[Federal Register Volume 68, Number 154 (Monday, August 11, 2003)]
[Notices]
[Pages 47624-47625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-20379]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48290; File No. SR-NSCC-2003-17]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Imposition of Fines

August 5, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 2, 2003, National 
Securities Clearing Corporation (``NSCC'') 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 
primarily by NSCC. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule change is to modify NSCC Rule 16 
and Addendum P to impose fines upon members and non-clearing members 
utilizing NSCC's Commission Settlement service when they fail to timely 
pay all or part of their monthly commission settlement obligations to 
NSCC.

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

    In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to modify NSCC's rules 
to provide that fines may be imposed upon members and non-clearing 
members utilizing NSCC's Commission Settlement service when they fail 
to timely pay all or part of their monthly commission settlement 
obligations to NSCC.
    Under NSCC Rule 16 (Settlement of Commissions), NSCC provides a 
service where all payments of commissions due on business where a 
principal is given up between NSCC members and non-clearing members may 
be settled on a monthly basis. Rule 16 provides that if a member or 
non-clearing member is indebted to NSCC, it shall pay \3\ the amount 
due to NSCC on or before the commission bill settlement date of each 
month, generally the 15th, as determined by NSCC. NSCC relies upon the 
timely receipt of the funds from such members and non-clearing members 
in order to pay others who are owed funds as a result of using the 
Commission Settlement service.
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    \3\ Members and non-clearing members may make payment via ACH 
wire transfer, Fed Funds wire transfer, or by check made payable to 
NSCC.
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    NSCC Rule 48 (Disciplinary Proceedings) allows NSCC to impose fines 
upon participants for any error, delay, or other conduct that is 
determined to be detrimental to NSCC's operations. Historically, NSCC 
has imposed fines upon participants for failure to timely settle end of 
day settlement balances, late settlement acknowledgement, and for late 
payment of clearing fund deposits. In 2002, NSCC commenced fining 
participants for failure to timely provide requested financial and 
operational information and for failure to timely notify NSCC on an 
ongoing basis of certain internal conditions which may cause NSCC to 
reevaluate the participants continued participation.\4\ NSCC now 
intends to commence fining members and non-clearing members for failing 
to timely meet their obligations to NSCC arising out of their use of 
the Commission Settlement service.
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    \4\ Securities Exchange Act Release No. 46903 (November 25, 
2002), 67 FR 72012 (December 3, 2002) (order approving NSCC's rule 
change to fine members who fail to timely provide requested 
financial or operating information or who fail to provide other 
changes to NSCC).
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    The proposed rule change also amends NSCC Addendum P (Fine 
Schedule) to reflect the addition of the fines. The proposed fine 
schedule in NSCC Addendum P, Section 5, Settlement of Commissions, 
pursuant to NSCC Rule 16,\5\ is as follows:
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    \5\ Fines to be levied for offenses within a moving twelve-month 
period beginning with the first occasion.

----------------------------------------------------------------------------------------------------------------
                                                                                                        Fourth
                                                                 First        Second       Third       occasion
                         Net debit                             occasion      occasion     occasion       (or
                                                                                                       greater)
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$0-100,000.................................................          (1)          $100         $200         $300
$100,000-200,000...........................................          (1)           200          300          400
Greater than $200,000......................................          (1)           300          400          500
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    Notes: (1) First occasions result in a warning letter to the 
Member/Non-clearing member.
    (2) In addition to the fine, unpaid amounts will incur interest 
charges until paid.

    In addition, Rule 16 has been modified to clearly state that 
failure to timely pay all or part of a monthly Commission Settlement 
balance may result in the imposition of a fine and may subject the 
member or non-clearing member to action by NSCC pursuant to Rule 46 
(Restriction on Access to Services) or Rule 48 (Disciplinary 
Proceedings). Participants will continue to have the ability to contest 
fines as currently provided for within NSCC's rules and procedures.\6\
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    \6\ See, e.g., NSCC Rule 37 (Hearing Procedures).
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    The proposed rule change is consistent with Section 17A(b)(3)(G) of 
the Act \7\ and the rules and regulations thereunder because it will 
allow NSCC to impose fines upon late paying users of the Commission 
Settlement service thereby further ensuring that NSCC has the ability 
to appropriately discipline for violations of its rules.
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    \7\ 15 U.S.C. 77(q-1)(b)(3)(G).

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[[Page 47625]]

(B) Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have an 
impact on or impose a burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    No written comments relating to the proposed rule change have been 
solicited or received. NSCC will notify the Commission of any written 
comments received by NSCC.

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

    The foregoing rule change will take effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-4(f)(2) \9\ 
thereunder because the proposed rule constitutes a due, fee, or other 
charge. At any time within sixty days of the filing of such 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
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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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NSCC-2003-17. This file number should be included on the 
subject line if e-mail is used. To help us process and review comments 
more efficiently, comments should be sent in hardcopy or by e-mail but 
not by both methods. 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 Section, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of such filing also will be available for inspection and copying 
at the principal office of NSCC. All submissions should refer to File 
No. SR-NSCC-2003-17 and should be submitted by September 2, 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. 03-20379 Filed 8-8-03; 8:45 am]
BILLING CODE 8010-01-P