[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