[Federal Register Volume 62, Number 176 (Thursday, September 11, 1997)]
[Notices]
[Pages 47855-47856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24133]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39019; File No. SR-NASD-97-41]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by National Association of Securities Dealers, Inc. Relating to 
the Definition of Branch Office

September 4, 1997.

I. Introduction

    On June 17, 1997,\1\ the National Association of Securities 
Dealers, Inc. (``NASD'' or ``Association'') submitted to the Securities 
and Exchange Commission (``SEC'' or ``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')\2\ 
and Rule 19b-4 thereunder,\3\ a proposed rule change to amend Rule 3010 
of the NASD's Conduct Rules to create another exception to the 
definition of branch office. A notice of the proposed rule change 
appeared in the Federal Register on July 2, 1997.\4\ The Commission 
received two comment letters endorsing the proposed rule change.\5\ The 
Commission is approving the proposed rule change.
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    \1\ The NASD granted an extension of the time for Commission 
action on this rule filing until thirty-five days after NASD 
Regulation filed an amendment advising of the action of the NASD 
Board of Governors. Letter from Craig L. Landauer, Associate General 
Counsel, NASD Regulation, Inc., to Katherine A. England, Assistant 
Director, Division of Market Regulation, SEC, dated June 24, 1997. 
The NASD Board of Governors reviewed this proposed rule change on 
June 26, 1997. Letter from Craig L. Landauer, Associate General 
Counsel, NASD Regulation, Inc., to Katherine A. England, Assistant 
Director, Division of Market Regulation, SEC, dated June 27, 1997.
    \2\ 15 U.S.C. Sec. 78s(b)(1).
    \3\ 17 CFR 240.19b-4.
    \4\ Securities Exchange Act Release No. 38781 (June 26, 1997), 
62 FR 35870.
    \5\ Letter from Allen W. Croessmann, President, BankBoston 
Investor Services, to Jonathan G. Katz, Secretary, SEC, dated July 
22, 1997 and Letter from Joseph P. Savage, Assistant Counsel, 
Investment Company Institute, to Jonathan G. Katz, Secretary, SEC, 
dated July 22, 1997.
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II. Description of the Proposal

    The definition of a branch office, found in NASD Rule 3010, 
includes any location identified by any means to the public or 
customers as a location at which the member conducts an investment 
banking or securities business, subject to several exceptions.\6\ If a 
business location of a member meets the definition of a branch office, 
such office must be identified to the NASD through the filing of a 
Schedule E to

[[Page 47856]]

Form BD and such location is subject to an annual NASD fee of $75.00.
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    \6\ See NASD Rule 3010(g)(2).
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    Rule 3010 does not address the circumstance in which a business 
location is used exclusively for appointments from time to time between 
registered representatives and customers. This issue may arise under 
networking arrangements between NASD members and banks. In this 
context, registered representatives of the member may periodically 
schedule appointments with bank customers at a bank location where the 
NASD member conducts no securities activities. Under the Interagency 
Statement on Retail Sales of Non-deposit Investment Products, banks are 
required to use signage at the place of the appointment to identify the 
NASD member that employ the registered person.\7\ Thus, the presence of 
this signage at the place of appointment could be interpreted as the 
member or its agent designating the location as a branch office for 
which branch office registration requirements would apply. Thus, the 
NASD has created another exception to the definition of branch office 
to address this type of situation.
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    \7\ Board of Governors of the Federal Reserve System et al., 
Interagency Statement on Retail Sales of Non-deposit Investment 
Products, p. 10 (February 15, 1994).
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    The proposed amendment adds language to paragraph (g) of Rule 3010 
to exempt from the definition of branch office certain locations where 
a person conducts business for the member firm occasionally and 
exclusively by appointment for the convenience of customers, and where 
the member maintains no other tangible presence. To be consistent with 
other provisions of Rule 3010, the persons conducting business at such 
locations would be required to provide each customer with the address 
and telephone number of the branch office or office of supervisory 
jurisdiction of the firm from which the person who is conducting the 
meeting is supervised.

III. Discussion

    The Commission believes the proposed rule change is consistent with 
the Act and rules and regulations promulgated thereunder. Specifically, 
the Commission believes that approval of the proposed rule change is 
consistent with Section 15A(b)(6)\8\ of the Act.\9\ Pursuant to Section 
15A(b)(6), the proposed rule change permits member firms and their 
representatives to be flexible when scheduling appointments at a 
location convenient to their customers without being assessed an 
additional branch office registration fee. However, the Commission 
reiterates that member firms, pursuant to NASD Rules, are required to 
monitor and supervise representatives and their activity, whether they 
conduct business in a branch or non-branch office. The status of a 
location as a branch or non-branch office is not relevant to the duty 
to supervise.\10\
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    \8\ Section 15A(b)(6) requires the Commission to determine that 
a registered national securities association's rules are designed to 
promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market 
and national market system; and are not designed to permit unfair 
discrimination among customers, issuers, brokers, or dealers.
    \9\ The Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 
Sec. 78c(f).
    \10\ The NASD plans to issue a Notice to Members to clarify 
member firms' supervisory responsibilities concerning non-branch 
offices.
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IV. Conclusion

    For the above reasons, the Commission believes that the proposed 
rule change is consistent with the provisions of the Act, and in 
particular with Section 15A(b)(6).
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NASD-97-41) be, and hereby 
is, approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-24133 Filed 9-10-97; 8:45 am]
BILLING CODE 8010-01-M