[Federal Register Volume 67, Number 214 (Tuesday, November 5, 2002)]
[Notices]
[Pages 67432-67434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28100]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46739; File No. SR-NASD-2002-146]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Amending NASD Rule 3011 To Require Members To 
Identify and Provide Contact Information for Their Anti-Money 
Laundering Compliance Persons

October 29, 2002.
    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 October 22, 2002, the National Association of Securities 
Dealers, Inc. (``NASD'' or ``Association''), submitted to 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 NASD. NASD 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).
    \4\ 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 Change

    NASD proposes to amend NASD rule 3011 to require each member to 
provide to NASD contact information for the individual or individuals 
responsible for implementing and monitoring the day-to-day operations 
and internal controls of the member's anti-money laundering (``AML'') 
compliance program (``AML Program''). Below is the text of the proposed 
rule change. New text is in italics.
* * * * *

[[Page 67433]]

3011. Anti-Money Laundering Compliance Program

    On or before April 24, 2002, each member shall develop and 
implement a written anti-money laundering program reasonably designed 
to achieve and monitor the member's compliance with the requirements of 
the Bank Secrecy Act (31 U.S.C. 5311, et seq.), and the implementing 
regulations promulgated thereunder by the Department of the Treasury. 
Each member organization's anti-money laundering program must be 
approved, in writing, by a member of senior management. The anti-money 
laundering programs required by this rule shall, at a minimum;
    (a) Establish and implement policies and procedures that can be 
reasonably expected to detect and cause the reporting of transactions 
required under 31 U.S.C. 5318(g) and the implementing regulations 
thereunder;
    (b) Establish and implement policies, procedures, and internal 
controls reasonably designed to achieve compliance with the Bank 
Secrecy Act and the implementing regulations thereunder;
    (c) Provide for independent testing for compliance to be conducted 
by member personnel or by a qualified outside party;
    (d) Designate, and identify to NASD (by name, title, mailing 
address, e-mail address, telephone number, and facsimile number) an 
individual or individuals responsible for implementing and monitoring 
the day-to-day operations and internal controls of the program and 
provide prompt notification to NASD regarding any change in such 
designation(s); and
    (e) Provide ongoing training for appropriate personnel.
* * * * *

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 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. NASD 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 USA PATRIOT Act of 2001 (``PATRIOT Act''),\5\ which was signed 
into law on October 26, 2001, recognizes that effective identification 
of money laundering and terrorist activities requires the expedited 
sharing and reporting of information among governmental and law 
enforcement authorities and financial institutions. In furtherance of 
this goal, section 314(a) of the PATRIOT Act requires the United States 
Department of the Treasury (``Treasury'') to adopt regulations to 
encourage cooperation and information sharing among financial 
institutions, their regulatory authorities, and law enforcement 
authorities. In particular, the regulations should be designed to 
facilitate law enforcement authorities' ability to share information 
with financial institutions and to request information from financial 
institutions about persons suspected of engaging in money laundering or 
terrorist activities. Section 314(a) of the PATRIOT Act further 
provides that the regulations adopted by Treasury may require that each 
financial institution designate one or more contact persons to receive 
information concerning, and to monitor accounts of, identified 
individuals or entities.
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    \5\ Uniting and Strengthening America by Providing Appropriate 
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. 
L. No. 107-56, 115 Stat. 272 (2001).
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    On September 18, 2002, Treasury issued a final rule implementing 
section 314 of the PATRIOT Act. Consistent with section 314(a) of the 
PATRIOT Act, the rule creates a system for the efficient communication 
of potential money laundering and terrorist information. Upon receiving 
a request for information by the Financial Crimes Enforcement Network 
(``FinCEN''), a bureau of Treasury, the rule requires financial 
institutions to identify a contact person to handle the request and to 
receive future information requests. When requested by FinCEN, the 
financial institution is required to provide the name, title, mailing 
address, e-mail address, telephone number, and facsimile number of the 
designated contact person. The financial institution must also promptly 
notify FinCEN of any changes to the contact information.
    NASD rule 3011, NASD's AML Compliance Program Rule, requires each 
member to designate an individual or individuals responsible for 
implementing and monitoring the daily operations of the firm's AML 
Program. To facilitate Treasury's efforts in collecting the AML contact 
information set forth in Treasury's final rule, NASD proposes to amend 
NASD rule 3011 to require that members provide to NASD contact 
information concerning the members' designated AML compliance 
person(s). The information would be used by Treasury in connection with 
its regulatory obligations set forth in section 314(a) of the PATRIOT 
Act and the implementing regulations promulgated thereunder. Consistent 
with Treasury's final rule, members would be required to provide to 
NASD the name, title, mailing address, e-mail address, telephone 
number, and facsimile number of the contact person. Members would also 
be required to promptly notify NASD of any changes to the 
information.\6\
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    \6\ NASD believes that its proposed amendments to NASD rule 3011 
are consistent with New York Stock Exchange, Inc. (``NYSE'') rule 
445 (AML Compliance Program), which requires that NYSE member 
organizations provide to the NYSE contact information identifying 
the member organization's designated AML compliance person and 
promptly notify the NYSE of any changes to the information.
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    NASD intends to initially collect the contact information through 
the Member Firm Contact Questionnaire on the NASD Website. NASD 
anticipates that form and system changes necessary to collect the 
contact information will be completed by November 15, 2002. Members 
will have until December 31, 2002, to provide NASD with the necessary 
contact information.\7\
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    \7\ New member applicants will be required to provide the 
contact information during the application process.
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2. Statutory Basis
    NASD 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 NASD'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. NASD believes that the proposed rule change is 
designed to accomplish these ends by expediting the information sharing 
process necessary to help combat money laundering and terrorism.
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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

    NASD 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.

[[Page 67434]]

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 foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \9\ and subparagraph (f)(6) of rule 19b-4\10\ 
thereunder because it does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; (iii) become operative for 30 days from the date on 
which it was filed, or such shorter time as the Commission may 
designate and NASD has given the Commission written notice of its 
intention to file the proposed rule change at least five business days 
prior to filing. 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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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 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 the filing will also be 
available for inspection and copying at the principal office of the 
Association. All submissions should refer to File No. SR-NASD-2002-146 
and should be submitted by November 26, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-28100 Filed 11-4-02; 8:45 am]
BILLING CODE 8010-01-P