[Federal Register Volume 67, Number 114 (Thursday, June 13, 2002)]
[Notices]
[Pages 40763-40765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14943]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46046; File No. SR-NYSE-2002-16]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. Regarding an Interpretation to NYSE Rule 345 (``Employees-
Registration, Approval, Records'') and Registered Persons Who Volunteer 
or Are Called Into Active Military Duty, and Deletion of a Provision 
Regarding Verbal Transfer Approvals

June 6, 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 June 5, 2002, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') 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 the Exchange. The 
Exchange filed the proposal pursuant to section 19(b)(3)(A) of the 
Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with 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\ 15 U.S.C. 78s(b)(3)(A).
    \1\ 17 CFR 240.19b-4(f)(6). The NYSE provided the Commission 
with written notice of its intention to file this proposed rule 
change on April 25, 2002. The Exchange has asked the Commission to 
waive the 30-day operative delay.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes an interpretation to NYSE Rule 345 
(``Employees-Registration, Approval, Records'') to provide relief from 
the Rule's registration requirements, annual registration maintenance 
fees, compensation prohibitions, and continuing education requirements 
as prescribed by NYSE Rule 345A, for registered persons who volunteer 
or are called into active military duty. Further, and as a separate 
matter, the NYSE proposes to delete Interpretation /01 to NYSE Rule 
345(a)(i) of the NYSE Interpretation Handbook, which provides for 
verbal transfer approvals for registered persons, as such approvals are 
administered through the National Association of Securities Dealers, 
Inc.'s (``NASD'') Web-based Central Registration Depository (``CRD'') 
system. The text of the proposed rule change is below. Proposed 
additions are in italics; proposed deletions are in brackets.
NYSE Interpretation Handbook
Rule 345  Employees--Registration, Approval, Records
    (a) Registration.
    /01  Exceptions.
    No change.
    /02  ``Independent Contractors.''
    No change.
    /03  Registered Persons Who Volunteer or Are Called to Active 
Military Duty The Exchange will grant specific relief to registered 
employees of members or member organizations who volunteer or are 
called into active military duty. Such registered employees will be 
placed in a specifically designated ``inactive'' status upon 
notification to the Exchange of their volunteering or military call-up. 
However, such employees will remain registered with the Exchange, and, 
therefore are eligible to receive transaction-based compensation. Since 
such employees are ``inactive,'' they may not perform any of the duties 
performed by a registered representative. However, his or her member or 
member organization may make arrangements with another registered 
representative of the member or member organization to have the 
accounts of such registered person serviced and to provide for a 
sharing of the commissions such accounts generate.
    Further, members and member organizations shall be waived from 
remitting to the Exchange the annual maintenance fees for such 
registered employees as prescribed in Rule 345.14.
    Such registered employees who volunteer or are called into active 
military duty shall receive a deferment from the Regulatory Element and 
Firm Element of the Continuing Education Program as prescribed in 
Exchange Rule 345A. Continuing Education requirements will be 
reinstated upon the registered person's return from active military 
duty.
    Dual members or member organizations of the NYSE and NASD should 
notify the NASD of their registered employees who volunteer or are 
called into active military duty by mailing or faxing to the CRD/Public 
Disclosure Department of the NASD a letter (on firm letterhead) 
identifying the name and CRD number of the registered person called 
into active duty, the name and CRD number of the firm, or firms, with 
whom such person is associated, and a copy of the official call-up 
notification.
    NYSE-only members or member organizations should notify the 
Exchange of their registered employees who volunteer or are called into 
active duty by mailing or faxing to the Exchange's Qualifications and 
Registrations Department, a letter (on firm letterhead) identifying the 
name and CRD number of person(s) who volunteer or are called into 
active duty, the name and CRD number of the firm, or firms, with whom 
such person is associated, and a copy of the official call-up 
notification.
* * * * *
NYSE Interpretation Handbook
Rule 345  Employees--Registration, Approval, Records
    (a)(i) Transfer of registered representatives
    [/01] Verbal Transfer Approvals
    Members and member organizations requesting verbal transfer 
approval for registered representatives of dual NYSE/NASD member 
organizations must contact the Central Registration Depository 
(``CRD'') and request such approval through the Temporary Agent

[[Page 40764]]

Transfer program (TAT). Applicants and member organizations that meet 
the established criteria of the TAT program will be granted NYSE 
temporary approval through the CRD in accordance with that criteria.
    Requests for verbal transfer approvals for registered 
representatives of NYSE-only members and member organizations should be 
made directly to the Exchange.]
    [/02]/01 Compensation to Non-Registered Persons.
    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, the NYSE 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. 
The Exchange 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
    As a result of the tragic events of September 11, 2001, some 
employees of members and member organizations have volunteered or have 
been, or may in the future be, called into active military duty.
    The Exchange is working with other self-regulatory organizations to 
establish a uniform policy that will provide specific relief to such 
registered persons, as follows:
     Continued registration with placement into a special 
inactive status;
     Continued eligibility for receipt of commission income;
     Deferment of continuing education requirements; and
     Waiver of annual registration maintenance fees.
    By way of background, NYSE Rule 345 provides, in part, that no 
members or member organizations shall permit any natural person to 
perform regularly the duties performed by a registered representative, 
unless such person shall have been registered with, qualified by, and 
acceptable to the Exchange. As proposed, the Exchange will grant 
specific relief as described above to registered employees of members 
or member organizations who volunteer or are called into active 
military duty. Such registered employees will be placed in a 
specifically designated ``inactive'' status upon notification to the 
Exchange of their volunteering or military call-up. However, such 
employees will remain registered with the Exchange, and, therefore, be 
eligible to receive transaction-based compensation. Since such 
employees are ``inactive,'' they may not perform any of the duties 
performed by a registered representative. However, a member or member 
organization may permit arrangements with another registered 
representative of the member or member organization to have the 
accounts of such registered person serviced and to provide for a 
sharing of the commissions such accounts generate.
    Further, members and member organizations shall be waived from 
paying the annual maintenance fees for such registered employees as 
prescribed in NYSE Rule 345.14. The NYSE's annual registration 
maintenance fee is $52 per registered person.
    Dual members or member organizations of the NYSE and NASD should 
notify the NASD of their registered employees being called into active 
military duty by mailing or faxing to the CRD/Public Disclosure 
Department of the NASD, a letter (on firm letterhead) identifying the 
name and CRD number of the person(s) who volunteer or are called into 
active duty, the name and CRD number of the firm, or firms, with whom 
such person is associated, and a copy of the official call-up 
notification.
    NYSE-only members or member organizations shall notify the Exchange 
of their registered employees who volunteer or are called into active 
duty by mailing or faxing to the Exchange's Qualifications and 
Registration Department, a letter (on firm letterhead) identifying the 
name and CRD number of the registered person(s) who volunteer or are 
called into active duty, the name and CRD number of the firm, or firms, 
with whom such person is associated, and a copy of the official call-up 
notification.
    NYSE Rule 345A provides, in part, that no member or member 
organization shall permit any registered person to continue to, and no 
registered person shall continue to, perform duties as a registered 
person, unless such person has complied with the Regulatory Element of 
the Continuing Education requirements of this Rule. As proposed, such 
registered employees who volunteer or are called into active military 
duty shall receive a deferment from the Regulatory Element and Firm 
Element of the Continuing Education requirement provided their member 
or member organization has notified the Exchange of their volunteering 
or military call up in the manner prescribed above. Continuing 
Education requirements will be reinstated upon the registered person's 
return from active military duty.
    Web Based CRD Approval of Transfers. In June 1999, the Commission 
approved the NASD's planned implementation of a Web-based CRD,\5\ along 
with revisions to Forms U-4 and U-5.\6\ The CRD is an industry-wide 
automated system, which provides efficient and expeditious review and 
tracking of registered persons in the securities industry, and changes 
in employment and disciplinary histories.
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    \5\ See Securities Exchange Act Release No. 41560 (June 25, 
1999), 64 FR 36059 (July 2, 1999) (SR-NASD-98-96).
    \6\ Form U-4 is the ``Uniform Application for Securities 
Industry Registration or Transfer.'' Form U-5 is the ``Uniform 
Termination Notice of Securities Industry Registration.''
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    In proposing implementation of this Web-based CRD, the NASD 
intended to modernize and streamline the registration process of 
individuals employed in the securities industry.
    In connection with the proposal, the Forms U-4 and U-5 were amended 
so that they could be submitted electronically through the Web-based 
CRD. As a result, individuals seeking registration were required to 
fill out and submit an electronic Form U-4. In addition, when an 
associated person terminates his association with a broker-dealer, the 
broker-dealer would be required to complete and submit an electronic 
Form U-5. Accordingly, the NASD no longer processes paper-based 
submission of such forms. In August 1999, the Exchange filed SR-NYSE-
99-37 with the Commission, seeking approval for the use of amended 
Forms U-4 and U-5, to be used in connection with the Web-based CRD. Its 
intended purpose was to assist the Exchange in its registration and 
oversight functions by providing more detailed reporting concerning 
persons associated with members and member organizations, and to permit 
non-NASD members and member organizations of the Exchange to file the 
forms electronically. The Commission approved the filing in October 
1999.\7\ As a result, verbal transfer approvals for registered persons 
are no longer administered in such a manner. Therefore, the Exchange

[[Page 40765]]

proposes to delete the interpretation relating to verbal transfer 
approvals.
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    \7\ Securities Exchange Act Release No. 41984 (October 6, 1999), 
64 FR 56005 (October 15, 1999) (SR-NYSE-99-37).
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2. Statutory Basis
    The Exchange believes that the proposed rule is consistent with the 
provisions of section 6(b)(4) of the Act,\8\ in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members, issuers and other persons using its services. In 
addition, the Exchange believes that the proposed rule is consistent 
with the provisions of section 6(b)(5) of the Act,\9\ which require the 
rules of an exchange to foster cooperation and coordination with 
persons engaged in regulating securities transactions.
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    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose 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
    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \10\ and subparagraph (f)(6) of Rule 19b-4 \11\ 
thereunder. 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission accelerate the 
operative date. The Commission finds good cause to designate the 
proposal both effective and operative upon filing with the Commission 
because such designation is consistent with the protection of investors 
and the public interest. Acceleration of the operative date will ensure 
that the benefits of the interpretation to NYSE Rule 345 and the 
deletion of the provision regarding verbal transfer approvals are not 
needlessly delayed. For these reasons, the Commission finds good cause 
to designate that the proposal is both effective and operative upon 
filing with the Commission.\12\
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    \12\ 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).
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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 NYSE. All 
submissions should refer to file number SR-NYSE-2002-16 and should be 
submitted by July 5, 2002.

    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. 02-14943 Filed 6-12-02; 8:45 am]
BILLING CODE 8010-01-P