[Federal Register Volume 66, Number 62 (Friday, March 30, 2001)]
[Notices]
[Pages 17460-17461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-7861]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44096; File No. SR-NASD-01-18]


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

March 23, 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 19, 2001, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), 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 Nasdaq. Nasdaq 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

    Nasdaq is proposing to amend the definitions of ``broker'' and 
``dealer'' in Article I of the By-Laws of Nasdaq 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\ 
Below is the text of the proposed rule change. Proposed new language is 
in italics; proposed deletions are in brackets.
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    \4\ Pub. L. No. 106-102, 113 Stat. 1338 (1999).
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By-Laws of the NASDAQ Stock Market, Inc.

Article I--Definitions

* * * * *
    (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

[[Page 17461]]

account of others, but does not include a bank;]
* * * * *
    (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;]
* * * * *

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

    In its filing with the Commission, Nasdaq 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. Nasdaq 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 Nasdaq 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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    Nasdaq 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. 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 Nasdaq 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 Nasdaq recognized that any future amendments to the 
Act's definitions of ``broker'' or ``dealer'' would, in effect, 
result in an identical change to the definitions of these terms in 
the Nasdaq By-Laws, without requiring any further action by the 
Board.
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2. Statutory Basis
    Nasdaq 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 NASD'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. Nasdaq believes that the proposal, which 
conforms the Nasdaq 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

    Nasdaq 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 Nasdaq as a ``non-
controversial'' rule change under Rule 19b-4(f)(6) under the Act.\9\ 
Nasdaq 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 (more than 30 days 
from March 19, 2001, the date on which it was filed), and Nasdaq 
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 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-01-18 and should 
be submitted by April 20, 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. 01-7861 Filed 3-29-01; 8:45 am]
BILLING CODE 8010-01-M