[Federal Register Volume 68, Number 127 (Wednesday, July 2, 2003)]
[Notices]
[Pages 39601-39603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16713]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48067; File No. SR-Amex-2003-48]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to the Amendment of Exchange Rules 340 and 341 and the 
Adoption of New Exchange Rule 359 To Provide for the Processing of 
Forms U-4 and U-5 by the NASD's Web CRD System

June 19, 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 May 23, 2003, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') 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 the Amex. 
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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rules 340, Disapproval of 
Employees, and 341, Approval of Registered Employees and Officers, and 
to adopt new Exchange Rule 359, Application and Termination Forms 
(Forms U-4 and U-5), to provide for the processing of the Uniform 
Application for Securities Industry Registration or Transfer (``Form U-
4'') and the Uniform Termination Notice for Securities Industry 
Registration (``Form U-5'') by the National Association of Securities 
Dealers, Inc.''s (``NASD's'') Web Central Registration Depository 
(``Web CRD'') system for all individuals required to be registered with 
or approved by the Exchange.\3\ Proposed new text is italicized and 
proposed deleted text is [bracketed] below.
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    \3\ In connection with the instant proposal, the Exchange filed 
an effective on filing rule proposal related to fee schedule changes 
for Form U-4 and Form U-5 processing. See Securities Exchange Act 
Release No. 48066 (File No. SR-Amex-2003-49).
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* * * * *
Rule 340 Disapproval of Employees--No change.

Commentary

    .01 Any employee or prospective employee of a member or member 
organization who is to be admitted to the trading floor must be 
registered and approved by the Exchange's. To become registered, such 
employee or prospective employee must electronically file [submit] an 
application on the Uniform Application for Securities Industry 
Registration or Transfer (``Form U-4'') and any amendment thereto to 
the Central Registration Depository. All employees and prospective 
employees of members and member organizations who have submitted 
applications for admission to the trading floor are required to be 
fingerprinted and to submit, or cause to be submitted, such 
fingerprints to the Exchange or its designee for identification and 
appropriate processing. Members and member organizations are required 
to electronically file [submit] a Uniform Termination Notice for [of] 
Securities Industry Registration (``Form U-5'') and any amendment 
thereto to the Central Registration Depository [to the Exchange's 
Membership Services Department] within 10 days of the date of 
termination of an employee that has been approved for admission to the 
trading floor. Members and member organizations also are responsible 
for obtaining and submitting a terminated employee's Exchange 
identification badge to the Exchange [together with the Form U-5]. For 
purposes of this Commentary .01, the term ``trading floor'' includes, 
but is not limited to, any space provided to members and their 
employees for the resolution of errors.
    .02 through .04. No change.
    .05 Transition to Web CRD.-- Members and member organizations must 
electronically file a Form U-4 with NASD's Web-based Central 
Registration Depository (CRD) system on or before such time as may be 
specified by the Exchange for each of their employees (including 
members ) who have access to the trading floor.
Rule 341 Approval of Registered Employees and Officers--(a) and (b) No 
change.

Commentary

    .01 Natural Persons Required to be Registered or Approved--Although 
the employment of each employee of a member or member organization is 
subject to disapproval by the Exchange, only (i) registered 
representatives, (ii) securities lending representatives, (iii) 
securities traders or (iv) a direct supervisor of (i), (ii) or (iii) 
above (see definitions 6, 7 and 8, General and Floor Rules), must be 
registered and approved. Note that a natural person who performs the 
duties normally performed by a (i) registered representative, (ii) 
securities lending representative or (iii) securities trader is also 
subject to this Rule, notwithstanding such natural person's assertion 
of ``independent contractor'' status. (See Rule 341B). The requirements 
for persons seeking Exchange approval as regular member, options 
principal members, allied members, partners, approved persons and 
subordinated lenders are set forth in Article IV, Section 2 of the 
Constitution and Rules 300, 301, 310, 311, 312, 317, 318 and 470. Such 
persons must file forms prescribed by the Exchange [which are available 
from the Membership Services Division].
    Any person who prior to June 1, 1970, was an allied member of the 
Exchange, in good standing, and who as of June 1, 1970, ceases to meet 
the definition of an allied member shall automatically cease his status 
as an allied member and may upon execution of such agreements as may be 
required by the Exchange qualify as a registered representative, 
supervisory person or officer. Any person who was an allied member in 
good standing prior to June 1, 1970, but does not meet the definition 
of allied member as of June 1, 1970, may

[[Page 39602]]

continue to perform those functions for his member corporation which he 
was performing on June 1, 1970.
    A ``securities lending representative'' is defined as any person 
who has discretion to commit a member or member organization with which 
he is associated, as an employee or otherwise, to any contract or 
agreement (written or oral) involving securities lending or borrowing 
activities with any other person.
    A ``securities trader'' is defined as any person engaged in the 
purchase or sale of securities or other similar instruments for the 
account of a member or member organization with which he is associated, 
as an employee or otherwise, and who does not transact any business 
with the public.
    .02 How to Register Employees or Obtain Approval of Officers.--To 
register an employee or obtain the approval of an officer, the employer 
must electronically file an application on the Uniform Application for 
Securities Industry Registration or Transfer (``Form U-4'') and any 
amendment thereto with NASD's Central Registration Depository. [submit 
the appropriate application form to the Membership Services Division, 
Attention Registered Personnel Section. The application includes an 
agreement, described in Commentary .08 below, which the prospective 
registered employee or officer must sign.]
    If the employer is a member of the New York Stock Exchange, Inc., 
and application for the registration of an employee or the approval of 
an officer is made to that exchange, the American Stock Exchange LLC [, 
Inc.,] application [form] should be submitted concurrently with the 
submission of an application to the New York Stock Exchange, Inc. and 
prompt notice should be furnished to the Exchange [Membership Services 
Division] of any action taken by the New York Stock Exchange, Inc. with 
respect to such application.
    .03 through .08--No change.
    .09 Termination of Employment.--Members and member organizations 
must immediately inform the [Membership Services Division of the] 
Exchange of any termination of employment of a member, registered 
employee or an officer, together with the reasons therefor. Such 
information is to be submitted on Form U-5 within ten days of the date 
of termination.
    .10 Rescinded [Additional Information.--The following material may 
be obtained from the Registered Section, Membership Services Division 
of the Exchange:
    (1) Application forms.
    (2) Study Guide for Registered Representative Examination.
    (3) Study Guide for Branch Office Manager Examination.
    (4) Notice of Termination of Employment of Registered Employee--
Form U-5].
    .11 Filing With Designee [Agent].--Any filing or submission 
required under this rule which is made with a properly authorized 
designee [agent] acting on behalf of the Exchange shall for purposes of 
this Rule be deemed to be a filing with the Exchange.
Rule 359. Application and Termination Forms (Forms U-4 and U-5)
    (a) An individual who (i) seeks to become a regular, options 
principal, or associate member, (ii) seeks to become a limited trading 
permit holder, (iii) seeks to own a regular, options principal, 
associate membership or limited trading permit, or (iv) is or should be 
an approved person or allied member shall electronically file a Uniform 
Application for Securities Industry Registration or Transfer (Form U-4) 
and any amendments thereto with Central Registration Depository. A 
member or member organization that terminates a regular member, options 
principal member, associate member, allied member, limited trading 
permit holder or approved person shall electronically file within 10 
days of such termination a Uniform Termination Notice for Securities 
Industry Registration (Form U-5) with the Central Registration 
Depository. A member or member organization shall electronically file 
with the Central Registration Depository any amendments to Form U-5 
within 10 days of the discovery of the information requiring the 
amendment.
    (b) Transition to Web CRD--Regular members, options principal 
members, and limited trading permit holders must electronically file a 
Form U-4 with NASD's Central Registration Depository system on or 
before such time as may be specified by the Exchange.
* * * * *

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 Amex included statements 
concerning the purpose of, and the 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. The Amex 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
    Amex Rule 340 currently requires Amex members and member 
organizations to submit Forms U-4 and U-5 for their employees with 
access to the trading floor (e.g., members and clerks). The Exchange 
also has long required persons who seek to become members or to own a 
membership to submit Form U-4 in connection with their membership 
applications. These forms currently are submitted to the Exchange's 
Membership Services Division as paper documents.
    The Exchange now is proposing to require all its members, member 
organizations and seat owners to use NASD's Web CRD as the mechanism 
for submitting required Forms U-4 and U-5 filings to the Exchange. As a 
result of this change, all persons that currently would submit paper 
Forms U-4s and U-5s to the Exchange would be required to submit these 
forms electronically through Web CRD. The CRD is a Web-based system 
that provides broker-dealers and their associated persons with ``one-
stop filing'' with the SEC, NASD, and other self-regulatory 
organizations and regulators. The CRD is operated by NASD and is used 
by participating regulators in connection with registering and 
licensing broker-dealers and their associated persons.
    The Exchange anticipates that, during the period between September 
3 and September 19, 2003, Amex members and member organizations will 
submit an updated Form U-4 to Web CRD for all individuals who work on 
the trading floor who have not previously submitted a Form U-4 to Web 
CRD.\4\ The proposed rule change also would require individuals who (i) 
seek to become a regular, options principal, or associate member, (ii) 
seek to become a limited trading permit holder, (iii) seek to own a 
regular, options principal, associate membership or limited trading 
permit, or (iv) are or should be an approved person or allied member, 
to electronically file a Form U-4 with Web CRD. The Exchange believes 
that automating the review of registration applications and termination 
notices by transitioning all Forms U-4 and U-5

[[Page 39603]]

filings to Web CRD will enable the Exchange to perform more efficiently 
its regulatory responsibilities with respect to members and member 
organizations and, thereby, will ultimately enhance investor 
protection.
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    \4\ A number of individuals that work on the trading floor 
already have submitted Form U-4 to Web CRD if they work for dual 
Amex/NASD member firms and their job responsibilities require 
registration with NASD.
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    The proposed amendments to Exchange Rules 340 and 341 and the 
adoption of Exchange Rule 359 are intended to facilitate the transfer 
of all required Forms U-4 and U-5 filings to Web CRD. The changes 
provide that the filing of Forms U-4 and U-5 with a duly authorized 
designee of the Exchange (i.e., NASD) would constitute submission to 
the Exchange. The proposed amendments also would eliminate references 
to the Membership Services Division that would become obsolete with the 
implementation of filing with Web CRD.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\5\ in general, and the provisions of 
section 6(b)(5) of the Act,\6\ in particular, which requires, among 
other things, that the rules of an exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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 
result in 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 \7\ and Rule 19b-4(f)(6) \8\ thereunder because 
the proposal: (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 30 days 
from the date of filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest; provided that the Exchange has given the Commission notice of 
its intent to file the proposed rule change at least five business days 
prior to the filing date of the proposed rule change or the Commission 
waives such prior notice. At any time within 60 days of the filing of 
such 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.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ See section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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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 such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-Amex-2003-48 and 
should be submitted by July 23, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-16713 Filed 7-1-03; 8:45 am]
BILLING CODE 8010-01-P