[Federal Register Volume 68, Number 247 (Wednesday, December 24, 2003)]
[Notices]
[Pages 74673-74674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31649]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48930; File No. SR-NASD-2003-177]


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 
Interpretive Material 3130

December 16, 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 December 2, 2003, the National Association of Securities Dealers, 
Inc. (``NASD'') 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 by NASD. NASD has 
designated the proposed rule change as ``non-controversial'' under 
section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change 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 is proposing to amend NASD IM-3130. The text of the proposed 
rule change is set forth below. Proposed new language is in italics; 
proposed deletions are in [brackets].
* * * * *

IM-3130. Restrictions on a Member's Activity

    (a) This explanation outlines and discusses some of the financial 
and operational deficiencies which could initiate action under Rule 
3130. Paragraphs [(b)](c)(2) and [(c)](d)(2) of Rules 3130 and 3131 
recognize that there are various unstated financial and operational 
reasons for which [the Association] NASD may impose restrictions on a 
member so as to prohibit its expansion or to require a reduction in 
overall level of business. These provisions are deemed necessary in 
order to provide for the variety of situations and practices which do 
arise and which, if allowed to persist, could result in increased 
exposure to customers and to broker/dealers.
    (b) In the opinion of the Board of Governors, it would be 
impractical and unwise to attempt to identify and list all of the 
situations and practices [which] that might lead to the imposition of 
restrictions or the types of remedial actions [the Association] NASD 
may direct be taken because they are numerous and cannot be totally 
identified or specified with any degree of precision. The Board 
believes, however, that it would be helpful to members' understanding 
to list some of the other bases upon which [the Association] NASD may 
conclude that a member is in or approaching financial difficulty.
    (c) For purposes of paragraphs [(b)](c)(2) and [(c)](d)(2) of Rule 
3130, a member may be considered to be in or approaching financial or 
operational difficulty in conducting its operations and therefore 
subject to restrictions if it is determined by [the Association] NASD 
that any of the parameters specified therein are exceeded or one or 
more of the following conditions exist:
    (1) through (8) No change
    (d) For purposes of paragraphs [(b)](c)(2) and [(c)](d)(2) of Rule 
3131, a member may be considered to be in or approaching financial or 
operational difficulty in conducting its operations and therefore 
subject to restrictions if it is determined by [the Association] NASD 
that any of the parameters specified therein are exceeded or one or 
more of the following conditions exist:
    (1) No change
    (2) The member has experienced a substantial change in the manner 
in which it processes its business which, in [the] NASD's view, [of the 
Association,] increases the potential risk of loss to customers and 
members.
    (3) through (8) No change
    (e) If [the Association] NASD determines that any of the conditions 
specified in paragraphs (c) or (d) of this explanation exist, it may 
require that the member take appropriate action by effecting one or 
more of the following actions until such time as [the Association] NASD 
determines they are no longer required:
    (1) through (12) No change
    (13) Be subject to such other restrictions or take such other 
action as [the Association] NASD deems appropriate under the 
circumstances in the public interest and for the protection of members.
* * * * *

[[Page 74674]]

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 proposed rule change would: (i) change references to 
``paragraphs (b)(2) and (c)(2)'' of NASD Rules 3030 and 3031 to 
``paragraphs (c)(2) and (d)(2)'' in NASD IM-3130(a), (c), (d), and (e); 
and (ii) change references to ``the Association'' to ``NASD'' in NASD 
IM-3130, thereby conforming the rule language in NASD IM-3130 to the 
rule language in Rules 3130 and 3131, as recently amended.\5\
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    \5\ See Securities Exchange Act Release No. 48438 (September 4, 
2003), 68 FR 53766 (September 12, 2003) (SR-NASD-2003-74).
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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A of the Act,\6\ in general, and with section 
15A(b)(6) of the Act,\7\ in particular, 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 conforming the references in NASD 
IM-3130 to renumbered paragraphs in recently amended NASD Rules 3130 
and 3131 and changing references to ``the Association'' to ``NASD'' 
would be consistent with the protection of investors and the public 
interest.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 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 would 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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not:
    (i) significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 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, it 
has become effective pursuant to section 19(b)(3)(A) of the Act \8\ and 
Rule 19b-4(f)(6) thereunder.\9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). The Commission notes that NASD 
provided 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 business days prior to the date of filing of 
the proposed rule change.
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    NASD has requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
The proposed rule change corrects references to recently amended rules, 
which should preserve the accuracy of NASD's rules. For these reasons, 
the Commission designates the proposal to be effective and operative 
upon filing with the Commission.\10\
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    \10\ For purposes only of accelerating the operative date of the 
proposed rule change the Commission considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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-NASD-2003-177. This file number should be included on the 
subject line if e-mail is used. To help the Commission 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 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 File No. SR-NASD-2003-177 and should be 
submitted by January 14, 2004.

    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. 03-31649 Filed 12-23-03; 8:45 am]
BILLING CODE 8010-01-P