[Federal Register Volume 66, Number 51 (Thursday, March 15, 2001)]
[Notices]
[Pages 15157-15159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6391]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44052; 
File No. SR-NASD-01-13]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Amendments to the By-Law 
Definitions of ``Broker'' and ``Dealer''

March 8, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on March 6, 2001, the National Association of Securities Dealers, 
Inc. (``NASD''), through its wholly owned subsidiary, NASD Regulation, 
Inc. (``NASD Regulation''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by NASD 
Regulation. NASD Regulation has designated the proposed rule change as 
constituting a ``non-controversial'' rule change under paragraph (f)(6) 
of Rule 19b-4 under the Act,\3\ which renders the proposal effective 
upon receipt of this filing by the Commission. 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule

    NASD Regulation is proposing to amend the definitions of ``broker'' 
and ``dealer'' in Article I of the By-Laws of NASD Regulation to 
conform with the recent changes to the definitions of ``broker'' and 
``dealer'' in the Act, as amended by the Gramm-Leach-Bliley Act of 1999 
(``GLBA'').\4\ Specifically, Title II of the GLBA eliminates the long-
standing general exception for banks

[[Page 15158]]

from the definitions of ``broker'' and ``dealer'' in the Act. In place 
of the general exception, the GLBA enumerates a series of exceptions 
from the definitions of ``broker'' and ``dealer'' for certain banking 
activities.
    Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in brackets.

By-Laws of NASD Regulation, Inc.
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    \4\ Pub. L. 106-102, 113 Stat. 1338 (1999).
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Article I

Definitions
    (a)-(b) No change.
    (c) ``broker'' shall have the same meaning as in Section 3(a)(4) of 
the act; [means any individual, corporation, partnership, association, 
joint stock company, business trust, unincorporated organization, or 
other legal entity engaged in the business of effecting transactions in 
securities for the account of others, but does not include a bank;]
    (d)-(e) No change.
    (f) ``dealer'' shall have the same meaning as in Section 3(a)(5) of 
the Act; [means any individual, corporation, partnership, association, 
joint stock company, business trust, unincorporated organization, or 
other legal entity engaged in the business of buying and selling 
securities for such individual's or entity's own account, through a 
broker or otherwise, but does not include a bank, or any person insofar 
as such person buys or sells securities for such person's own account, 
either individually or in some fiduciary capacity, but not as part of a 
regular business;]
    (g)-(ff) No change.

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 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 purpose of the proposed rule change is to amend the definitions 
of ``broker'' and ``dealer'' in the By-Laws of the NASD Regulation to 
conform to the definitions of ``broker'' and ``dealer'' in the Act. 
Under the proposal, the definitions of ``broker'' and ``dealer'' in the 
By-Laws will incorporate by reference the definitions of these terms as 
set forth in Sections 3(a)(4) and 3(a)(5), respectively, of the Act.\5\
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    \5\ 15 U.S.C. 78c(a)(4) and (a)(5).
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    NASD Regulation is proposing to amend the definitions of ``broker'' 
and ``dealer'' in its By-Laws in anticipation of changes being made to 
the Act's definitions of these terms pursuant to the GLBA. More 
specifically, title II of the GLBA, which becomes effective on May 12, 
2001, eliminates the long-standing general exception for banks from the 
definitions of ``broker'' and ``dealer'' in the Act. In place of the 
general exception, for banks, the GLBA enumerates a series of 
exceptions from the definitions of ``broker'' and ``dealer'' for 
certain specified banking activities.\6\
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    \6\ See id.
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    The proposed rule change is necessary to ensure that the 
definitions of ``broker'' and ``dealer'' in the NASD Regulation By-Laws 
remain consistent with the definitions in the Act. Moreover, because 
the proposed rule change would incorporate by reference the definitions 
of ``broker'' and ``dealer'' as set forth in the Act, it would 
eliminate the need for any conforming amendments to the definitions of 
these terms in the By-Laws in the event Congress amends the Act's 
definitions in the future.\7\
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    \7\ In approving the proposed rule change, the Board of 
Directors of NASD Regulation recognized that any future amendments 
to the Act's definitions of ``broker'' and ``dealer'' would, in 
effect, result in an identical change to the definitions of these 
terms in the NASD Regulation By-Laws, without requiring any further 
action by the Board.
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2. Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(6) of the Act,\8\ 
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 proposed amendments which conform the NASD Regulation By-Law 
definitions of ``broker'' and ``dealer'' with those in the Act, is 
consistent with these purposes.
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    \8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation does not believe that the proposed rule change 
would result in 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 nor received.

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

    The proposed rule change has been filed by NASD Regulation as a 
``non-controversial'' rule change under Rule 19b-4(f)(6) under the 
Act.\9\ NASD Regulation has stated that, because the foregoing proposed 
rule change: (1) Does not significantly affect the protection of 
investors or the public interest; (2) does not impose any significant 
burden on competition; and (3) does not become operative until May 12, 
2001 (or whatever date Title II of the GLBA becomes effective), more 
than 30 days from the date on which it was filed (March 6, 2001), and 
NASD Regulation provided the Commission with written notice of its 
intent to file the proposed rule change at least five days prior to the 
filing date, the proposed rule change has become immediately effective.
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    \9\ 17 CFR 240.19b-4(f)(6)
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    At any time within 60 days of this filing, the Commission may 
summarily abrogate this proposal if it appears to the Commission that 
such action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.

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 20549-0609. 
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

[[Page 15159]]

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-01-13 and should be submitted by April 5, 
2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-6391 Filed 3-14-01; 8:45 am]
BILLING CODE 8010-01-M