[Federal Register Volume 64, Number 52 (Thursday, March 18, 1999)]
[Notices]
[Pages 13462-13463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6552]



[[Page 13462]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41152; File No. SR-NYSE-99-05]


Self-Regulatory Organization; Notice of Filing and Order Granting 
Accelerated Approval of Proposed Rule Change by the New York Stock 
Exchange, Inc. for Approval of Interim Forms U-4 and 
U-5

March 10, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 10, 1999, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons. For the reasons discussed 
below, the Commission is granting accelerated approval of the proposed 
rule change.
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    \1\ 15 US.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

    The Exchange proposes to implement Interim Forms U-4 (Uniform 
Application for Securities Industry Registration or Transfer) and U-5 
(Uniform Termination Notice for Securities Industry Registration) for 
the duration of their application as the industry standard. The forms, 
submitted as Exhibit A with this proposal, may be examined in the 
Commission's Public Reference Room and at the Exchange.

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 NYSE 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 III below. The NYSE 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

1. Purpose
    The Exchange is filing Interim Forms U-4 and U-5. These forms are 
used by the Exchange as part of its registration and oversight of 
persons associated with members and member organizations.\3\ These 
forms are employed in connection with the industry's Central 
Registration Depository (``CRD''). The CRD is an automated industry-
wide system which allows for the review and tracking of registered 
persons within the securities industry and is used by self-regulatory 
organizations, the Commission, and the states.
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    \3\ The Commission notes that these forms have been approved by 
the Commission and are currently in effect. See Securities Exchange 
Act Release No. 37407 (July 5, 1996), 61 FR 36595 (July 11, 1996) 
(order granting accelerated approval of SR-NASD-96-19) and 
Securities Exchange Act Release No. 39562 (January 20, 1998), 63 FR 
3942 (January 27, 1998) (order granting approval of SR-NASD-97-78).
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    In July 1996, the Commission approved revisions to Forms U-4 and U-
5.\4\ These revisions were developed by a task force of industry 
representatives that included the Exchange. The most significant of 
these revisions related to questions on the Forms dealing with 
disclosure by applicants of prior regulatory, civil or criminal 
actions. In addition, the Commission approved new Form U-4 and U-5 
formats compatible with a redesign of the CRD system anticipated in the 
Spring of 1997.\5\
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    \4\ See Securities Exchange Act Release No. 37407 (July 5, 
1996), 61 FR 36595 (July 11, 1996) (order granting accelerated 
approval of SR-NASD-96-19).
    \5\ Id.
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    On November 25, 1996, the NASD filed a proposed rule change 
designed to permit the release of additional information regarding the 
disciplinary history of members and their associated persons as part of 
a Public Disclosure Program (``PDP'').\6\ Additionally, the filing 
sought to make the Forms U-4 and U-5 compatible with the redesigned CRD 
system. The information proposed to be disclosed through the PDP 
included:
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    \6\ See Securities Exchange Act Release No. 37994 (November 27, 
1996), 61 FR 64549 (December 5, 1996)(notice of filing of SR-NASD-
96-38).
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     All pending arbitrations and civil proceedings that relate 
to securities or commodities transactions.
     Pending written customer complaints alleging sales 
practice violations and compensatory damages of $5,000 or more.
     Settlements of $10,000 or more of arbitrations, civil 
suits, and customer complaints involving securities or commodities 
transactions.
     Current investigations involving criminal or regulatory 
matters.
     Terminations of employment after allegations involving 
violations of investment-related statutes of rules, fraud, theft, or 
failure to supervise investment-related activities.
     Bankruptcies less than 10 years old and outstanding liens 
or judgments.
     Bonding company denials, payouts, or revocations.
     Any suspension or revocation to act as an attorney, 
accountant, or federal contractor.
    In early 1997, the NASD determined that the scheduled CRD redesign 
should be reassessed. A revised, Internet-based approach and a longer 
range schedule were adopted for its implementation. In October 1997, 
the NASD submitted a filing withdrawing the November 1996 filing 
because it was premised on the implementation of the previous CRD 
redesign.\7\
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    \7\ See Securities Exchange Act Release No. 39322 (November 13, 
1997), 62 FR 62391 (November 21, 1997) (notice of filing of SR-NASD-
97-78).
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    However, to accomplish the release of the PDP information, the 
October 1997 filing also proposed the implementation of reformatted 
Interim Forms U-4 and U-5.\8\ These forms would require the same 
substantive disclosure as the November 1996 filing, but would be 
compatible with current CRD technology. In addition, the October 1997 
filing included amendments which clarified the definition of the terms 
``Investigation,'' ``Sales Practice Violation,'' ``Investment 
Related,'' and ``Appropriate Signatory.'' The October 1997 filing 
became effective in March 1998.\9\
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    \8\ Id.
    \9\ See Securities Exchange Act Release No. 39562 (January 20, 
1998), 63 FR 3942 (January 27, 1998) (order granting approval of SR-
NASD-97-78). See also Securities Exchange Act Release No. 39731 
(March 6, 1998), 63 FR 12558 (March 13, 1998) (notice changing the 
effective date of the forms from February 17, 1998 to March 16, 
1998).
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    The Exchange requests approval for the use of these Interim Forms 
U-4 and U-5 for the duration of their application as the industry 
standard until the industry establishes a more permanent format.
2. Statutory Basis
    The Exchange believes that the use of Forms U-4 and U-5 is 
consistent with Section 6(b)(5) \10\ of the Act because the use of 
standard registration forms fosters cooperation and coordination with 
persons engaged in the regulating transactions in securities. 
Additionally, the information reported on the forms

[[Page 13463]]

assists the Exchange in its responsibilities under Section 6(c) \11\ of 
the Act, which requires that an Exchange deny membership to persons 
subject to a statutory disqualification or persons who cannot meet such 
standards of training, experience and competence as are prescribed by 
the rules of the Exchange or persons who have engaged in acts or 
practices inconsistent with just and equitable principles of trade.
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    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(c).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposal does not impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited or received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
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 20549-0609. 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 NYSE. All 
submissions should refer to File No. SR-NYSE-99-05 and should be 
submitted by April 2, 1999.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission believes that the proposed rule change is consistent 
with the Act and the rules and regulations thereunder \12\ applicable 
to a national securities exchange. In particular, the Commission 
believes that the proposed rule change is consistent with Section 
6(b)(5) \13\ which requires, among other things, that the rules of an 
exchange be designed to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, not to permit unfair discrimination among customers, 
issuers, brokers or dealers, and, in general, to protect investors and 
the public interest.
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    \12\ Pursuant to Section 3(f) of the Act, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. The Commission notes that a version of the 
Forms U-4 and U-5 are used by all self-regulatory organizations. 
Moreover, the forms provide self-regulatory organizations with a 
centralized and efficient means of maintaining information on member 
firms and their associated persons. 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change benefits the 
public because the release of additional PDP information provides 
investors with a resource to aid them in choosing a broker-dealer for 
their investment needs. Moreover, increasing disclosure of members' and 
their associated persons' relevant disciplinary history could help 
investors determine whether to conduct or continue to conduct business 
with a particular broker-dealer or associated person. The Commission 
notes that disclosure of this additional information may serve as a 
deterrent to fraudulent activity as well.
    In reassessing the CRD redesign, the task force determined that the 
Forms U-4 and U-5 had to be redesigned to accomplish the release of the 
additional PDP information. In addition to facilitating the release of 
additional information, the forms were also redesigned to be compatible 
with the current CRD protocol (i.e., the answers on the interim forms 
now match the location of questions in the CRD system). The Commission, 
therefore, approves the use of these interim forms, recognizing their 
necessity in disseminating this additional disciplinary history to the 
public.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. The Commission notes that the 
forms have previously been approved by the Commission and are currently 
in effect.\14\ The Commission also notes that the previous filing was 
submitted for the requisite notice and comment period, and the 
Commission received no public comments. Furthermore, the proposed rule 
change raises no new issue of regulatory concern. The Commission 
believes, therefore, that granting accelerated approval to the proposed 
rule change is appropriate and consistent with Section 6 \15\ of the 
Act.
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    \14\ See supra note 3.
    \15\ U.S.C. 78f.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-NYSE-99-05) is hereby 
approved on an accelerated basis.

    \16\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-6552 Filed 3-17-99; 8:45 am]
BILLING CODE 8010-01-M