[Federal Register Volume 67, Number 100 (Thursday, May 23, 2002)]
[Notices]
[Page 36280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-12983]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45933; File No. SR-NASD-2002-27]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Granting Approval to a Proposed Rule Change and 
Amendment No. 1 Thereto Amending NASD Rule 3070 Concerning the 
Reporting of Criminal Offenses by Members and Persons Associated With a 
Member to the NASD

May 15, 2002.
    On February 21, 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''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend NASD 
Conduct Rule 3070 to limit reporting under this category to any felony, 
certain types of misdemeanors, and substantially equivalent activity in 
a domestic, foreign or military court. According to NASD Regulation, 
this proposed rule change would conform NASD Rule 3070(a)(5) to a 
proposed rule change by the New York Stock Exchange, Inc. (``NYSE'') to 
amend NYSE Rule 351(a)(5).\3\ The proposed rule change was published 
for comment in the Federal Register on March 8, 2002.\4\ The Commission 
received one comment letter on the proposal,\5\ which supports the 
proposed rule change. On May 14, 2002, NASD Regulation filed Amendment 
No. 1 to the proposed rule change with the Commission.\6\ This order 
approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 45869 (May 3, 2002), 
67 FR 31398 (May 9, 2002) (approving SR-NYSE-2002-06).
    \4\ See Securities Exchange Act Release No. 45493 (March 1, 
2002), 67 FR 10783.
    \5\ See letter to Jill M. Peterson, Assistant Secretary, 
Commission, from Selwyn J. Notelovitz, Senior Vice President, Global 
Compliance, Charles Schwab & Co., Inc., dated March 21, 2002 
(``Schwab Letter'').
    \6\ See letter to Katherine England, Assistant Director, 
Division of Market Regulation, Commission, from Shirley Weiss, 
Associate General Counsel, NASD Regulation, dated May 14, 2002 
(``Amendment No. 1''). In Amendment No. 1, NASD Regulation amended 
the proposed rule change to require that an arrest, arraignment, or 
conviction before a military court of any of the enumerated crimes 
be reported to the NASD. In addition, NASD Regulation added the 
conspiracy to commit any one of the enumerated misdemeanors under 
NASD Conduct Rule 3070(a)(5) to the list of crimes that must be 
reported to the NASD. This is a technical amendment and is not 
subject to notice and comment.
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    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \7\ 
and, in particular, the requirements of Section 15A of the Act \8\ and 
the rules and regulations thereunder. The Commission finds specifically 
that the proposed rule change is consistent with Section 15A(b)(6) of 
the Act \9\ because narrowing the scope of reportable criminal offenses 
that members and member organizations would be required to report to 
the NASD is designed to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling and facilitating 
transactions in securities. In particular, by continuing to require 
that every felony be reported, but only the proposed misdemeanors, 
would in effect, minimize the number of immaterial filings and maximize 
the effective use of resources committed to fulfilling self-regulatory 
responsibilities at the Association. Moreover, the proposed rule change 
would continue to capture the reporting of arrests for which any 
subsequent conviction would subject the individual to a statutory 
disqualification under Section 3(a)(39) of the Act.\10\
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    \7\ In approving this proposed rule change, the Commission notes 
that it has considered its impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78o-3.
    \9\ 15 U.S.C. 78o-3(b)(6).
    \10\ 15 U.S.C. 78c(a)(39).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change and Amendment No. 1 thereto 
(File No. SR-NASD-2002-27) are approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-12983 Filed 5-22-02; 8:45 am]
BILLING CODE 8010-01-P