[Federal Register Volume 69, Number 37 (Wednesday, February 25, 2004)]
[Notices]
[Pages 8718-8719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4121]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49269; File No. SR-NASD-2004-05]


Self Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Granting Accelerated Approval of Proposed Rule 
Change to Amend NASD Rule 2370 Relating to Certain Lending Arrangements 
Between Registered Persons and Customers

February 18, 2004.
    On January 9, 2004, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association'') filed with the Securities and 
Exchange Commission (``Commission''), pursuant to section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend NASD Rule 2370. 
Specifically, NASD proposed to exempt lending arrangements between 
family members as well as lending arrangements between registered 
persons and a financial institution or other entity or person regularly 
engaged in the business of providing credit, financing, or loans from 
the rule's notice and approval requirements and to indicate that the 
scope of the rule is limited to lending arrangements between registered 
persons and their own customers, rather than any customer of the firm. 
The proposed rule change was published for comment in the Federal 
Register on January 23, 2004.\3\ The Commission received no comment 
letters on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 49081 (January 14, 
2004), 69 FR 3410.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities association,\4\ and, in 
particular, the requirements of section 15A(b)(6) of the Act,\5\ which, 
among other things, requires that NASD rules be designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, and, in general, protect investors and 
the public interest. The Commission believes that the proposed rule 
change should allow NASD members to allocate supervisory and compliance 
resources to those loans where a potential for substantial abuse 
exists. The Commission notes that the proposed rule change only removes 
lending arrangements for which NASD believes the potential for 
misconduct is minimal from the rule's notice and approval process and 
that NASD members may continue to prohibit all lending arrangements 
between registered persons and customers altogether. The Commission 
also notes that NASD may bring a disciplinary action against a 
registered person who has entered into an unethical lending arrangement 
with a customer under NASD Rule 2110.
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    \4\ In approving this proposed rule change, the Commission notes 
that it has considered its impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78o-3(b)(6).
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    Furthermore, the Commission finds good cause for approving the 
proposed rule change prior to the thirtieth day after notice of the 
publication in the Federal Register. The Commission believes that 
acceleration of the approval of this proposal should allow NASD members 
to immediately focus on lending arrangements covered by amended NASD 
Rule 2370. Accordingly, the Commission finds good cause, consistent 
with section 19(b)(2) of the Act,\6\ to approve the proposed rule 
change on an accelerated basis.
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    \6\ 15 U.S.C. 78s(b)(2).
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act\7\, that the

[[Page 8719]]

proposed rule change (File No. SR-NASD-2004-05) is hereby approved on 
an accelerated basis.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4121 Filed 2-24-04; 8:45 am]
BILLING CODE 8010-01-P