[Federal Register Volume 64, Number 150 (Thursday, August 5, 1999)]
[Rules and Regulations]
[Pages 42594-42596]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20099]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 240 and 249

[Release No. 34-41672; File No. S7-16-99]
RIN 3235-AH73


Broker-Dealer Registration and Reporting

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is taking several steps 
as contingency planning in the event that the implementation of Web CRD 
is postponed and Legacy CRD must be reinstated. These steps include 
redesignating Form BD currently in effect until July 30, 1999 as 
Interim Form BD, redesignating Form BDW currently in effect until 
August 1, 1999 as Interim Form BDW, and extending the effectiveness of 
these forms indefinitely; amending Rules 15b3-1(c), 15b6-1, 15Ba2-2(e), 
15Bc3-1, 15Ca2-1(c), and 15Cc1-1 under the Securities Exchange Act of 
1934 to allow the Commission, by order, to conditionally exempt broker-
dealers from the filing instructions contained in those rules and Forms 
BD and BDW, respectively; and amending the Commission's Rules of 
Practice to delegate the authority to issue orders under all these 
rules to the Director of the Division of Market Regulation. These 
actions will permit the Commission to require use of Interim Form BD 
and Interim Form BDW after July 30, 1999 and August 1, 1999, 
respectively, in the event the full implementation of Web CRD is 
delayed and it becomes necessary to return to the Legacy CRD system.

EFFECTIVE DATE: July 30, 1999.

FOR FURTHER INFORMATION CONTACT: Catherine McGuire, Chief Counsel, 
Barbara A. Stettner, Special Counsel, or Brian R. Baysinger, Special 
Counsel at (202) 942-0073, Office of Chief Counsel, Division of Market 
Regulation, Securities and Exchange Commission, 450 Fifth Street, N.W., 
Washington, D.C. 20549-1001.

SUPPLEMENTARY INFORMATION:

I. Description of Amendments

    On April 30, 1999, the Securities and Exchange Commission 
(``Commission'') adopted amendments to Form BDW (``Revised Form BDW'') 
and Rules 15b3-1, 15b6-1, 15Ba2-2, 15Bc3-1, 15Ca1-1 and 15Cc1-1 under 
the Securities Exchange Act of 1934 (``Exchange Act'').\1\ On July 2, 
1999, the Commission adopted amendments to Form BD (``Revised Form 
BD'') and Rules 15b3-1, 15Ba2-2, and 15Ca2-1 under the Exchange Act.\2\ 
These amendments were mainly technical and formatting changes needed to 
accommodate electronic filing in ``Web CRD,'' the new, Internet-based 
Central Registration Depository (``CRD'') system. Revised Form BDW was 
intended to supercede Form BDW, currently in effect until August 1, 
1999, beginning August 1, 1999, and Revised Form BD was intended to 
supercede Form BD, currently in effect until July 30, 1999,\3\ 
beginning July 30, 1999.
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    \1\ Securities Exchange Act Release No. 41356 (April 30, 1999), 
64 FR 25143 (May, 10, 1999) (``BDW Adopting Release'').
    \2\ Securities Exchange Act Release No. 41594 (July 2, 1999); 64 
FR 37586 (July 12, 1999) (``BD Adopting Release'').
    \3\ The current Form BD is referred to in the Adopting Release 
as ``Interim Form BD.''
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    Since the time the Commission adopted these amendments, the 
National Association of Securities Dealers Inc., which operates the CRD 
system, has engaged in more extensive testing of Web CRD. While it 
appears at this time that the implementation of Web CRD will continue 
to go forward as planned, we believe it is prudent to implement a 
contingency plan in the event the full implementation of Web CRD is 
delayed for any reason.
    This contingency plan consists of three elements. First, the 
Commission is redesignating the old Form BD and Form BDW, respectively, 
as Interim Form BD and Interim Form BDW and extending their effective 
dates indefinitely. This is intended to preserve the effectiveness of 
these forms in the event it becomes necessary to return to the Legacy 
CRD system.\4\ However, registrants must continue to file on Revised 
Forms BD and BDW until notified otherwise by the Commission.
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    \4\ The CRD system that is currently in effect is referred to as 
``Legacy CRD.'' As explained in the BD Adopting Release and the BDW 
Adopting Release, the interim forms are compatible with Legacy CRD, 
not with Web CRD. See BD Adopting Release and BDW Adopting Release 
for details.
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    Second, the Commission is amending Rules 15b3-1, 15b6-1, 15Ba2-2, 
15Bc3-1, 15Ca2-1, and 15Cc1-1 to provide the Commission with the 
authority to, by order, conditionally exempt broker-

[[Page 42595]]

dealers from the filing instructions for Form BD and Form BDW. This 
authority is needed to provide the Commission with sufficient 
flexibility to continuously maintain the registration system for 
broker-dealers in the event the full implementation of Web CRD is 
delayed.
    Third, the Commission is amending Rule 30-3 of its Rules of 
Practice to add a new paragraph (a)(67). This paragraph will delegate 
the authority to issue orders under Rules 15b3-1(c)(4), 15b6-1(e), 
15Ba2-2(e)(4), 15Bc3-1(e), 15Ca2-1(c)(4), and 15Cc1-1(d) to the 
Director of the Division of Market Regulation.\5\ The Commission 
believes that this is necessary to effectively respond to any event 
that may delay the full implementation of Web CRD.
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    \5\ 17 CFR 200.30-3
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    The Commission is adopting these amendments immediately, without 
notice and comment, which would otherwise be required by the 
Administrative Procedure Act. The Commission for good cause finds that, 
based on the reasons cited above, notice and solicitation of comment 
regarding the Commission's contingency planning for CRD is 
impracticable, unnecessary, and contrary to the public interest.\6\ 
Furthermore, the Commission for good cause finds that, based on the 
reasons cited above, the rules and amendments shall be effective July 
30, 1999. The Commission believes that the benefits of having a 
contingency plan to handle any problems with implementing Web CRD 
justify any minimal cost or inconvenience to broker-dealers. If the 
Commission does not adopt a contingency plan, and Web CRD fails to 
timely and adequately replace Legacy CRD, the marketplace could be 
disrupted: new broker-dealers could be delayed when trying to enter the 
market and important information about broker-dealers and their 
employees may be temporarily unavailable or difficult to access. This 
contingency plan needs to be adopted prior to the expiration of the old 
Form BD on July 30, 1999.
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    \6\ 5 U.S.C. 553(b)(3)(B) (an agency may dispense with prior 
notice and comment when it finds, for good cause, that notice and 
comment are ``impracticable, unnecessary, or contrary to the public 
interest.''). 5 U.S.C. 553(d) (an agency may dispense with 
publication of a rule less than thirty days before its effective 
date only for good cause).
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    There will be little or no additional costs if Interim Forms BD and 
BDW are retained concurrently with new Forms BD and BDW because the 
forms are virtually identical. Furthermore, the Commission will inform 
broker-dealers which forms to file and does not intend to discipline 
firms that inadvertently file on the wrong form.
    The Commission would like to stress that we still expect Web CRD to 
be implemented as planned. However, the Commission believes that, given 
the size and complexity of the Web CRD system, and the importance of 
the CRD system in the broker-dealer regulatory scheme, it is prudent to 
have a contingency plan in place.

II. Cost Benefit Analysis

    The Commission believes that the benefits of the rule amendments 
clearly justify any costs that may be incurred. The amendments will 
benefit broker-dealers by providing a contingency plan in the event the 
full implementation of Web CRD is delayed. Also, the Commission would 
like to stress that there would be little or no additional costs to 
industry participants if Interim Forms BD and BDW are retained 
concurrently with Revised Forms BD and BDW.

III. Competitive Effects/NSMIA

    Pursuant to Section 23(a) of the Exchange Act, the Commission does 
not believe the rule amendments will impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Exchange Act.

IV. Regulatory Flexibility Analysis

    Pursuant to Section 605(b) of the Regulatory Flexibility Act, the 
Chairman has certified that the rule amendments will not have a 
significant impact on a substantial number of small entities.\7\ A copy 
of the Certification is attached as Exhibit A.
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    \7\ 15 U.S.C. 78w(a).
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List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government agencies).

17 CFR Parts 240 and 249

    Broker-dealers, Reporting and recordkeeping requirements, 
Securities.

Statutory Basis and Text of Final Amendments

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

    1. The authority citation for part 200 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 78mm, 79t, 
77sss, 80a-37, 80b-11, unless otherwise noted.
* * * * *
    2. Section 200.30-3 is amended by adding paragraph (a)(67) to read 
as follows:


Sec. 200.30-3  Delegation of authority to Director of Division of 
Market Regulation.

* * * * *
    (a) * * *
    (67) To issue orders under Rules 15b3-1(c)(4), 15b6-1(e), 15Ba2-
2(e)(4), 15Bc3-1(e), 15Ca2-1(c)(4), and 15Cc1-1(d) (17 CFR 240.15b3-
1(c)(4), 240.15b6-1(e), 240.15Ba2-2(e)(4), 240.15Bc3-1(e), 240.15Ca2-
1(c)(4), and 240.15Cc1-1(d)).
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    3. The authority citation for part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 
78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 
80b-11, unless otherwise noted.
* * * * *
    4. By amending Sec. 240.15b3-1 by adding paragraph (c)(4) to read 
as follows:


Sec. 240.15b3-1  Amendments to application.

* * * * *
    (c) Temporary re-filing instructions. * * *
    (4) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BD (17 CFR 249.501) and 
paragraphs (c)(1), (c)(2), and (c)(3) of this section under conditions 
that differ from the filing instructions contained in Form BD and 
paragraphs (c)(1), (c)(2), and (c)(3) of this section.
    5. By amending Sec. 240.15b6-1 by adding paragraph (e) to read as 
follows.


Sec. 240.15b6-1  Withdrawal from registration.

* * * * *
    (e) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BDW (17 CFR 249.501a) under 
conditions that differ from the filing instructions contained in Form 
BDW.
    6. By amending Sec. 240.15Ba2-2 by adding paragraph (e)(4) to read 
as follows:


Sec. 240.15Ba2-2  Application for registration of non-bank municipal 
securities dealers whose business is exclusively intrastate.

* * * * *

[[Page 42596]]

    (e) Temporary re-filing instructions. * * *
    (4) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BD (17 CFR 249.501) and 
paragraphs (e)(1), (e)(2), and (e)(3) of this section under conditions 
that differ from the filing instructions contained in Form BD and 
paragraphs (e)(1), (e)(2), and (e)(3) of this section.
    7. By amending Sec. 240.15Bc3-1 by adding paragraph (e) to read as 
follows:


Sec. 240.15Bc3-1  Withdrawal from registration of municipal securities 
dealers.

* * * * *
    (e) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BDW (17 CFR 249.501a) under 
conditions that differ from the filing instructions contained in Form 
BDW.
    8. By amending Sec. 240.15Ca2-1 by adding paragraph (c)(4) to read 
as follows:


Sec. 240.15Ca2-1  Application for registration as a government 
securities broker or government securities dealer.

* * * * *
    (c) Temporary re-filing instructions. * * *
    (4) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BD (17 CFR 249.501) and 
paragraphs (c)(1), (c)(2), and (c)(3) of this section under conditions 
that differ from the filing instructions contained in Form BD and 
paragraphs (c)(1), (c)(2), and (c)(3) of this section.
    9. By amending Sec. 240.15Cc1-1 by adding paragraph (d) to read as 
follows:


Sec. 240.15Cc1-1  Withdrawal from registration of municipal securities 
dealers.

* * * * *
    (d) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BDW (17 CFR 249.501a) under 
conditions that differ from the filing instructions contained in Form 
BDW.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

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

    Authority: 15 U.S.C. 78a, et. seq., unless otherwise noted;

* * * * *
    11. By amending Sec. 249.501 by designating the current text as 
paragraph (a) and by adding paragraph (b) to read as follows:


Sec. 249.501  Form BD, for application for registration as a broker and 
dealer or to amend or supplement such an application.

    (a) * * *
    (b) Interim Form BD shall be used for application for registration 
as broker-dealer under the Securities Exchange Act of 1934, or to amend 
such application, only by order of the Commission. In the event broker-
dealers are required to comply with their filing obligations on Interim 
Form BD, the form will be made available at the Commission's 
Publication Office at (202) 942-4040.
    12. By amending Sec. 249.501a by designating the current text as 
paragraph (a) and by adding paragraph (b) to read as follows:


Sec. 249.501a  Form BDW, notice of withdrawal from registration as 
broker-dealer pursuant to Sec. 240.15b6-1, Sec. 240.15Bc3-1, or 
Sec. 240.15Cc1-1 of this chapter.

    (a) * * *
    (b) Interim Form BDW shall be used for application for registration 
as broker-dealer under the Securities Exchange Act of 1934, or to amend 
such application, only by order of the Commission. In the event broker-
dealers are required to comply with their filing obligations on Interim 
Form BD, the form will be made available at the Commission's 
Publication Office at (202) 942-4040.

    By the Commission.

    Dated: July 30, 1999.
Margaret H. McFarland,
Deputy Secretary.

    Note: This Appendix A to the preamble will not appear in the 
Code of Federal Regulations.

Appendix A to the Preamble--Securities and Exchange Commission 
Regulatory Flexibility Act Certification

    I, Arthur Levitt, Jr., Chairman of the U.S. Securities and 
Exchange Commission (``Commission''), hereby certify, pursuant to 5 
U.S.C. Sec. 605(b), that (1) the redesignation of Form BD and Form 
BDW, as currently in effect until July 30, 1999 and August 1, 1999, 
respectively, as Interim Form BD and Interim Form BDW and (2) the 
amendments to Rules 15b3-1(c), 15b6-1, 15Ba2-2(e), 15Bc3-1, 15Ca2-
1(c), and 15Cc1-1(``Rules'') and 17 CFR Sec. Sec. 249.501 and 501a 
under the Securities Exchange Act of 1934 (``Exchange Act'') would 
not, if adopted, have a significant economic impact on a substantial 
number of small entities. The redesignation of Form BD and Form BDW 
is intended to preserve the effectiveness of these forms in the 
event it is necessary to return to the legacy CRD system. The rule 
amendments would allow the Commission, by order, to conditionally 
exempt broker-dealers from the filing instructions contained in 
those rules and Forms BD and BDW, respectively. This authority is 
needed to provide the Commission with sufficient flexibility to 
continuously maintain the registration system for broker-dealers in 
the event the full implementation of Web CRD is delayed. The 
amendments would impose little or no new recordkeeping requirements 
or compliance burdens on small entities. Accordingly, the amendments 
would not have a significant economic impact on a substantial number 
of small entities.

    Dated: July 30, 1999.
Arthur Levitt, Jr.,
Chairman.
[FR Doc. 99-20099 Filed 7-30-99; 4:34 pm]
BILLING CODE 8010-01-P