[Federal Register Volume 68, Number 201 (Friday, October 17, 2003)]
[Notices]
[Pages 59828-59829]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26286]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48622; File No. SR-BSE-2003-18]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment 
Nos. 1 and 2 Thereto by the Boston Stock Exchange, Inc. To Adopt an 
Anti-Money Laundering Compliance Program

October 10, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on September 24, 2003, the Boston Stock Exchange, 
Inc. (``BSE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Exchange amended the proposal on October 3, 2003 and October 9, 
2003. The Commission is publishing this notice to solicit comments on 
the proposed rule change, as amended, from interested persons and to 
grant accelerated approval to the proposed rule change.
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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 adopt a new section entitled ``Anti-Money 
Laundering Compliance Program'' to its Rules under Chapter II, Dealings 
on the Exchange. The text of the proposed rule change follows. 
Additions are in italics.
* * * * *

Chapter II

Dealings on the Exchange

    Secs. 1-41, no change

Anti-Money Laundering Compliance Program

    Sec. 42. Each member organization and each member not associated 
with a member organization shall develop and implement a written anti-
money laundering program reasonably designed to achieve and monitor 
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 Section shall, 
at a minimum:
    (1) 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:
    (2) Establish and implement policies and internal controls 
reasonably designed to achieve compliance with the Bank Secrecy Act and 
the implementing regulations thereunder;
    (3) Provide for independent testing for compliance to be conducted 
by Participant personnel or by a qualified outside party;
    (4) Designate, and identify to the Exchange (by name, title, 
mailing address, e-mail address, telephone number, and facsimile 
number) a person or persons responsible for implementing and monitoring 
the day-to-day operations and internal controls of the program and 
provide prompt notification to the Exchange regarding any change in 
such designation(s); and
    (5) Provide ongoing training for appropriate persons.
* * * * *

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 Exchange 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 III 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
    In response to the events of September 11, 2001, President Bush 
signed into law on October 26, 2001 the Uniting and Strengthening 
America by Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism Act of 2001 (the ``Patriot Act'') \3\ to address 
terrorist threats through enhanced domestic security measures, expanded 
surveillance powers, increased information sharing and broadened anti-
money laundering requirements. The Patriot Act amends, among other 
laws, the Bank Secrecy Act, as set forth in Title 31 of the United 
States Code.\4\ Certain provisions of Title III of the Patriot Act, 
also known as the International Money Laundering Abatement and Anti-
Terrorist Financing Act of 2001 (``MLAA''), impose affirmative 
obligations on a broad range of financial institutions, including 
broker-dealers, specifically requiring the establishment of anti-money 
laundering monitoring and supervisory programs.
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    \3\ Uniting and Strengthening America by Providing Appropriate 
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. 
L. 107-56, 115 Stat. 272 (2001).
    \4\ 31 U.S.C. 5311, et seq.
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    MLAA Section 352 required all financial institutions (including 
broker-dealers) to establish anti-money laundering programs that 
include, at a minimum: (i) Internal policies, procedures and controls; 
(ii) the specific designation of an anti-money laundering compliance 
officer; (iii) an ongoing employee training programs; and (iv) an 
independent audit function to test the anti-money laundering program.
    The Commission has approved NASD's and several other exchanges' 
proposals to adopt rules requiring their members and member 
organizations to establish anti-money laundering compliance programs 
with the minimum standards described above.\5\ Proposed BSE Section 42, 
entitled ``Anti-Money Laundering Compliance Program'' of Chapter II, 
Dealings on the Exchange, of the Rules of the Board of Governors of the 
Boston Stock Exchange, Inc. involves similar requirements. Adoption of 
the proposed rule would establish a regulatory framework for members 
and member organizations to comply with the requirements of the Patriot 
Act in this area.
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    \5\ See, e.g., Securities Exchange Act Release No. 45798 (April 
22, 2002), 67 FR 20854 (April 26, 2002) (Order approving SR-NASD-
2002-24 and SR-NYSE-2002-10).
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2. Statutory Basis
    The Exchange believes that the statutory basis for the proposed 
rule change is section 6(b)(5) of the Act, \6\ in that it is designed 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating 
securities transactions, 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, and is not 
designed to permit unfair

[[Page 59829]]

discrimination between customers, issuers, brokers or dealers.
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    \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 
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

    No written comments were solicited or received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, and amended, 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 at 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-BSE-2003-18 and should be submitted by November 7, 2003.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange. In 
particular, the Commission believes that the proposed rule change is 
consistent with section 6(b)(5) of the Act,\7\ which, among other 
things, requires that the Exchange's rules be designed to prevent 
fraudulent and manipulative acts and practices, and, in general, 
protect investors and the public interest.
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    \7\ 15 U.S.C. 78f(b)(5). In approving this rule, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    The Commission believes that the Exchange's proposal to adopt an 
Anti-Money Laundering Compliance Program accurately, reasonably, and 
efficiently implements the requirements of the Patriot Act as it 
applies to their members. The Commission also recognizes that anti-
money laundering compliance programs will evolve over time, and that 
improvements to these programs are inevitable as members find new ways 
to combat money laundering and to detect suspicious activities.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register. The Commission notes 
that the Rule is substantially similar to anti-money laundering 
compliance program rules that the Commission has previously approved 
for other self-regulatory organizations.\8\ Accordingly, the Commission 
believes that there is good cause, consistent with Section 19(b) of the 
Act,\9\ to approve the proposed rule change on an accelerated basis.
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    \8\ See Securities Exchange Act Release Nos. 45798 (April 22, 
2002), 67 FR 20854 (April 26, 2002) (Order approving SR-NASD-2002-24 
and SR-NYSE-2002-10); 46041 (June 6, 2002), 67 FR 40366 (June 12, 
2002) (Order Approving SR-Phlx-2002-29); 46258 (July 25, 2002), 67 
FR 49715 (July 31, 2002) (Order Approving SR-Amex-2002-52); 446462 
(September 5, 2002), 67 FR 58665 (September 17, 2002) (Notice of 
Filing and Order Granting Accelerated Approval of SR-CBOE-2002-45); 
46468 (September 6, 2002), 67 FR 58095 (September 13, 2002) (Notice 
of Filing and Immediate Effectiveness of SR-PCX-2002-44); and 46739 
(October 29, 2002), 67 FR 67432 (November 5, 2002) (Notice of Filing 
and Immediate Effectiveness of SR-NASD-2002-146).
    \9\ 15 U.S.C. 78f(b)(5) and 78s(b).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
\10\ that the proposed rule change, as amended, is hereby approved.
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    \10\ 15 U.S.C. 78s(b)(2).

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. 03-26286 Filed 10-16-03; 8:45 am]
BILLING CODE 8010-01-P