[Federal Register Volume 68, Number 126 (Tuesday, July 1, 2003)]
[Notices]
[Pages 39171-39172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16521]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48079; File No. SR-NASD-2003-94]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Technical Amendments to Rule 2210

June 24, 2003.
    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 11, 2003, the National Association of Securities Dealers, Inc. 
(``NASD''), filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by NASD. NASD has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ which renders the proposal effective upon receipt of this 
filing by 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\ 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 is proposing to amend NASD Rule 2210 to reinsert certain 
existing rule language that was inadvertently omitted from amendments 
to NASD Rule 2210 that the Commission recently approved. The text of 
the proposed rule change is available at the Office of the Secretary, 
NASD, and at the Commission.

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.

[[Page 39172]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On May 9, 2003, the Commission approved amendments to NASD Rule 
2210 and the Interpretive Materials that follow NASD Rule 2210, and the 
creation of new NASD Rule 2211, all of which govern member 
communications with the public (the ``Advertising Modernization Rule 
Change'').\4\ The Advertising Modernization Rule Change becomes 
effective on November 3, 2003. Among other things, the Advertising 
Modernization Rule Change revised paragraph (c) of NASD Rule 2210, 
which addresses member filing requirements and NASD review procedures 
for member communications with the public. However, the proposed rule 
filing failed to include current NASD Rule 2210(c)(3), which sets forth 
the filing and NASD review procedures for member sales literature that 
includes bond mutual fund volatility ratings.
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    \4\ See Securities Exchange Act Release No. 47820 (May 9, 2003), 
68 FR 27116 (May 19, 2003) (SR-NASD-00-12).
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    The Advertising Modernization Rule Change was initially filed with 
the Commission on March 15, 2000, shortly after the Commission had 
approved the proposed rule change that included current NASD Rule 
2210(c)(3).\5\ Because of the close proximity of the Commission's 
approval of the bond mutual fund volatility rule and the initial filing 
of the Advertising Modernization Rule Change, the language of current 
NASD Rule 2210(c)(3) was inadvertently omitted from the Advertising 
Modernization Rule Filing. This omission of current NASD Rule 
2210(c)(3) was unintentional, as NASD does not intend to rescind the 
NASD Rule 2210 provisions governing bond mutual fund volatility 
ratings.\6\
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    \5\ See Securities Exchange Act Release No. 42476 (February 29, 
2000), 65 FR 12305 (March 8, 2000) (SR-NASD-97-89).
    \6\ In this regard, the Advertising Modernization Rule Change 
does not amend NASD Interpretive Material 2210-5, which governs 
members' use of bond mutual fund volatility ratings.
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    The purpose of this filing is to reinsert the language of current 
NASD Rule 2210(c)(3) concerning the filing and review requirements for 
member sales literature that contains bond mutual fund volatility 
ratings. The reinserted rule language is the same as the language used 
in current NASD Rule 2210(c)(3), other than certain minor, non-
substantive changes. In this regard, the new language adds a heading 
prior to the paragraph, uses ``NASD'' rather than ``the Association'' 
to refer to NASD,\7\ and clarifies that members must file sales 
literature that includes bond mutual fund volatility ratings at least 
10 business days prior to the date of first use of the sales 
literature. These changes are consistent with changes made to other 
paragraphs of NASD Rule 2210 under the Advertising Modernization Rule 
Change. In addition, this rule filing renumbers paragraphs (c)(3) 
through (c)(9) as paragraphs (c)(4) through (c)(10), and corrects 
certain paragraph cross-references.
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    \7\ NASD is in the process of amending NASD Rule 0120(j) to make 
clear that the term ``NASD'' refers collectively to NASD, NASD 
Regulation, Nasdaq, and NASD Dispute Resolution. See Amendment No. 1 
to SR-NASD-2003-75./FTNT
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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 reinserting the language of current 
Rule 2210(c)(3) that was inadvertently omitted from the Advertising 
Modernization Rule Change is consistent with the protection of 
investors and the public interest.
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    \8\ 8 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation believes that the proposed rule change would not 
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

    The foregoing proposed rule change has been filed by the Exchange 
as a ``non-controversial'' rule change pursuant to Section 19(b)(3)(A) 
of the Act \9\ and paragraph (f)(6) of Rule 19b-4 thereunder.\10\ 
Consequently, because the proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for thirty days from the date on 
which it was filed or such shorter time as the Commission may designate 
if consistent with the protection of investors and the public interest, 
and the Exchange provided the Commission with written notice of its 
intent to file the proposed rule change along with a brief description 
and text of the proposed rule change at least five days prior to the 
filing date, it has become effective pursuant to Section 19(b)(3)(A) of 
the Act and Rule 19b-4(f)(6) thereunder. However, this proposed rule 
change does not alter the November 3, 2003 effective date of the 
Advertising Modernization Proposed Rule Change that the Commission 
approved on May 9, 2003.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(i).
    \10\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of this filing, the Commission may 
summarily abrogate this proposal 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.

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 NASD. All 
submissions should refer to the file number in the caption above and 
should be submitted by July 22, 2003.

    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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-16521 Filed 6-30-03; 8:45 am]
BILLING CODE 8010-01-P