[Federal Register Volume 66, Number 135 (Friday, July 13, 2001)]
[Notices]
[Pages 36812-36813]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17518]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44512; File No. SR-NASD-00-39]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Granting Approval to Proposed Rule Change and 
Amendment Nos. 1 and 2, and Notice of Filing and Order Granting 
Accelerated Approval of Amendment No. 3 to Proposed Rule Change 
Amending Schedule A of the NASD By-Laws for the Timely Filing of 
Reports, and Amendments to IM-9216, Minor Rule Violation Plan

July 3, 2001.
    On June 20, 2000, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through it wholly owned subsidiary, 
NASD Regulation, Inc. (``NASD Regulation''), pursuant to section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and rule 
19b-4 thereunder,\2\ filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') a proposed rule change to amend Schedule A 
of the NASD By-Laws for the timely filing of reports, and amendments to 
IM-9216, the Minor Rule Violation Plan (``MRVP''). NASD Regulation 
amended the proposal on September 5, 2000.\3\ NASD Regulation again 
amended the proposal on September 21, 2000.\4\ The proposed rule 
change, including Amendment Nos. 1 and 2, was published for notice and 
comment in the Federal Register on September 29, 2000.\5\ No comments 
were received on the proposal. On June 28, 2001, NASD Regulation 
amended the proposal.\6\ This order approves the proposed rule change. 
Also, Amendment No. 3 is approved on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See September 1, 2000 letter from Alden S. Adkins, Senior 
Vice President and General Counsel, NASD Regulation to Joseph P. 
Morra, Special Counsel, Division of Market Regulation 
(``Division''), SEC (``Amendment No. 1''). In Amendment No. 1, NASD 
Regulation made technical, non-substantive changes to the original 
proposal. In addition, NASD Regulation provided clarifying language 
to assist in describing the requirements under Rule 1120.
    \4\ See September 19, 2000 letter from Gregory J. Dean, Jr., 
Assistant General Counsel, NASD Regulation to Joseph P. Morra, 
Special Counsel, Division, SEC (``Amendment No. 2''). In Amendment 
No. 2, NASD Regulation corrected the reference to SEC Rule 19d-
1(c)(2) in the title to IM-9216.
    \5\ Securities Exchange Act Release No. 43330 (September 22, 
2000), 65 FR 58585.
    \6\ See June 28, 2001 letter from Patrice M. Gliniecki, Vice 
President and Deputy General Counsel, NASD Regulation to Katherine 
A. England, Assistant Director, Division, SEC (``Amendment No. 3, 
NASD Regulation made the following changes to the proposal regarding 
the MRVP: (1) Member firm violations of the Regulatory Element of 
NASD Rule 1120, Continuing Education, will not be eligible for 
consideration under the MRVP; (2) untimely notifications filed 
pursuant to NASD Rule 4619(d) may be appropriate for disposition as 
a minor violation, where, for example, a member inadvertently misses 
the filing deadline but files the notification the following day 
before the commencement of trading and no customer harm has 
occurred; intentionally late filings are inappropriate for 
disposition as a minor violation of the rule; (3) synchronization of 
business clocks pursuant to NASD Rule 6953 is deleted from the 
proposal; (4) Securities Exchange Act Rule 17a-11, Notification 
Provisions for Brokers and Dealers, is deleted from the proposal; 
(5) payment of annual fees pursuant to MSRB Rule A-14 is clarified 
to reflect that, in the event NASD Regulation staff were to issue a 
minor violation to a firm for failure to pay the annual fee in a 
timely manner, the firm would remain obligated to pay the annual fee 
to the MSRB; firms would not be permitted to pay the minor violation 
fine in lieu of paying the annual fee to the MSRB; and (6) changes 
in language to the ``Purpose'' section of the proposal as originally 
filed (the new language is delineated in Amendment No. 3).
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    The Commission has reviewed carefully the proposed rule change, and 
Amendment Nos. 1, 2 and 3, and finds the proposed rule change is 
consistent with the Act and the rules and regulations promulgated 
thereunder.\7\ Specifically, the Commission finds that approval of the 
proposed rule change is consistent with section 15A(b)(6) of the

[[Page 36813]]

Act,\8\ which requires, among other things, that the Association's 
rules 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. The Commission 
also finds that the proposal, as amended, is consistent with section 
15A(b)(7) of the Act,\9\ in that it will allow for reasonable 
safeguarding of investors' interests while establishing fair and 
reasonable rules for the Association's members and persons associated 
with its members. The Commission also finds the proposal is consistent 
with section 15A(b)(8) of the Act,\10\ in that it furthers the 
statutory goal of providing a fair procedure for disciplining the 
Association's members and associated persons. Finally, the Commission 
finds the proposal is consistent with Securities Exchange Act Rule 19d-
1(c)(2) \11\ that governs minor rule violation plans.
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    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78o-3(b)(6).
    \9\ 15 U.S.C. 78o-3(b)(7).
    \10\ 15 U.S.C. 78o-3(b)(8).
    \11\ 17 CFR 240.19d-1(c)(2).
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    In approving this proposal, the Commission in no way minimizes the 
importance of compliance with these rules, and all other rules subject 
to the imposition of fines under the Association's MRVP. The Commission 
believes that the violation of any self-regulatory organizations' 
rules, as well as Commission rules, is a serious matter. However, in an 
effort to provide the Association with greater flexibility in 
addressing certain violations, the MRVP provides a reasonable means to 
address rule violations that do not rise to the level of requiring 
formal disciplinary proceedings. The Commission expects that the 
Association will continue to conduct surveillance with due diligence, 
and make a determination based on its findings whether fines of more or 
less than the recommended amount are appropriate for violations of 
rules under its MRVP, on a case by case basis, or if a violation 
requires formal disciplinary action.
    The Commission finds good cause for approving proposed Amendment 
No. 3 before the 30th day after the date of publication of notice of 
filing of Amendment No. 3 in the Federal Register. The Association 
filed Amendment No. 3 largely in response to concerns raised by the 
Commission regarding language in the original proposal, and ambiguity 
regarding how the Association intended to monitor violations of certain 
rules if those rules were administered under the Association's MRVP. 
Amendment No. 3 clarifies the ambiguities noted by the Commission and 
eliminates some rules that did not lend themselves to enforcement 
through an MRVP to address the Commission's concerns. The substantive 
changes implemented in Amendment No. 3 warrant accelerated approval. 
For these reasons, the Commission finds good cause for accelerating 
approval of Amendment No. 3.
    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 3, including whether proposed 
Amendment No. 3 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 
number SR-NASD-00-39 and should be submitted by August 3, 2001.
    It Therefore Is Ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-NASD-00-39), including 
Amendment Nos. 1, 2 and 3, is approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-17518 Filed 7-12-01; 8:45 am]
BILLING CODE 8010-01-M