board
    9400  Imposition of Sanctions and Costs
    9500  Limitation and Approval Procedures under Rules 3130 and 
3140
    9600  Summary Suspension, Revocation, Expedited Remedial and 
Eligibility Procedures
    9700  Procedures on Grievances Concerning the Automated Systems
    9800  Corporate Financing and Direct Participation Program 
Matters
10000  Code of Arbitration Procedure
    10100  Administrative Provisions
    10200  Industry and Clearing Controversies
    10300  Uniform Code of Arbitration
    10400  Mediation Rules
11000  Uniform Practice Code

SEC Rules and Regulation T

* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the 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

    (a) The proposed rule change is part of a multi-phase program in 
which the NASD is reorganizing the NASD Manual to make it more usable 
by members and other users of the Manual. The present rule change is a 
non-substantive reordering of the existing Rules, interpretations, and 
other provisions of the Manual to establish a more logical progression 
of Rules within the Manual. All Rules in the NASD Manual, including not 
only the current Rules of Fair Practice but also such specialized Rules 
as the PORTAL Rules, Nasdaq Rules, Code of Arbitration Procedure, and 
so forth, have been numbered consecutively throughout the Manual and 
considered together as ``Rules.'' In addition, a common numbering and 
naming scheme for subdivisions within a Rule has been used. Discussion 
of specific changes is set forth below.
    (1) Rules Terminology. The change in terminology from ``Rules of 
Fair Practice'' to ``Rules'' has been made in all Rules in which such 
terminology appears. As described above, the Rules now include not only 
the former Rules of Fair Practice, but also all other Rules and Codes 
of the NASD, by whatever name they have been known. Rules and 

[[Page 62117]]
other material that did not previously have titles have been given 
descriptive titles as part of the revision.
    (2) Categories. The Rules are no longer divided into Articles, but 
are numbered from beginning to end. Major categories, numbered in the 
thousands, include Membership and Registration Rules, Conduct Rules, 
Marketplace Rules, and Procedural Rules. Subcategories of Rules are 
numbered in the hundreds or tens, as appropriate, with individual Rules 
at the tens or unit level. Where individual Rules that would normally 
be numbered at the tens level exceed the numbers available, they have 
been numbered at the unit level instead, to allow adequate numbers for 
each Rule.
    (3) Paragraph Numbering. A uniform method of numbering the various 
paragraph levels within Rules have been used throughout. Thus, 
subdivisions within a Rule have been renumbered as follows:
    (a)
    (1)
    (A)
    (i)
    a.
    1.
    A.
    i.
    Where there were unnumbered subparagraphs within a Rule, they have 
generally been given numbers to facilitate reference to them.
    (4) Names of Rule Subdivisions. The terms used to refer to parts of 
Rules have been made uniform as follows:
    Rule 1001
    paragraph (a)
    subparagraph (1)
    subparagraph (A)
    subparagraph (i)
    etc.
    In referring to a provision that has multiple levels, the name of 
the largest level has been used wherever possible, such as Rule 
1000(a)(1), or paragraph (a)(1)(A). In this method, the term 
``subparagraph'' is normally used only when referring to lower levels 
within the same Rule, as in ``subparagraph (i) of this Rule,'' or to 
multiple subparagraphs, as in ``subparagraphs (2)(A) and (B) of 
paragraph (a).''
    (5) Interpretive Material. Some Interpretations have been converted 
to Rule form as part of this rule change. Interpretative material that 
has not been converted to Rule form, including Interpretations, 
Resolutions, Explanations, Policies, and Guidelines, has been given the 
designation ``IM,'' for ``Interpretative Material.'' This was done to 
provide uniformity to the various designations in the current Manual. 
All Interpretive Material in the Rules of the Association is numbered 
with ``IM-'' followed by the number(s) of the Rule or Rules it 
interprets. Interpretive Material in the By-Laws and Schedules A and B 
has been left as it is currently, since those sections are not part of 
the Rules numbering scheme.
    (6) Terms and Abbreviations. The terms ``Association,'' 
``Corporation'' and ``NASD'' are presently used alternately in some of 
the Association's existing Rules when referring to the NASD. To 
establish uniformity, the term ``Association'' has been used throughout 
the Rules when referring to the NASD. The By-laws will continue to use 
the term ``Corporation.'' When reference is made in the Rules or 
Interpretative Material to the ``Securities and Exchange Commission,'' 
it has been shortened to ``SEC'' or ``Commission.'' In the same way, 
other terms that are adequately defined in the By-Laws or the 
definitional portion of the Rules (Rule 0120) have not been redefined 
in individual Rules. Therefore, such terms as ``the Act'' have been 
used without further description unless such usage would be confusing 
in the particular context. References to SEC Rules are preceded by the 
designation ``SEC,'' such as in ``SEC Rule 11Aa3-2,'' in order to avoid 
confusion with the Rules of the Association. Code of Federal 
Regulations (CFR) citations to well-known SEC rules have been deleted. 
They were infrequently used in the Manual and are not thought to be 
helpful for most users of the Manual; therefore, only the SEC Rule 
number has been used in most instances.
    (7) Indentation. A common system of indentation and paragraph 
structure has been used within the Rules, whereby each succeeding 
subdivision level is indented about five spaces further than the next 
higher level. This system, together with the new paragraph numbering 
system, should make it easier for Manual users to determine which 
provisions are subsidiary to others.
    (8) Technical Corrections. In several instances, a careful review 
of the Rules for this rule change revealed typographical, grammatical, 
or cross-referencing errors, which were corrected when it was obvious 
to NASD staff that an error had occurred. Many such corrections have 
been footnoted in the rule change. Minor changes to punctuation and 
capitalization have also been made for consistency.
    The NASD plans to train key staff members in the above style and 
numbering conventions, so that future rule changes will conform to the 
new style and keep the Manual clear and consistent.
    (b) The NASD believes that the proposed rule change is consistent 
with the provisions of Section 15A(b)(6) of the Act,\1\ in that the 
proposed rule change does not alter the substance of the NASD's By-Laws 
or Rules; rather, the proposed rule change simplifies the layout of the 
NASD Manual and makes it easier to use. Making the NASD Manual easier 
to use enhances the protection of investors and the public interest.

    \1\ 15 U.S.C. 78o-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Association 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 Statements on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    No comments were solicited or received by the NASD.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 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 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
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 

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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 the file number in the caption above and 
should be submitted by December 26, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-29430 Filed 12-1-95; 8:45 am]
BILLING CODE 8010-01-M