[Federal Register Volume 63, Number 37 (Wednesday, February 25, 1998)]
[Rules and Regulations]
[Pages 9413-9417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4711]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 249

[Release No. 34-39677]


Commission Requirements for Registration Under Section 15 of the 
Exchange Act

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is adopting Interim 
Form BD for the registration of brokers and dealers under the 
Securities Exchange Act of 1934. The Interim Form is intended to 
enhance the ability of the public to obtain information regarding 
securities professionals until the redesigned CRD system is 
operational.

EFFECTIVE DATE: March 16, 1998.

FOR FURTHER INFORMATION CONTACT: Catherine McGuire, Chief Counsel, or 
Paul Andrews, Special Counsel at (202) 942-0073, Office of Chief 
Counsel,

[[Page 9414]]

Division of Market Regulation, Mail Stop 7-11, Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 12, 1996, the Commission adopted amendments to Form
    BD (``1996 Amendments''), the uniform application form for broker-
dealer registration under the Securities Exchange Act of 1934 
(``Exchange Act'').\1\ In general, the amendments were adopted to 
provide the Commission, self-regulatory organizations (``SROs''), and 
state securities regulators with better information about a 
registrant's disciplinary history; to elicit more precise information 
about the business activities of broker-dealer applicants; and to 
facilitate the electronic retrieval of information. At the time it 
adopted these amendments, the Commission stated that use of Form BD, as 
amended, was to coincide with the implementation of the redesigned 
Central Registration Depository (``CRD''), a computer system operated 
by the National Association of Securities Dealers, Inc. (``NASD'') that 
maintains registration information regarding broker-dealers and their 
registered personnel. Among other things, the redesigned CRD system 
will allow broker-dealers to file Form BD electronically.\2\
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    \1\ Securities Exchange Act Rel. No. 37431 (July 12, 1996), 61 
FR 37357 (July 18, 1996); see also 17 CFR 249.501.
    \2\ The CRD is a customized electronic database that allows 
``one-stop'' filing for broker-dealer registration among the various 
state and federal regulators. In 1992, the Commission began 
participating in the CRD system as part of its ongoing effort to 
reduce the costs associated with broker-dealer registration.
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    Although the NASD expected to implement the redesigned CRD system 
in September 1996, a test of the system that began in May 1996 revealed 
that additional changes were needed in the software that will be used 
by broker-dealers to make electronic filings. Furthermore, the NASD 
determined that broker-dealers needed additional time to prepare their 
internal operations and infrastructure to support electronic filings. 
As a result, the NASD delayed the implementation of the redesigned CRD 
system. Because of this delay, on September 4, 1996, the Commission 
suspended the compliance date for the Form BD amendments.\3\ Thus, 
until the redesigned CRD system is fully functional, applicants 
continue to file old Form BD.
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    \3\ Securities Exchange Act Rel. No. 37632 (September 4, 1996), 
61 FR 47412 (September 9, 1996).
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    One of the primary goals of the enhanced CRD, as well as the Form 
BD as amended, is to make certain information concerning broker-dealers 
and their associated persons more readily available to the public until 
the CRD redesign is complete. The NASD has determined to make the 
information available through a web-based technology. To do so, 
however, it is necessary to reformat a segment of Form BD.
    To enhance the ability of the public to obtain information 
regarding securities professionals, the Commission is adopting Interim 
Form BD for use by registrants until the redesigned CRD system is 
operational.\4\ Interim Form BD is based on old Form BD; it requires 
registrants to file information called for by the 1996 Amendments. The 
information would be in a computer format that will allow the CRD to 
make the information available to the public over the WorldWide Web. 
The Interim Form would not change the substance of the 1996 Amendments, 
but only their appearance on a temporary basis.
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    \4\ At this time, that is expected to occur shortly before the 
year 2000.
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II. Description of the Interim Form BD

    Interim Form BD will consist of Form BD currently in use with one 
exception. Old Question 7 on Form BD will be reformatted to resemble 
Question 11 on the amendments to Form BD approved by the Commission in 
July 1996.\5\ The NASD, through the CRD system, will then publish the 
contents of Question 7 in the interim form for public access. Question 
7 requests information about the disciplinary history of the applicant 
and its control affiliates, including information relating to statutory 
disqualifications,\6\ other relevant history, and the applicant's 
financial soundness. In order to make the disclosure more organized and 
complete, Question 7 is broken into broad categories: criminal, civil, 
regulatory, and financial. Disclosure of such offenses as military 
court convictions, perjury, and conspiracy to commit certain offenses 
is also required.
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    \5\ The Commission has the authority to require the filing of 
Form BD pursuant to Sections 15 and 17 of the Exchange Act. 15 
U.S.C. 78o and 78q.
    \6\ Sections 15(b)(1), 15(b)(4) and 15(b)(6) of the Exchange Act 
authorize the Commission to deny registration to a broker-dealer if 
the broker-dealer or an associated person of the broker-dealer has 
engaged in the activities listed in those sections, 15 U.S.C. 
78o(b)(1), (b)(4), and (b)(6). See also 15 U.S.C. 78o-3(g)(2).
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III. Effective Date

    In general, the Administrative Procedure Act (``APA''), 5 U.S.C. 
551, et seq., requires that agency rulemaking, such as changing Form 
BD, must be subject to a public notice and comment period. 5 U.S.C. 
553. That requirement has already been satisfied. In Securities 
Exchange Act Rel. No. 35224, 60 FR 4040 (Jan. 12, 1995), the Commission 
solicited comment on what became the 1996 Amendments to Form BD. The 
substance of these amendments (namely, new Question 11) will be used in 
Interim Form BD. Thus, Interim Form BD is not subject to a notice and 
comment period.\7\ In addition to being unnecessary, the Commission is 
of the view that soliciting comment would be impractical. The proposed 
Interim Form BD would only be used on a temporary basis and to delay 
its implementation until after a notice and comment period would 
significantly reduce its efficacy.
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    \7\ Alternatively, Section 553(b)(3)(B) of the APA provides that 
an agency may dispense with prior notice and comment when it finds, 
for good cause, that such notice and public comment are 
``impracticable, unnecessary, or contrary to the public interest.'' 
5 U.S.C. 533(b)(3)(B). Because Interim Form BD makes no substantive 
or material change to the 1996 Amendments, and the Commission has 
already solicited comment on those amendments, the Commission finds 
that good cause exists such that notice and comment are unnecessary 
for the adoption of Interim Form BD.
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    Moreover, although the APA generally requires publication of such 
amendments at least thirty days before their effective date, this 
requirement does not apply if the Commission determines, for good 
cause, not to provide a thirty-day period. See 5 U.S.C. 533(d). In 
light of the previous notice and comment period in connection with the 
Form BD amendments, as well as the fact that Interim Form BD will 
provide investors with immediate and inexpensive access to the relevant 
information concerning broker-dealers and their associated persons, the 
Commission here finds that good cause exists such that Interim Form BD 
is effective as of 16, 1998. The use of Interim Form BD is prospective 
only. Registrants already registered with the Commission need not 
refile on Interim Form BD.

IV. Statutory Basis

    15 U.S.C. 78o, 78q, 78w.

List of Subjects in 17 CFR Part 249

    Broker-Dealers, Reporting and recordkeeping requirements, 
Securities.

    For the reasons set forth above, the Commission hereby amends Title 
17, Chapter II, part 249 of the Code of Federal Regulations as follows:

[[Page 9415]]

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    1. The authority citation for Part 249 continues to read in part as 
follows:

    Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *
    Note: Form BD does not, and the Interim Form will not, appear in 
the Code of Federal Regulations.

    2. By amending Form BD (referenced in Section 249.501) to revise 
Question 7 to read as follows:

BILLING CODE 8010-01-P
      

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[GRAPHIC] [TIFF OMITTED] TR25FE98.000



[[Page 9417]]

[GRAPHIC] [TIFF OMITTED] TR25FE98.001


* * * * *
    By the Commission.

    Dated: February 18, 1998.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-4711 Filed 2-24-98; 8:45 am]
BILLING CODE 8010-01-C