[Federal Register Volume 63, Number 146 (Thursday, July 30, 1998)]
[Notices]
[Pages 40759-40761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20363]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40252; File No. SR-NASD-98-46]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Technical Corrections to 
Delegation Plan and IM-1000-4

July 23, 1998.
    On July 9, 1998, the National Association of Securities Dealers, 
Inc. (``NASD'') through its regulatory subsidiary NASD Regulation, Inc. 
(``NASD Regulation'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder.\2\ The proposed rule change is described in Items I, II, 
and III below, which Items have been prepared by NASD Regulations. NASD 
Regulation has designated this proposal as one constituting a stated 
policy, practice, or interpretation with respect to the meaning of an 
existing rule under Section 19(b)(3)(A)(i) of the Act, which

[[Page 40760]]

renders the proposal effective upon the Commission's receipt of this 
filing. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation is proposing to make a technical correction to NASD 
Interpretive Material IM-1000-4 and a clarifying amendment to the Plan 
of Allocation and Delegation of Functions by NASD to Subsidiaries 
(``Delegation Plan'') regarding NASD Regulation's authority to inspect 
the books and records of The Nasdaq Stock Market, Inc. (``Nasdaq''). 
Below is the text of the proposed rule change. Proposed new language is 
italicized; proposed deletions are in brackets.
IM-1000-4. [Appointment of Executive Representative] Branch Offices and 
Offices of Supervisory Jurisdiction
    [The term ``executive representative'' as found in Section 3 of 
Article III of the By-Laws means that person designated by the member 
to represent, vote and act for the member in all the affairs of the 
Association. Pursuant to the provisions of Section 8 of Article III of 
the By-Laws, every member who maintains a registered branch office in a 
district of the Association other than the one in which its main office 
is located, is entitled to one vote on all matters pertaining solely to 
the district in which such registered branch office is located, 
including the election of members of the Board of Governors from such 
district. Should a member maintain more than one branch office in a 
district, it is entitled to only one vote in that district. Therefore, 
each member shall designate one executive representative and shall 
designate one ``district executive representative'' for each district 
other than the one in which the main office is located in which the 
member maintains a registered branch office.]
    Each member is under a duty to insure that its membership 
application with the Association is kept current at all times by 
supplementary amendments to its original application and that any 
offices other than the main office are properly designated and 
registered, if required, with the Association.
    Each member must designate to the Association those offices of 
supervisory jurisdiction, including the main office, and must register 
those offices which are deemed to be branch offices in accordance with 
the standards set forth in Rule 3010.

Plan of Allocation and Delegation of Functions by NASD to 
Subsidiaries

    I. NASD, Inc.
* * * * *
D. Access to and Status of Offices, Directors, Employees, Books, 
Records, and Premises of Subsidiaries
    Notwithstanding the delegation of authority to the Subsidiaries, as 
set forth in Sections II.A. and III.A. below, the staff, books, 
records, and premises of the Subsidiaries are the staff, books, 
records, and premises of the NASD subject to oversight pursuant to the 
Act, and all officers, directors, employees, and agents of the 
Subsidiaries are officers, directors, employees, and agents of the NASD 
for purposes of the Act. The books and records of Nasdaq shall be 
subject at all times to inspection and copying by NASD Regulation.

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

    In its filing with the Commission, NASD Regulation 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. NASD Regulation has prepared summaries, set 
forth in Section 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

1. Purpose
    The proposed rule change makes a technical correction to 
Interpretive Material 1000-4 by removing an obsolete provision 
regarding election procedures and district executive representatives. 
All regional nomination and district election procedures are now set 
forth in Articles VI and VIII of the NASD Regulation By-Laws, which 
permit only the Executive Representative of a member firm to cast a 
vote for a nomination or election.
    The proposed rule change also adds a clarifying provision to the 
Delegation Plan specifically authorizing NASD Regulation to inspect and 
copy Nasdaq records. Nasdaq has always provided NASD Regulation with 
full access to its records. The clarification to the Delegation Plan 
was recommended by the Independent Consultant retained by the NASD in 
accordance with Securities Exchange Act Release No. 37538 (August 8, 
1996), SEC's Order Instituting Public Proceedings Pursuant to Section 
19(h)(1) of the Securities Exchange Act of 1934, Making Findings and 
Imposing Remedial Sanctions, In the Matter of National Association of 
Securities Dealers, Inc., Administrative Proceeding File No. 3-9056 
(``Order''). Undertaking No. 2 of the Order requires that NASD 
Regulation have full access to the records of Nasdaq.
(2) Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(6) of the Act,\3\ 
which requires, among other things, that the Association's rules must 
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. NASD Regulation believes 
that the technical and clarifying corrections set forth in the proposed 
rule change are consistent with the provisions of the Section 
15A(b)(6).\4\
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    \3\ 15 U.S.C. 78o-3(b)(6).
    \4\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation 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 Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act \5\ and subparagraph (e)(1) of Rule 19b-4 
thereunder \6\ in that it constitutes a stated policy, practice, or 
interpretation with respect to the meaning of an existing rule. At any 
time within 60 days of the filing of a rule change pursuant to Section 
19(b)(3)(A) of the Act, \7\ the Commission may summarily abrogate the 
rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors,

[[Page 40761]]

or otherwise in furtherance of the purposes of the Act. \8\
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    \5\ 15 U.S.C. 78s(b)(3)(A)(i).
    \6\ 17 CFR 240.19b-4(e)(1).
    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ In reviewing this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 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 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 File No. SR-NASD-98-46 and should 
be submitted by August 20, 1998.

    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. 98-20363 Filed 7-29-98; 8:45 am]
BILLING CODE 8010-01-M