[Federal Register Volume 67, Number 16 (Thursday, January 24, 2002)]
[Notices]
[Pages 3519-3520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1699]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45300; File No. SR-NASD-2002-02]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 by the 
National Association of Securities Dealers, Inc.; To Amend NASD Code of 
Procedure Rule 9522

January 17, 2002.
    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 January 4, 2002, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its wholly owned 
subsidiary, NASD Regulation, Inc. (``NASD Regulation''), filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by NASD Regulation. On January 11, 2002, NASD 
Regulation amended the proposal.\3\ NASD Regulation filed the proposal 
pursuant to section 19(b)(3)(A) of the act,\4\ and Rule 19b-4(f)(6) 
thereunder,\5\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See January 11, 2002 letter from Sarah J. Williams, 
Assistant General Counsel, NASD Regulation, to Katherine A. England, 
Assistant Director, Division of Market Regulation, SEC (``Amendment 
No. 1''). In Amendment No. 1, NASD Regulation provided its rationale 
for waiver of the 30-day operative delay. See Rule 19b-4(f)(6). 17 
CFR 240.19b-(f)(6). The 60-day abrogation period runs from January 
11, 2002, the date that NASD Regulation filed Amendment No. 1.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6). NASD Regulation asked the Commission 
to waive the five-day pre-filing notice requirement and the 30-day 
operative delay.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation proposes to amend NASD Code of Procedure Rule 9522, 
Initiation of Eligibility Proceeding; Member Regulation Consideration, 
to describe in the Rule the cases in which the Department of Member 
Regulation may approve an MC-400 application for relief from NASD 
eligibility requirements. The text of the proposed rule change is 
below. Proposed new language is in italics. Proposed deletions are in 
brackets.
9522. Initiation of Eligibility Proceeding; Member Regulation 
Consideration
    (a) through (e)(2)(A) No change.
    (B) The Department of Member Regulation finds, after reasonable 
inquiry, that except for the identity of the employer concerned, the 
terms and conditions of the proposed admission or continuance are the 
same in all material respects as those imposed or not disapproved in 
connection with a prior admission or continuance of the disqualified 
person pursuant to an order of the Commission under SEC Rule 19h-1 or 
other substantially equivalent written communication, and that there is 
no intervening conduct or other circumstance that would cause the 
employment to be inconsistent with the public interest or the 
protection of investors; [or]
    (C) The disqualification previously was a basis for the institution 
of an administrative proceeding pursuant to a provision of the federal 
securities laws, and was considered by the Commission in determining a 
sanction against such disqualified person in the proceeding; and the 
Commission concluded in such proceeding that it would not restrict or 
limit the future securities activities of such disqualified person in 
the capacity now proposed, or, if it imposed any such restrictions or 
limitations for a specified time period, such time period has 
elapsed[.];or
    (D) The disqualification consists of a court order or judgment of 
injunction or conviction, and such order or judgment:
    (i) expressly includes a provision that, on the basis of such order 
or judgment, the Commission will not institute a proceeding against 
such person pursuant to section 15(b) or 15B of the Act or that the 
future securities activities of such persons in the capacity now 
proposed will not be restricted or limited; or
    (ii) includes such restrictions or limitations for a specified time 
period and such time period has elapsed.
* * * * *

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 its proposal and 
discussed any comments it received regarding the proposal. 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
    NASD Regulation proposes to amend Rule 9522 to expressly describe 
in the Rule those instances in which the Department of Member 
Regulation may approve an MC-400 application for relief from NASD 
eligibility requirements. In August 2000, the SEC approved amendments 
to Rule 9522 to, among other things, provide the Department of Member 
Regulation with the discretion to approve an MC-400 application in 
those cases in which the disqualifying event is excepted from the 
``full'' notice requirements of Rule 
19h-1 under the Act,\6\ but where a ``short form'' notification to the 
SEC under Rule 19h-1 is still required.\7\ The proposed rule change 
provides a complete description, within Rule 9522, of those cases in 
which the disqualifying event permits ``short form'' notification to 
the SEC under Rule 19h-1.
---------------------------------------------------------------------------

    \6\ 17 CFR 240.19h-1.
    \7\ See Securities Exchange Act Release No. 43102 (August 1, 
2000), 65 FR 48266 (August 7, 2000) (SR-NASD-99-76) at 48269.
---------------------------------------------------------------------------

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 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3(b)(6).

---------------------------------------------------------------------------

[[Page 3520]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to section 19(b)(3)(A) of the Act \9\ and 
Rule 19b-4(f)(6) \10\ thereunder.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change 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.
    NASD Regulation has asked that the Commission waive the 5-day pre-
filing notice requirement and accelerate the operative date. The 
Commission finds good cause to do so, because such designation is 
consistent with the protection of investors and the public interest. 
Rule 9522, in its current form, does not provide a full description of 
the cases in which the Department of Member Regulation may approve an 
MC-400 application for relief from NASD eligibility requirements. 
Because the proposed rule change would amend Rule 9522 to provide a 
complete description of those cases in which the disqualifying event 
requires ``short form'' notification to the SEC under Rule 19h-1, the 
Commission finds waiver of the pre-filing notice requirement and 
operative delay is consistent with the protection of investors and the 
public interest. For these reasons, the Commission finds good cause to 
waive the 5-day pre-filing notice requirement and the 30-day operative 
waiting period to allow the proposed rule change to be both effective 
and operative upon filing with the Commission.\11\
---------------------------------------------------------------------------

    \11\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f). The Commission notes that, should cases arise where approval 
of an MC-400 application for relief from NASD eligibility 
requirements does not reasonably fall within the scope of Rule 9522 
as amended by this proposed rule change, the NASD must file a 
proposed rule change to amend the Rule.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal 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 Association. All 
submission should refer to file number SR-NASD-2002-02 and should be 
submitted by February 14, 2002.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-1699 Filed 1-23-02; 8:45 am]
BILLING CODE 8010-01-M